The purpose of AB 32 is to accelerate the movement away from carbon-based energy sources such as oil and coal to alternative energy sources including solar and wind. AB 32 consists of rules and incentives to encourage businesses and consumers to become more energy efficient and to slowly switch energy sources to cleaner energy. Proposition 23 would suspend AB 32 until the state's unemployment rate was below 5.5% for a year, which is unlikely to happen before 2020 at the earliest.
The principal components of AB 32 are greater fuel efficiency standards for vehicles, a requirement that utilities get 33% of their energy from renewable sources by 2035 and an emission trading system (cap and trade) where the amount of allowable greenhouse gas emissions are reduced every year and emitters can buy and sell permits with the objective of meeting the goals in the least cost approach.
I support AB 32 for four principal reasons none of which relate to reducing global warming, which would come as an added benefit. My support comes after serving for eight months on an economic review committee that provided an independent assessment of the ARB and other economic analyses of AB 32. Our report can be viewed at
One, AB 32 will lead to lower energy costs through facilitating efficiency innovations and providing a broad market that will accelerate cost reductions for alternative energy sources. While alternative energy sources in the beginning are more expensive than carbon-based energy such as oil, this will change over time as oil prices rise and alternative energy prices decline. As a result, consumers and businesses will save money in addition to the money saved as AB 32 policies spur energy efficiency.
Two, there are health and air quality benefits to Californians that are real although they are not counted in the conventional economic analyses of AB 32. The reduction of greenhouse gas emissions will, at the same time, reduce emissions that cause local air pollution, which in turn causes illness and associated health care costs.
Three, AB 32 will continue to make California the most sought after location for new firms seeking to develop innovative products and services to meet the demand from consumers and businesses for energy efficiency. These efforts, which now lead our venture capital sector, can make California a center for innovation in new battery technology, electric vehicles and products and services related to solar energy. The local venture capital community, the Silicon Valley Leadership Group (including the Valley's largest technology companies) and the Bay Area Council all oppose Proposition 23 along with the Governor and former cabinet Secretary George Shultz under Presidents Nixon and Reagan.
This week at the ARB hearing on the 33% renewable portfolio standard for utilities, the state's largest utilities supported the proposal and many, such as PG&E, also oppose Proposition 23.
Four, reducing our dependence on oil will have benefits for our national security and allow more flexibility in our foreign policy implementation around the world.
The intent of AB 32 is to shift the financial incentives away from using carbon-based energy sources such as oil. There will be a period of transition and it is certain that the use of oil for energy in California will be less than it otherwise would be without AB 32. All of the credible economic analyses conclude that the economic impacts of AB 32, which do not count health or air quality benefits or the emergence of new industries, are, nevertheless, small in comparison to the size of the state's economy. Moreover, any transition costs are likely to be less than previously expected as the deep recession will make meeting the emission reduction targets much easier in the next few years as emissions have fallen during the recession.