California's Climate Law Lives! Sort of, At Least

Last Updated Nov 3, 2010 8:07 AM EDT

The fight may have been in California, but the battle over the state's Prop 23 and Prop 26 gave us a glimpse into what a national referendum on clean energy policy might look like. In a few words: Encouraging, expensive, and in the end, a little schizophrenic.

Clean energy did receive an endorsement from voters, who handily defeated Prop 23, an initiative funded by Texas oil refiners Valero (VLO) and Tesoro, and Koch Industries that would've paralyzed the state's global warming law. And by doing so, Californians showed that they believe the global warming law is the correct path to restoring its economy by creating a new industry.

AB 32, as it's known, requires the reduction of greenhouse gas emission levels in the state to 1990 levels by 2020. Valero and Tesoro contend that AB 32 threatens their 4,000-person workforce in California and will lead to higher gasoline prices and electricity rates, not to mention higher operating costs for the companies. Prop 23 would've suspended AB 32 until the state's 12.4 percent unemployment rate dropped to at least 5.5 percent for a full year, a feat that has occurred rarely.

Had Prop 23 passed, the state's global warming law would be impotent, delivering a fatal wound to the clean energy industry and an 'It ain't gonna work' message to other states considering similar legislation. And that would have been no small disaster. Clean energy is one of the few industries in California that experienced growth during the recession. AB 32 has been called the "single largest source of job creation in California in the last two years," according to venture capitalist Vinod Khosla.

Not to mention that California is often a testbed for the rest of the country. The federal government has been both unwilling and unable to pass climate change legislation and instead has tried to promote clean energy through stimulus funding and soon-to-be-expired tax credits. While the clean energy industry welcomes funding, what it really needs is stability and some policy certainty if it hopes to attract investors and clear substantial financing hurdles.

Before there's too much celebrating, though, let's be clear that the rejection of Prop 23 was as much about voters thumbing their noses at out-of-state oil refiners as it was a nod towards clean energy. And it took a lot of money -- some $31 million spent by those opposed to Prop 23 -- an outspoken governor and some savvy 'It's us against greedy Texas oil companies' marketing to get voters on board. To get an idea of how large the effort was, consider these Election Day tidbits from the Los Angeles Times.

Prop 23 opponents mustered 3,200 volunteers, made 2.8 million phone calls to voters, sent out 3.4 million pieces of mail, made 379,676 on-campus contacts with college students and operated a sophisticated computerized outreach program that identified and contacted 481,000 voters and showered voters with 900,000 get-out-the vote phone calls and text messages in the last three days.
Now the bad news ...
Although AB 32 will survive, it's still going to be hobbled. In a classic example of the state's Jekyll and Hyde tendencies, California voters also approved Prop 26, which requires that certain state and local fees, including those that address adverse impacts on the environment and society, must be approved by a two-thirds majority. Supporters of Prop 26, who unsurprisingly include tobacco and alcohol providers, plus Chevron (CVX), argue that it will prevent politicians from raising hidden taxes on goods like food and gas by disguising taxes as "fees."

There's a reason Chevron, Phillip Morris, ConocoPhillips (COP) and the American Beverage Association, to name a few, spent more than $18 million pushing the initiative. By expanding the definition of a tax and tax increase, the state would have difficulty assessing fees, including those that pay for air pollution and toxic cleanups like oil spills. It's anticipated that the state could lose $1 billion in revenues a year, according to the state's legislative analyst.

Photo of thin-film solar on Walmart's Mountain View, Calif. store from Walmart