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California's Model Climate Policies Will Maintain Momentum in Obama Second Term

A second Obama White House guarantees California a federal supporter in its crusade to slow global warming.

Nov 8, 2012
BrightSource's Ivanph solar project in California, first large-scale solar therm

For decades, California has been the engine of growth behind America's sputtering clean energy economy—adopting groundbreaking clean air and climate policies as federal efforts lagged behind.

The hope was that California's initiatives would become the template for a national law to slow global warming. 

That hasn't happened yet—and it isn't likely to over the next four years. In his second term, President Obama faces the same divided Congress that rejected carbon-reduction targets and a price on carbon dioxide emissions, two cornerstones of California climate policy.

But an Obama White House provides California a key federal partner that wants to regulate global warming emissions from power plants and cars and won't interfere. Steady support from the top might encourage other states to copy or join California's pioneering initiatives, according to policy experts and advocates, which only helps the Golden State.

"I can imagine a set of states deciding to take on something like California's program several years into an Obama administration, having warmed up to the idea of greenhouse gas regulation and having seen it work in practice," said Cara Horowitz, executive director of UCLA Law School's Emmett Center on Climate Change and the Environment.

California's clean economy is driven by at least four sweeping policies: an economywide cap-and-trade program that puts a price on carbon pollution; a low-carbon fuel standard that limits the sale of carbon-intensive fuels; a 33 percent renewable electricity standard; and rigorous clean-car mandates for automakers.

Some of those are brand-new, and many state and federal officials will be watching closely to see if the policies reduce heat-trapping gases while creating new business opportunities, rather than causing electricity price spikes and job losses, as critics contend.

Here's a rundown of the policies, and a look at how the second Obama administration could help them along.

Cap and Trade: Removing the Stigma

After six years in the making, California is set to launch the first auction of its cap-and-trade program on Nov. 14.

The program is the hallmark of California's global warming law, AB32, which requires the state to cut greenhouse gas emissions by 30 percent by 2020 and 80 percent by 2050.

Regulators will set a ceiling on CO2 emissions from utilities, oil extractors and fossil fuel-burning factories and require them to pay for their pollution by buying carbon allowances in quarterly auctions.

In year one alone, the program is expected to generate between $660 million and $3 billion in auction proceeds. By 2020, cap and trade could send $8 billion into state coffers annually.

California's program is the nation's second cap-and-trade system and the first to target carbon polluters across the economy. The Regional Greenhouse Gas Initiative limits emissions from power plants in nine participating Eastern states. In both cases the states established the program without federal involvement and approval.

Obama supported federal cap-and-trade legislation in his first term, and rumors are swirling that he might push for a national carbon tax to help cut the deficit. Far more certain is that his Environmental Protection Agency will finalize greenhouse gas limits for existing power plants and oil refineries.  

Any action from Obama on greenhouse gases could help chip away at the stigma of regulating carbon, said Horowitz of UCLA's climate change center. "States may learn that regulating greenhouse gas is actually not as scary as they thought it was." Already, some states are awakening to its economic benefits.

California tried to create a regional cap-and-trade pact with six other states called the Western Climate Initiative, but political will faded after Congress failed to pass federal climate legislation, the economy soured and skepticism about global warming became a tenet of GOP politics. A similar effort among Midwestern states was also abandoned.

For now, California is expected to link its scheme to Quebec's carbon market in 2013.

Matthew Kahn, an economist and professor of environmental economics at UCLA, said the more states that adopt cap and the trade, the better for California. "There would be less backlash ... if there's the perception that the rest of the country is catching up and that we're a trendsetter" and not a "green guinea pig."

Kahn explained that California's carbon polluters will each have to spend millions of dollars a year to buy pollution allowances, increasing business costs and raising the risk that jobs could "leak" to other states. If other states enact cap and trade, it would create a level playing field, he said. It would also increase the size of the pool for buying and selling allowances, which stabilizes prices of permits.

The ideal scenario, Kahn said, would be for California to link or fold its cap-and-trade program into a national carbon-trading scheme. While federal climate policy remains a remote reality, Kahn expressed slight optimism that if California's experiment proves good for the environment and the economy, moderate Republican lawmakers could get behind national carbon legislation.

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