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  • California Climate Vote More about Protecting Investments

    California voters overwhelmingly rejected Proposition 23, the ballot initiative that would have suspended the 2006 Global Warming Solutions Act (AB 32) until the state’s unemployment level dropped below 5.5 percent for four consecutive quarters.

    AB 32 aims to return greenhouse gas emissions in California to 1990 levels by 2020. Many Californians saw Proposition 23 as a battle between out-of-state oil producers versus environmentalists and in-state venture capitalists spurring a clean energy revolution, so it’s no surprise California rejected it by a 61 percent to 39 percent margin. But the vote was not about climate policy to the venture capitalists in Silicon Valley. Rather it was about how their investments would fall flat without the taxpayers artificially propping them up.

    Businesses rightfully have an interest in protecting their bottom lines, and many of the venture capitalist firms calculated that AB 32 would be a huge boon to the so-called clean-tech industry. “AB 32 is a stimulus for economic growth and innovation,” said Tom Werner, chief executive of California-based solar panel maker SunPower Corporation. Perhaps for his industry, but not for the rest of the state. Heritage research fellow David Kreutzer points out:

    In addition to the standard environmental groups, those financing the opposition to Proposition 23 are mainly financiers who stand to gain from restrictions on conventional energy and billionaires who are far removed from worries over monthly energy bills and losing a job. The problem for the other 37 million Californians is that they do worry about how they can pay higher energy bills and about getting and keeping a job.

    This process, known as rent-seeking (because it causes businesses to lobby for rules in their favor at the expense of others), is bad economics, bad for the consumer, and bad for the state of California. Not only is there an opportunity cost to lobbying (business resources spent on lobbying could be spent elsewhere), but politics governed by special interests typically worsens conditions for the consumer. Consumers are the ones who bear the costs of these government policies; meanwhile, industry receives a seemingly free windfall.

    The tradeoff for less greenhouse gas emissions is higher energy prices and thus lost income and higher unemployment, which is why Proposition 23 was offered in the first place. Reports on cap and trade by government, and by think tanks—independent, left-leaning, and right-leaning—all conclude that cap-and-trade policies to reduce greenhouse gas emissions are economic losers. Studies from the National Black Chamber of Commerce, The Brookings Institution, the Energy Information Administration, the Congressional Budget Office, the Environmental Protection Agency, and The Heritage Foundation all found net decreases in income and employment—even after the government spends money to subsidize green jobs.

    Venture capitalists should bear the risk and, therefore, reap the rewards or suffer the consequences of an investment decision. But if the government dictates these decisions by subsidizing a portion of the project, the venture capitalists receive all the rewards with minimal risk. With start-up companies and large corporations alike receiving money from the government through direct subsidies, tax credits, and unnecessary regulations, firms will divert investments to clean-energy technology away from other potentially more profitable and value-creating investments.

    Alternative energy sources may be able to compete economically with more conventional ones and eventually replace them, but that process should be driven by the market. As Kreutzer notes, “Just as cars replaced horse-drawn carriages and electric lights replaced kerosene lamps (which replaced whale-oil lamps) and jetliners replaced passenger steam ships, it is likely that some new forms of energy will out-compete the old forms. If so, the developers won’t need mandates to get consumers to use them.” Profits and losses are a much better indicator of what producers should supply than what the government tells us we need.

    The rejection of Proposition 23 may seem like a victory for environmentalists hoping to revive a national cap-and-trade program. But it’s more of the same: government policies that create concentrated benefits and widespread costs.

    Posted in Energy [slideshow_deploy]

    7 Responses to California Climate Vote More about Protecting Investments

    1. Ron Kilmartin, Pleas says:

      Prop 23 died due to an overwhelming propaganda campaign by the eco-marxists, the green-gadget fleecers, and the cap and trade fleecers. However, Californians may have been duped this once, but let's wait and see what happens after 1 to 2 years of CARB AB 32 tyranny. To paraphrase a certain has-been actor and soon to be has-been governor and AB 32 promoter, we'll be back!.

    2. Pingback: PA Pundits - International

    3. John, Whittier, CA says:

      http://www.nytimes.com/2010/11/03/business/energy

      http://www.yinglisolar.com/

      Yingli is a large Chinese manufacturer of solar products.

      The link between Yingli, Prop 23 and California is Tom Steyer, a billionaire hedge fund manager. He invested $5 million of his own money to defeat Prop 23. His holding firm is a big investor in Yingli.

      http://www.calwatchdog.com/2010/10/28/prop-23-foe

      So here's the point. Steyer spent $5 million to defeat Prop 23 in order to protect the environment, but the only thing he is protecting is his wallet. Furthermore, I don't oppose one making a lot of money on such an investment assuming the State will be much improved. But this will not be the case. Yingli is likely to be the recipient of CA tax money to build solar cells outside of California. The Calwatchdog article says Yingli has plans to build a plant in either Texas or AZ.

      So the residents of CA – unemployment 12.4% – will pay higher energy costs (i.e. taxes via the global warming bill) to support the creation of green jobs in places like Texas and Arizona all in the name of global warming. Just another absurdity in land of California.

    4. Charles Sainte Clair says:

      Global Warming is a hoax, brought to you by the likes of Al Gore who plan to make a fortune out of it. Climate changes. When George Washington threw that silver dollar across the Potomac (yes I know that was a fable) it probably skipped across the ice. The little Ice Age was a fact. Many, many people died of starvation because of it. The Vikings took advantage of the warm weather during the 1000s to make homes and farms in Greenland. The Romans did the same thing around the year 1 A.D.

      Warm is a good thing. CO2 makes things grow. We would all be dead without it. And worrying about cow farts is certainly a huge waste of time. Hey, if I was rich and famous and lived at the beach or in Hollywood, I suppose I could waste my time pursuing the new Religion.

      Thank God I'm a Country Boy.

    5. Pingback: California Elects to Stay on Course for Economic Disaster | The Pelican Post

    6. Pingback: California Squirms with CIRM: The Embryonic Stem Cell Boondoggle | The Foundry: Conservative Policy News.

    7. Pingback: California Squirms with CIRM: The Embryonic Stem Cell Boondoggle | The Conservative Papers

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