In 2006, California passed a landmark piece of legislation known as AB 32, Global Warming Solutions Act, which called for reductions in greenhouse gas emissions to 1990 levels which would be effective in 2020. This model for future Federal action was passed by a state Democratic legislature with support from labor and businesses and signed into law by a Republican Governor. AB 32 upped the ante to reduce emissions and improve air quality.
Suddenly, chapter two for AB32 is beginning: a November ballot for Proposition 23 wants to repeal this Act.
Why? On one side of the aisle are supporters of clean air that include many consumers and local companies along with venture capital firms who financed clean tech projects that have led to new job creation in California and other parts of the U.S. On the other side are the oil companies who want to “suspend state laws” requiring reduced greenhouse gas emissions until the unemployment rate drops to 5.5% for 4 consecutive quarters.
The most important player in all of this is Washington DC. The model developed by the Golden State has been incorporated into the House and Senate versions for pending energy reform and clean tech innovation and development. Many states, including the Northeast’s ten state Regional Greenhouse Gas Initiative, are using the AB 32 template as a method of reducing pollutants.
As I always state, I am a financial professional, and this is not a political column. These are my observations of the playing field today. And, I think that repeal of AB 32 would be a real step backward.
Let’s go to the tape—or rather balance of trade. 2008 was a record year for U.S. crude oil imports as we exported over $400 Billion in cash out of the U.S., followed by $200 Billion in 2009 and already $30 Billion last month.
The late Senator Everett Dirksen once said, “A Billion here, a Billion there, soon you’re talking about real money.” Imagine what he would say today? In an era when we are concerned about deficit reduction, let’s see if we can turn the page on this chapter of imported energy.
The situation in California seems to be similar to the one Washington: not enough people are listening.
Look at corporate America: August has seen a feeding frenzy with M&A activity. First was BHO Billiton’s $38.6 Billion unsolicited offer for Potash. This was followed by Dell’s $1.15 Billion bid for 3Par, just to be topped by HP’s $1.6 Billion bid. On August 13th, 3Par stock closed at $9.65, and today is $27 with no change in business, and even talk of a higher price by Dell. Both Dell and HP have found what they believe to represent value for their respective shareholders, yet still few new plants or jobs are being created.
With $1.7 Trillion currently in cash hoarded by corporations, a small number of companies are slowly starting to use it on merger partners, stock buybacks, or dividend hikes. That’s good for shareholders. But again, it probably does not result in new jobs or improvement in sustainability.
And, Washington, what about the jobs? Do you think that any of these acquisitions will result in new jobs, or new plants?
And, California, do you think that the repeal of AB 32 will result in a gain of jobs to get to the 5.5% level?
If Washington can’t take the lead with climate and energy legislation, how can we expect Californians to react? George Schultz, former Ronald Reagan cabinet member, said, “As a former Secretary of State, I see our dependence on foreign oil as one of the greatest threats to national security, and the dirty energy proposition would undermine efforts to break that dependence.”
In 1990, under Bush 41, Congress approved the Clean Air Act to control pollution. It required the EPA to develop regulations and added provisions to reduce acid rain and other pollutants. As the EPA takes the lead, the states have elected to construct their own methods of compliance while California has been leading the pack for twenty years. Yesterday, AT&T and Sun Edison opened a rooftop solar facility in San Diego with plans to build 5 more in California. San Diego Mayor Jerry Sanders said, “Our residents and businesses have embraced clean energy, which not only benefits our environment, but our region’s economy.”
The world is looking to Washington for leadership, and Washington seems to be looking to California. In the end, what will Washington do?
Will Washington allow the clean tech revolution to move offshore to China, India, and Europe, or create a framework for clean tech to grow and prosper at home? Washington needs to provide direction. Washington needs to provide certainty.
While California based SunPower and BrightSource Energy, and internationally recognized GE and First Solar would benefit from the current California initiatives for solar and wind installations, it is a tough pill to swallow at home that there is much stronger support outside of the U.S. to reduce the dependence on fossil fuels right now.
Let’s not forget what Albert Einstein said: “We can’t solve problems by using the same kind of thinking we used when we created them.”
To all of our leaders from all parts of the country, it’s time to smell the roses. It’s time to provide some leadership. It’s time to do the right thing.