California dreamin’ – puny measures against greenhouse gases


Richard Moore

Original source URL:

September 15, 2006
In Gamble, Calif. Tries to Curb Greenhouse Gases

SACRAMENTO ‹ In the Rocky Mountain States and the fast-growing desert Southwest,
more than 20 power plants, designed to burn coal that is plentiful and cheap, 
are on the drawing boards. Much of the power, their owners expected, would be 
destined for the people of California.

But such plants would also be among the country¹s most potent producers of 
carbon dioxide, the king of gases linked to global warming. So California has 
just delivered a new message to these energy suppliers: If you cannot produce 
power with the lowest possible emissions of these greenhouse gases, we are not 

³When your biggest customer says, ŒI ain¹t buying,¹ you rethink,² said Hal 
Harvey, the environment program director at the William and Flora Hewlett 
Foundation, in Menlo Park, Calif. ³When you have 38 million customers you don¹t 
have access to, you rethink. Selling to Phoenix is nice. Las Vegas is nice. But 
they aren¹t California.²

California¹s decision to impose stringent demands on suppliers even outside its 
borders, broadened by the Legislature on Aug. 31 and awaiting the governor¹s 
signature, is but one example of the state¹s wide-ranging effort to remake its 
energy future.

The Democratic-controlled legislature and the Republican governor also agreed at
that time on legislation to reduce industrial carbon dioxide emissions by 25 
percent by 2020, a measure that affects not only power plants but also other 
large producers of carbon dioxide, including oil refineries and cement plants.

The state¹s aim is to reduce emissions of climate-changing gases produced by 
burning coal, oil and gas. Other states, particularly New York, are moving in 
some of the same directions, but no state is moving as aggressively on as many 
fronts. No state has been at it longer. No state is putting more at risk.

Whether all this is visionary or deluded depends on one¹s perspective. This is 
the state that in the early 1970¹s jump-started the worldwide adoption of 
catalytic converters, the devices that neutralize most smog-forming chemicals 
emitted by tailpipes. This is the state whose per capita energy consumption has 
been almost flat for 30 years, even as per capita consumption has risen 50 
percent nationally.

Taking on global warming is a tougher challenge. Though California was second in
the nation only to Texas in emissions of carbon dioxide in 2001, and 12th in the
world, it produced just 2.5 percent of the world¹s total. At best, business 
leaders asked in a legislative hearing, what difference could California¹s cuts 
make? And at what cost?

California, in fact, is making a huge bet: that it can reduce emissions without 
wrecking its economy, and therefore inspire other states ‹ and countries ‹ to 
follow its example on slowing climate change.

Initiatives addressing climate change are everywhere in California, pushed by 
legislators, by regulators, by cities, by foundations, by businesses and by 

Four years ago, California became the first state to seek to regulate emissions 
of carbon dioxide from automobile tailpipes. Car dealers and carmakers are 
challenging the law in federal court.

In late August, Gov. Arnold Schwarzenegger signed a measure requiring builders 
to offer home buyers roofs with tiles that convert sunlight into electricity. 
Homeowners in some communities are already choosing them to reduce their 
electric bills.

California, which has for decades required that refrigerators, air conditioners,
water heaters and other appliances become more energy efficient, just added to 
the list: first, chargers for cellphones or computers; second, set-top boxes and
other remote-controlled devices. Those categories consume up to 10 percent of a 
home¹s power.

Last fall, California regulators barred major investor-owned electrical 
utilities from signing long-term contracts to buy energy unless the seller¹s 
greenhouse-gas emissions meet a stringent standard.

³We are dealing with it across the board,² said Michael R. Peevey, the president
of the Public Utilities Commission. By contrast, the Bush administration has 
been averse to any legislative assault on climate change.

Opponents say California may hurt its own residents with its clean-energy 
mandate. Scott Segal, a lawyer for Bracewell & Giuliani who represents electric 
utilities, summarized California¹s policy as: ³All electrons are not created 
equal. We¹re going to discriminate against some of them, and create artificial 
barriers in the marketplace for electricity.² California consumers could end up 
paying more for their energy and struggling to find enough, Mr. Segal said.

Is California dreaming? Can its multifaceted approach become a toolkit for other
states? Will investors make the state the incubator for clean-energy 
technologies that will reduce its energy bills and buoy its economy? Or will all
this turn California into a stagnating economic island of ever-rising 
electricity prices and ever-rolling blackouts?

One thing is certain: The issue will not go away. This summer, a brutal 
California heat wave killed roughly 140 people. A 2004 National Academy of 
Sciences report predicted that, at the current growth rate of emissions, there 
would be at least five times as many heat waves in Los Angeles by 2100 compared 
with the current historical average, and twice as many heat-related deaths.

The study predicted that at least half the state¹s alpine forests would 
disappear by century¹s end, and that the Sierra snowpack ‹ crucial to 
California¹s water supply ‹ would decline by at least 29 percent and as much as 
70 percent.

There seems to be political support, in California and nationally, for action on
climate change. Statewide, a July 26 poll from the Public Policy Institute of 
California showed that 79 percent of 2,051 people surveyed said that global 
warming was a ³very serious² or a ³somewhat serious² threat to the state¹s 
economy and quality of life. The findings mirrored those of a national poll of 
1,206 people conducted in mid-August by The New York Times and CBS News.

But polling organizations have asked little about the potentially painful 
sacrifices that may be required.

The Car Culture

Back in the 1950¹s, when the movie director George Lucas was growing up, cars 
rocked around the clock in Modesto, and they were so enshrined in his 1973 hit, 
³American Graffiti.² The movie reaffirmed what much of the nation knew ‹ there 
was no car culture like California¹s. Sleek convertibles? Muscle cars? Sport 
utility vehicles? Many were hatched in the design studios of Detroit, but 
popularized by Hollywood movies and celebrities, and by plain old California 

Fast forward to August. In the middle of the sales lot at Modesto Toyota sat a 
long row of sport utility vehicles the dealership had acquired as trade-ins in 
previous weeks. Leaning on a 2006 Ford Expedition, George S. Ismail, a sales 
manager, said, ³We¹re getting a lot of people trading in their sport utility 
vehicles for smaller cars.² Even heavily discounted, the used S.U.V.¹s sit for 

Yet Modesto Toyota is breaking records, Mr. Ismail said, selling about 400 
vehicles a month, up from 260 a year ago. Most are small cars ‹ Camrys and 
Corollas. Some are hybrid vehicles that use even less fuel, like the Prius. 
One-quarter of 200,000 new hybrid vehicles registered nationwide in 2005 
belonged to Californians, according to the automotive analyst R. L. Polk.

With smaller cars increasingly popular, California now burns less gasoline per 
capita than all but six states. Burning less gasoline cuts carbon dioxide. 
Tailpipes account for more than half the state¹s carbon dioxide emissions, 
federal figures show.

Much of this change in driver taste is attributable to the higher price of 
gasoline. But what if gasoline prices fall again and bigger, less efficient 
vehicles become more popular? California has an answer.

It came from Assemblywoman Fran Pavley, a Democrat and former schoolteacher who 
drives a Prius and whose South Coast district has a bird¹s-eye view of the 
smoggy Los Angeles basin. Four years ago Ms. Pavley wrote the first state law 
regulating carbon dioxide emissions from cars and trucks. It requires vehicle 
makers to eventually reduce the average emissions of carbon dioxide of the mix 
of cars it sells in California by 30 percent, beginning with the 2009 model 
year. Light trucks, including sport utility vehicles, must meet the same 
standard by the 2016 model year.

Ten states, including New York, New Jersey and Connecticut, have followed suit. 
Canada instituted voluntary emissions reductions at similar levels, which major 
automobile manufacturers have agreed they can meet. ³We think that, coupled with
Canada, we¹re now over one-third of the market,² Ms. Pavley said in an 

But automobile manufacturers and some dealerships have vowed to wipe her law 
from the books. Their lawsuit¹s central assertion is that, by regulating carbon 
dioxide emissions, California is using a backdoor means to control fuel 
efficiency, which, under the federal Energy Policy and Conservation Act, is the 
exclusive preserve of the federal Transportation Department. To produce less 
carbon dioxide, cars would have to be more fuel efficient.

On Sept. 15, Judge Anthony W. Ishii of Federal District Court in Fresno will 
hear arguments on California¹s request to dismiss the case. If the lawsuit 
survives, the first hearing is set for January. This schedule overlaps with that
of another case with direct bearing on this issue. The Supreme Court, petitioned
by a dozen states, led by Massachusetts, and three cities, including New York, 
will decide whether the law requires the Environmental Protection Agency to 
declare carbon dioxide a pollutant and to regulate it. The Bush administration 
contends it has no authority to do either.

If the Supreme Court accepts the administration¹s arguments, it will not help 
California in its legal fight against Detroit, because a key to the state¹s case
is the contention that carbon dioxide is in fact a pollutant under the Clean Air

Hungry Electronics

Imagine all the small electronic devices in a modern home ‹ iPods and handheld 
organizers, cellphones and laptops ‹ charging at a power strip.

Arthur H. Rosenfeld, a member of the California Energy Commission, knows how 
much electricity is wasted when people unplug the devices but leave the charger 
plugged in. Dr. Rosenfeld estimates that such chargers ‹ along with appliances 
like televisions that draw power even when they are off because they are 
designed to respond to remote controls ‹ use up to 10 percent of an average 
home¹s power.

He calls them ³vampires² ‹ things with teeth that suck power at night.

Recently, Dr. Rosenfeld proudly held up a small green cellular phone charger 
that consumes less than half a watt of electricity ‹ a fifth as much as its 
predecessors ‹ when left plugged into an outlet. It meets state standards that 
take effect in 2007. The same standards will require sharp power cutbacks from 
audio and video equipment, both when the devices are in use and when they are 
standing by for a remote signal.

Since the 1970¹s, California¹s energy-efficiency standards have reduced 
electricity consumption by the equivalent of the output of more than 20 average 
power plants, Dr. Rosenfeld said. And the standards have become templates for 
other states and Washington. Nationally, Dr. Rosenfeld added, energy-efficiency 
policies have saved the economy $700 billion since the 1970¹s.

But why would utilities, which sell electricity, have any interest in seeing 
sales diminish? In 1982, the Public Utilities Commission decoupled utilities¹ 
sales and their profits by allowing rate increases for utilities that helped 
customers cut energy use.

The logic was that for every dollar the consumer did not spend on energy, the 
utility would get real income ‹ say 15 cents, which would exceed the profit the 
utility could have made on that dollar. For consumers, efficiency savings more 
than offset the rate increases. ³Even though rates go up, bills go down,² said 
Mr. Harvey of the Hewlett Foundation.

Ralph Cavanagh, the co-director of the energy program at the Natural Resources 
Defense Counsel, said: ³Every other state in the country rewards utilities for 
selling more energy. It¹s a perfectly perverse incentive.²

Mr. Peevey, of the utilities commission, said he expected new efficiencies to 
absorb half the increase in demand as the state grows to 40 million people, from
38 million.

Mr. Peevey¹s commission has also been a prime mover in increasing state support 
for residential solar power. Solar energy remains four times as expensive as 
electricity produced by conventional fuels. But, he said, ³the idea is to make 
the solar industry a self-sustaining, economically viable industry,² and to make
the cost come down.

California businesses and investors, public and private, are getting into the 
act. The state¹s huge pension fund, Calpers, is committing just under $1 billion
to renewable-energy investments. Among the early incentive-driven ventures in 
solar power are the homes in the Carsten Crossings subdivision in Rocklin, a 
Sacramento suburb. In August, Mr. Schwarzenegger signed legislation making solar
panels a standard option for new-home buyers by 2012 and ensuring that utilities
reduce homeowners¹ bills based on the electricity returned to the grid.

Some of those incentives were available when construction started. Now four 
families have moved in. They see themselves as pragmatists, not crusaders. ³This
is the next logical step² in construction, said one of the homeowners, Lt. Col. 
Thomas Sebens, a specialist in drone aircraft at Beale Air Force Base.

Their roofs show how public and private decisions, markets and government, have 
meshed. T. J. Rodgers, a fiercely anti-regulatory entrepreneur, underwrote the 
solar cells¹ production. The PowerLight Corporation, based near San Francisco, 
bought the cells from Mr. Rodgers¹s company, the SunPower Corporation, and 
turned them into roof tiles. The tiles ended up on houses built by Grupe Homes, 
based in Stockton, because state utility regulators established a $5,500 
state-financed rebate for builders who install similar systems, which cost 
$20,000. Federal law gives home buyers a $2,000 tax credit; state law guarantees
lower electric bills as utilities buy back power homeowners do not need.

The July utility bills, the new homeowners¹ first, were the talk of the 

Larry Brittain, an office products salesman with a four-bedroom, 
2,400-square-foot home, was the winner at $73.27 for electricity in the month 
ending July 25 ‹ the hottest July on record. For the last 10 June days in a 
similar house nearby, his bill was $103.

³This is a bet with a winning hand,² Mr. Brittain said. ³You can¹t lose.²

Pressure on Suppliers

In Gerlach, Nev., 100 miles north of Reno, a high desert butte was made ready 
two years ago for its wedding to the Granite Fox Power Project, a plant designed
to burn pulverized Western coal. Electrical transmission lines were close by.

But, like Miss Havisham in Dickens¹s ³Great Expectations,² Gerlach waits for a 
groom that may never arrive. The plant was a certain source of significant new 
carbon dioxide emissions. Mr. Cavanagh predicted that it ³would wipe out all the
carbon dioxide savings from California¹s spectacularly successful efforts to 
save electricity during 2001 and 2002.²

Southern Californians would likely be the eventual customers. But last fall, the
California Public Utilities Commission barred the investor-owned utilities it 
regulates from signing long-term contracts for electricity if the emissions 
exceeded those of the cleanest gas-driven plants. The only technology that could
accomplish that with coal is expensive and has not been perfected.

Said Mr. Peevey of the commission, ³All we¹re saying is, Fine, you send it here,
but it has to be, in terms of air quality and greenhouse gas emissions, it has 
to be comparable to the newest combined-cycle gas turbine.² One fifth of 
California¹s electricity comes from coal, the vast majority of it from outside 
the state.

This past winter, Sempra Energy, the parent of San Diego Gas & Electric and 
Sempra Generation and the developer of Granite Fox, put the project up for sale.
Neal E. Schmale, Sempra¹s president, said the ruling had had a negligible impact
on the decision. High natural gas prices prompted the company to invest in gas 
storage and terminals instead, Mr. Schmale said.

Among California environmentalists, however, the ³for sale² sign on Granite Fox 
was taken as a victory for a pioneering policy that reaches beyond the state¹s 
borders. V. John White, an environmental lobbyist in Sacramento, compares 
building a Southwestern power plant to building a mall: California is a 
desirable anchor tenant.

But California is also the state where electricity deregulation foundered in 
2000; bills soared and an economic crisis ensued. Even without a crisis, 
Californians¹ electricity rates are about 40 percent above the national average.

Robert McIlvaine, a coal industry consultant from Northfield, Ill., said, ³If 
you are going to generate electricity from gas, the cost of doing so is going to
be considerably greater than coal ‹ 50 percent more or 100 percent more.²

But, Mr. Harvey said: ³People don¹t pay rates. They pay bills. You can have 
twice the rate and half the consumption and be just as happy.²

On Aug. 31, legislators enacted the bill sponsored by the State Senate 
president, Don Perata, Democrat of Oakland, and extended the commission¹s rule 
to all power providers.

Business people ask if this could provoke another crisis. Power-plant siting 
experts, like Thomas A. Johns, the vice president of development at Sithe Global
Power, a New York company, say that, in the short term, the loss of California 
business may not matter much to the merchants of power in the Southwest. 
Fast-growing cities like Phoenix and Las Vegas are ready markets.

In the long run, however, ³California is a big piece² of the total consumption 
in the West ‹ 40 percent, Mr. Johns said. ³If 40 percent of the Western load 
will not buy coal, you will have less coal.²

The risk, both Mr. Johns and Mr. Schmale said, is in increasing the state¹s 
reliance on natural gas, whose price has been extremely volatile in recent 
years. (California law bars construction of nuclear plants until the questions 
of waste disposal are resolved.)

³When you exclude coal and nuclear from your base load,² Mr. Johns said, ³you¹ve
only got one option, and that¹s natural gas.² Another measure awaiting the 
governor¹s signature toughens standards by requiring that by 2010, 20 percent of
the energy sold in California comes from a portfolio of renewable sources, like 
geothermal and wind. Last year, 10.7 percent of California¹s power came from 
renewable sources.

New renewable energy sources could make prices less volatile, but Mr. Schmale of
Sempra said California¹s policy makers need to muster ³the political will² to 
build transmission lines and ³all those other things that would be necessary to 
make the environmental things work.²

Caps, Costs and Credits

Perhaps the most ambitious measure California has undertaken is the newly 
mandated 25 percent reduction in carbon dioxide emissions. ³If we do it right,² 
Mr. Schwarzenegger said at a news conference, ³it can be an example for the rest
of the world and the rest of the country to see.² If not, the concept could be 

The law, sponsored by Ms. Pavley and the Assembly speaker, Fabian Núñez, 
Democrat of Los Angeles, gives the California Air Resources Board authority to 
set industry-specific targets for emissions reductions, effective in 2012, and 
to establish mechanisms ‹ including the creation of emissions allowances that 
companies might trade or bank ‹ to facilitate compliance. These targets would be
adjusted from 2012 to 2020 to meet the 25 percent goal.

Those who have studied the question agree that the new system will cost 
consumers more. ³A cap-and-trade system will raise the cost of electricity to 
consumers to some degree,² said Lawrence H. Goulder, a professor of 
environmental and resource economics at Stanford University.

As the European Union found after the 1997 Kyoto Protocol, figuring out how to 
assign emissions credits is not easy.

Whatever the decisions, chances are that they will be met by a lawsuit. Margo 
Thorning, the chief economist at the American Council for Capital Formation, a 
group supporting business interests, argues in a study that ³sharp cutbacks in 
California¹s energy use would be necessary to close the 41 percent gap in 2020 
between projected emissions² and the cuts the law requires. Dr. Thorning added 
in an interview, ³The technologies that will enable us to move quickly in a 
cost-effective way away from fossil fuel just aren¹t there yet.²

Allan Zaremberg, president of the state Chamber of Commerce, predicted that 
businesses would flee to unregulated areas and continue to emit climate-changing

Dr. Thorning¹s study was countered in mid-August with a study by David 
Roland-Holst, an adjunct professor of agricultural and resource economics at the
University of California, Berkeley. Professor Roland-Holst argued that the new 
law would add $60 billion and 17,000 jobs ‹ in fields like alternative energy ‹ 
to the California economy by 2020 by attracting new investment.

James D. Marston, the head of state global warming programs for Environmental 
Defense, the New York group that helped lead the fight for California¹s new 
carbon cap, said, ³We¹ll look back in 10 years and say this was the final 
breakthrough and the final political consensus that we have to do something 
meaningful on global warming.²

Copyright 2006 The New York Times Company

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