California’s Prop 23: Why it Matters to the Nation

On November 2nd, Californians will vote “yes” or “no” on Proposition 23.  Prop 23 seeks to suspend AB 32, the California Global Warming Solutions Act of 2006, which aims to reduce greenhouse gas emissions to 1990 levels by 2020 through, among other things, increased use of renewable energy and pollution controls until state unemployment (currently at 12.4%) is sustained at 5.5% for 4 consecutive quarters.  That has only happened 3 times in the last 34 years.

Proposition 23 is in large part funded by out-of-state oil interests, including two companies headquartered in Texas: Tesoro and Valero Corps., who have refineries in the state.  Those in favor of Prop 23 say it would raise electricity rates and cost the economy jobs.  Opponents, including both candidates for governor, Jerry Brown and Meg Whitman (though Whitman is in favor of suspending AB 32 for 1 year),  claim that AB 32 has created jobs, even during the recession, and that clean tech is the fastest growing segment of the state’s economy.  Kill AB 32, they say, and investments in the clean-tech sector will flee the state due to a lack of support and the economy will be worse off than it currently is.

California is the nation’s bellwether when it comes to energy and environment legislation.  If Prop 23 is voted down, and AB 32 proceeds, it will likely further incent the federal government to move forward with a renewable electricity standard and greenhouse gas emissions regulations via cap and trade.   If Prop 23 passes, that will likely shrink investment in California’s clean-tech sector and will also likely signal to the Federal Government that now might not be the time to pursue these initiatives.  Many states also follow California’s lead, and will be either emboldened or discouraged when it comes to implementing their own standards.