opinion from the late,

great, golden state...

CRO Main Page

by Wayne Lusvardi | Pasadena Ambrose Bierce in The Devil's Dictionary satirically defined electricity as the power that causes all natural phenomena not known to be caused by something else.  This definition seems apt for California Assembly Bill 32 (AB 32), also known as the Global Warming Solutions Act of 2006. AB 32, which mandates shifting to much costlier forms of green energy, is not about Global Warming or Green Power at all. It would not have a chance of success in greenie California without its environmental mythology. What AB 32 is all about is passing along the costs of cleaning the air in California by restructuring the regional political economy of western Red versus Blue states and creating new government energy enterprises similar to Fannie Mae and Indy-Mac Bank in the financial sector. The provisions of AB 32 are broad and include creating a carbon market with a cap and trade scheme. Additionally it mandates that public and municipal utilities must gradually ramp up to provide a third or more of their energy from renewable sources like wind, solar and geothermal power rather than imported coal-fired power. AB 32 has nothing to do with "global warming" contrary to both its proponents and opponents. To understand what AB 32 really is one must go back in time to understand air quality regulation in California . For air quality has been the apparent driver of many of California 's environmental and electricity regulatory disasters, such as the contamination groundwater with the chemical MTBE and the Electricity Crisis of 2001. We Were Running Out of Sky, Not Energy In the 1960's, smog was so bad in Southern California that you couldn't even see the mountains from the foothills on a hot August day. Home builders knew they eventually couldn't sell new tract homes in the future in places like Fontana and Rancho Cucamonga , which were regional cul-de-sacs for regional smog, unless air quality was improved. In 1960, the Motor Vehicle Pollution Control Board was established. In 1963, the Federal Clean Air Act was enacted providing grants, and de facto control, over pollution control districts. In 1966, auto tailpipe standards were established for the first time in the nation. In 1967, the Federal Air Quality Act was adopted and the California Air Resources Board (CARB) was created by merger of other departments.  1970 heralded the first Earth Day and the Federal Clean Air Act Amendments granting statutory authority to control air pollution. Most importantly, in 1972 California 's Air Quality Implementation Plan was rejected by the U.S. Environmental Protection Agency. The Oil Embargo of 1973 brought about smaller, more efficient cars and relatively lower air emissions. By 1975, catalytic converters were mandated on all vehicles. In 1974, the Southern California Edison Company and the Metropolitan Water District of Southern California bought 5000-acres of the ocean floor off the former oil field at Bolsa Chica in Huntington Beach to jointly build a nuclear power plant and water desalting plant on a man-made island. The project was abruptly abandoned due to the reaction of the newly growing environmental movement. NIMBY ocean views and wetlands became more important than electricity, water, or oil extraction. Is it any surprise that California periodically has energy and water crises as everything must pay homage to the clean air god. Like the ancient religion of the Roman Empire, it is how the elites, the professionals and the specialists stay in power. In order to meet air quality standards in the mid 1980's, many cities in Southern California shut down or downsized old fossil fuel power plants and shifted to reliance on imported electricity from out of state coal and gas-fired power plants. Much of that natural gas was supplied from gas fields and pipelines from Texas . The Los Angeles Department of Water and Power, together with other cities (Pasadena , Glendale , Burbank , Anaheim , etc.) facilitated the construction of the Intermountain Power Coal-Fired Power Plant in Utah . This outsourced power production shifted air pollution elsewhere. The price of improving the air quality was the outsourcing of money, jobs and air pollution to surrounding (mostly Red) states. In 1984, Smog Check went into place on most vehicles. All importantly, in 1996, the Clinton-run EPA mandated that California clean up smog by no later than 2001, or it would cut-off Federal funds for highways, schools, etc. to the state. California had only one real option available to meet the 2001 EPA clean air deadline: mothball old polluting fossil fuel power plants or sell off old plants and allow new investors to retrofit them with cleaner natural gas power. However, the mortgages (bonds) on the old power plants now had no way of being paid off. This triggered so-called electricity deregulation as a scheme to pay off the stranded debt. In the year 2000, Southern California had for the first time in ten years only one Stage 1 Smog Alert. As a result of the shut down of old polluting power plants, the mountains became visible for the first time in a decade. CARB mandated in 1999 that a chemical, MTBE, be added to gasoline to reduce automobile emissions and improve air quality. MTBE leaked from underground gas tanks and contaminated groundwater supplies resulting in costly clean ups and the mothballing of old independent gas stations until double-walled gas tanks could be installed. As of April 1, 2009, CARB is threatening to shut down independent gas stations again. This time it is for failure to install new low vapor emitting nozzles at a cost of $8,000 per nozzle! In 2001 California experienced an historical electricity crisis involving rolling blackouts and sky rocketing electricity rates. Finally, new Governor Schwarzenegger rolled the stranded debts on the bonds of the old decommissioned power plants into a $40 billion bond issue to be paid from the revenue stream of over-market prices on long-term electricity contracts. Enron was scapegoated as the cause of the 2001 energy crisis originally caused by air quality regulation in response to public demand to eliminate smog. The Global Warming Solutions Act By 2006, Governor Schwarzenegger had signed AB 32, the Global Warming Solutions Act. Today, public and municipal utilities are scrambling to enter contracts with wind and solar farms and geothermal power plants to meet the AB 32 deadlines.  Most of these new sources of power are located within California. Clean hydropower and nuclear power, and relatively clean natural gas, were not considered Green Power under AB 32 because that would mean out-of-state power producers could simply shift from dirty coal power to cleaner sources of power to export electricity to California. And California could not tolerate having clean and cheaper conventional sources of power qualify as Green Power because that would not stop the hemorrhaging of money and jobs to nearby (Red) western states. What AB 32 is all about is the restructuring of the electricity market in Blue-State California so that it is no longer as dependent on cheap imported sources of energy from Red States ( Utah , Arizona , Oregon , Idaho , Nevada , Texas , etc.).  The reason for this can be seen in the table below which shows that comparative prices for electricity in the Western states for 2008 relative to California . Surrounding states produce electricity from 44% to 76% of the average price of the cost in California (or roughly 25% to 50% less than California ). Average Retail Price of Electricity to Ultimate Customers by End-Use Sector, by State, Year-to-Date through December 2008 (Cents per kilowatthour)


Price per kilowatt hour (cents)

Per Cent of California Average Retail Price

Mountain States



Arizona (Red)



Colorado (Red)



Idaho (Red)



Montana (Red)



Nevada (Blue)



New Mexico (Blue)



Utah (Red)



Wyoming (Red)



Pacific States Contiguous



California (Blue)



Oregon (Red)



Washington (Blue/Red)



Source: What AB 32 does is stop the exporting of money, jobs, and thus political power to Western Red states in return for cheap energy. To state the obvious, AB 32 has nothing to do with stopping our reliance on "dirty coal power" or on oil from Middle Eastern Muslim sheiks. It has more to do with stopping California 's dependence on coal-fired power from Mormon Utah and natural gas from Baptist Texas. It is all about stopping Red states from benefiting from California 's cost to improve its air quality. In fact, it might be seen as a scheme for getting other states to indirectly pay for cleaning up California ’s smog.  Put another way, California could have its cake and eat it too; its own “sustainable” energy and breathe clean air too. To re-rig the energy pricing system in its favor, California , however, needed a malefactor and a third party victim to convince the public that they must abandon much cheaper out-of-state imported power.  That factor is C02, carbon dioxide (which sounds like carbon monoxide, a highly toxic gas emitted from auto exhausts). The third party victims are those that would suffer from the nebulous claims of “global warming.” The antidote for the toxic dose of C02 is a cap on carbon emissions. A carbon cap evens the playing field of energy prices in Western states.   As the energy demagogue of the western states California can call the tune it wants as long as it pays the energy pipers. As the Beacon Hill Institute has said in a recent report on the Western States Climate Initiative (linked with AB 32) is that a cap on carbon emissions is effectively a tax on energy production that is passed to industry, businesses and consumers. The likely result is to drive commerce and jobs to other states (hopefully to California under AB 32). The Beacon Hill Institute report found that capping C02 emissions and buying emissions credits (“cap and trade”) “would have substantial negative effects” on the economies of the member states of the Western Climate Initiative. If 100% of greenhouse gas emission permits would be auctioned off to emitters in a cap-and-trade scheme, the Beacon Hill Institute estimated that the seven states:

--Would lose from 103,931 to 251,674 private sector jobs, while the permit revenue would allow the states to hire 57,269 to 142,241 state employees;

--Would put investment by firms at serious risk by slowing investment in the region by $548 million to $1,448 million;

--Would diminish total personal income, which would fall by $6.35 billion to $18.31 billion per year.

Source: Those who oppose AB 32 need to be careful about attacking global warming which admittedly is nothing more than a diversionary “noble lie”(Plato). It is a mythical scientific legitimation for restructuring the western energy system. But to attack global warming is tantamount to putting oneself in the camp of the anti-scientific Luddites, the corporate polluters, and even worse, the anti-NIMBY’s. Although AB 32 has really nothing to do with global warming, it does indirectly result in furthering the improvement of air quality in the south western states. If the public only intuitively understands that fighting the “global warming” bugaboo will somehow reduce visible smog in California and other states, it will be a hard political fight to overturn it even if it fails. Ironically, as AB 32 further reduces the smog layer in urban areas of Southern California the result will be more "global warming."  And environmentalists will perpetually point to this with alarm and more circular logic to justify even more interventions in the economy. What the public needs to know about AB 32 is that the same sort of class of politicians and experts that brought about the California the Electricity Crisis of 2001, the costly MTBE contamination of groundwater supplies, and the shutdown of independent gas stations, is once again going to attempt to radically re-engineer our energy system (just as they re-engineered the financial system to a bankruptcy). Only this time any failure won’t be confined to California . That they have catastrophically failed at every previous attempt is ignored by the public because environmentalists can always say to the public: “look at the sky, isn’t it cleaner?” Their secondary goal is to reduce or even eliminate private sector energy production and replace it with new government sycophantic and union-based energy enterprises (a la Fannie Mae and Indy-Mac). Rational arguments tend to be ineffectual when dealing with powerful cultural forces. The social psychological concept of cognitive dissonance says that abject failure ironically results in those who failed claiming the moral high ground because they can always say “we tried, didn’t we?” But it is better for the public to know what they are up against. As the proponents of AB 32 might say, “all power corrupts but we need the electricity (and clean air).” CRO copyright 2009 Wayne Lusvardi Formerly with Metropolitan Water District of So. Calif., Lusvardi has written on water issues in, Privatization Watch (Reason Public Policy Institute) and the L.A. Business Journal. The views expressed are his own.

Leave a Reply