California’s AB 32 Still on the Hot Seat (Prop 23 Defeat Based on Economic Fallacy)

By Tom Tanton -- November 10, 2010

On November 2, California voters defeated Proposition 23 by 61 to 39 percent, rejecting a suspension of of the state’s Global Warming Solutions Act, otherwise known as Assembly Bill 32 (AB32).

California in general bucked a national trend on Election Day with all but one statewide office going to the Democrats. As of this writing, the Attorney General race has the Republican Steve Cooley slightly ahead in the vote count, but no official call has been made.

Pundits and politicians are making much about the Proposition 23 vote, but what does it really say? Equally important is the national message to be taken from the proposition’s defeat.

It is not what is being portrayed by the otherwise humbled Left environmentalists.

Mainstream Hype

Fred Krupp, president of Environmental Defense Fund, said the Prop 23 defeat sends “a big signal” to the rest of the country and the world that Californians stand firmly behind the law, which would cut greenhouse gas emissions in the state to 1990 levels by 2020. “This is the largest referendum anywhere on the planet where people have directly voted on clean energy and climate policy,” Krupp said in an interview. “It’s the largest state in the country sending a clear message that they want a clean energy economy and clean energy jobs.”

The primary cheerleader for AB32, Governor Schwarzenegger, was not shy about his feelings either, calling Proposition 23’s defeat “a huge, huge victory” for California, the state’s environment, the green-tech industry and job growth.

Schwarzenegger says he wants to take the same coalition that defeated the ballot measure – which includes Republicans, Democrats, environmentalists, organized labor and high-tech entrepreneurs – to Washington, D.C., where efforts to pass national climate change legislation have been declared dead by President Obama. “This was a victory over … greedy oil companies from Texas who are trying to flex their muscles,” adds Schwarzenegger.

“Green Jobs” Spam

Reading the bigger lessons of this vote is difficult, as the campaign in opposition to Proposition 23 kept changing.

As I wrote right here back in May, the debate moved, and still moves. California was to lead the global parade, with other states and countries following. Didn’t happen. In fact, most states that had originally signed on to the Western Climate Initiative have dropped out or suspended their own activities until their economies improve. The Chicago Climate Exchange is effectively shut down. Prices in the Regional Greenhouse Gas Initiative (RGGI) in the northeast states have collapsed due to disinterest.

In the face of such isolation on “doing something” about climate,  proponents of the massive regulatory scheme (opponents of the proposition) began promoting ‘facts’ that somehow implementation of AB 32 would lead to an influx of ‘green jobs’ in the market.

Jobs, jobs, jobs–a new New Deal for California.

Even from the viewpoint of the ‘greens’ on ‘green jobs’, the employment impact of government-dependent employment will not be significant anytime soon. A recent study by the American University Investigative Reporting Workshop found for all the massive investment by the American Reinvestment and Recovery Act in wind and solar energy, the bulk of dollars spent and jobs created end up overseas in countries like Denmark, Germany, China and Japan where manufacturing of these technologies occurs.

From the green perspective, we invent and they make.

Arguing on the Merits

As late as October, the Proposition was ahead in polls, although short of a 50% majority, at 43% to 42%, according to the Public Policy Institute’s poll. As the debate issues morphed, support waned.

For a time, the opposition touted “the energy security” that would result from heavy handed market intrusion, until I and others pointed out that many of the regulations, such as the Low Carbon Fuel Standard, would actually worsen our reliance on imported energy from unstable regimes, like Venezuela and Iran.

For a little while it focused on global warming’s impact on state water supplies, until it was noted that concrete for water infrastructure would skyrocket in price under AB32. The arguments kept coming, and having been at this for five years (pre-dating adoption of the law) I was sure there would be other cataclysmic projections of what would happen if AB32 was suspended.

There were times as well, that the opposition claimed that AB32 couldn’t possibly be the culprit in California’s high unemployment and economic malaise, as most of the regulations will not be enforced until later next year or the following year. The proposition’s opposition ignored the irony of claiming all of the green jobs and venture capital investments ARE the result of that same yet-to-be-enforced law.

In any event, claims of jobs loss or of a jobs cornucopia relied ultimately on computer models. Empirical evidence from Spain, and Italy, and Denmark and Germany was ignored because Californians consider themselves unique and uniquely clever…we’d never implement identical programs so poorly. While we may be clever, we also have a short memory, having completely forgotten the failure of electricity “deregulation” debacle of 2000, wherein Californians’ mis-implemented a different program similar to Europeans.

Attacking the Messengers

Appearing to have lost on their arguments against suspending AB32, advocates took to attacking the messengers, especially the oil companies providing much of the funding for the initiative. The massive BP spill in the gulf didn’t help. Steve Maviglio, working for the No on 23 campaign, wrote on the California Majority Report, a blog to which he is the main contributor:

“More dirty energy money continues to flow into the campaign by Texas oil interests to buy their way onto the California ballot,” rang the critics.

Ads run in opposition to Proposition 23 tactlessly showed refineries (see above) spewing clouds of smoke, never mind that California has the strictest emission rules in the nation. That fact would not have been changed if Proposition 23 had passed.

The opposition also claimed that passage would threaten the health of Californians (see below).

In the end days of the campaign, the argument returned to the 125,000 green jobs created in California and the $9 billion in venture capital invested in green technology. Opponents of Proposition 23 used that as a cudgel to convince voters that green jobs are our salvation.

Not seen in the debate were the shattered windows…manifest in 2.25 million unemployed. Those were just blamed on the nationwide recession. The fact that California’s unemployment is fully 3 percentage points above the national average was too deep in the weeds to build campaign slogans.

Conclusion

So what does the Proposition’s failure tell us? Fred Krupp is partially correct when he says “It’s the largest state in the country sending a clear message that they want a clean energy economy and clean energy jobs.” He’s right that California wants jobs, preferably clean energy ones. But they were misled into thinking AB32 will provide that solution.

Taking the national perspective, proposition 23’s failure tells free marketers that we need a long-term effort educating the public and Congress on the fallacy of “green jobs” that are wholly dependent on subsidies and mandates. Our side must also be ready for shifting arguments as new poll-tested rationals pop up.

California is committed to implementing AB32, and the results will speak for themselves. Will our economy improve and unemployment drop, or will we see a continuing slide? Will prices for energy and energy intensive goods moderate, or will we see California continue to have way-higher prices than the rest of the nation, or worse?

The new Congress would be wise to wait and see the real results of Proposition 23’s defeat, measured in real economic performance, rather than the “read” from pundits claiming to know what the vote meant. It is too bad that California will have to pay the price for this data.

As a Californian who wants a more prosperous future, this is a sad time. There is such thing as economic truth. Resources spent by government are resources not spent in the private sector, and higher-cost energy is a net negative for the state.

But there will be a next time for California, and voters will be wiser. “Green” energy is a futile crusade, as is a quest for  “stable” climate.