Viewing blog posts written by Gino DiCaro
Wall Street Journal editorializes about the 'price' of California's AB 32Posted by Gino DiCaro, VP, Communications on July 12, 2012
Would a family be willing to pay the equivalent of two additional mortgage payments per year for California's greenhouse gas (ghg) reduction program?
That's a question many will have to answer as California's AB 32 regulatory scheme slowly becomes complete and families face $2,500 in additional annual costs from higher energy bills and more expensive consumer products.
This week the Wall Street Journal editorialized on the cost and economic impacts from the California-only greenhouse gas regulations and argued that the state should stop pretending that it won't have to pay dearly to reach it's ambitious global warming goals.
To ring the alarm, the WSJ used a recent CMTA-commissioned report, conducted by Andrew Chang and Company, on the economic impacts of the complete regulatory scheme. The editorial also focused on a seperate report by the Boston Consulting Group on the costs of the state's low carbon fuel standard -- one of the many policies being used to reach our 1990 ghg levels.
Below is the article, in case you missed it.
Following the WSJ article are charts on the eye popping costs of the program.
In 2006, the Legislature promised that AB 32 would help clean the environment and protect the economy, not raise utility and gasoline bills on hard hit families and employers. The numbers coming to light five years after AB 32’s passage, and only months before full regulatory implementation, are likely not what the voters had in mind.
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When manufacturers leave, you won't hear a howlPosted by Gino DiCaro, VP, Communications on May 16, 2012
The California Business Alliance for a Greener Economy recently retorted in Fox and Hounds that the California manufacturers "continue to cry wolf", after we wrote a piece on the needless employer costs being built in to the California Air Resources Board's carbon cap-and-trade auction. The group's response did not substantiate any miscalculations in our $3 billion cost estimates on refineries and food processors, they are just annoyed with our positions on AB 32.
Below is their piece with our responses in bold.
CMTA response: We are looking forward to learning where our numbers are wrong or misinformed.
Let’s take a look back: CMTA hated AB 32 when it was first developed. They formed the so-called AB 32 Implementation Group to pushback progress each step of the way. They supported Proposition 23 to avoid the standards and kill competition. And they’re still at it, dreaming up worse case scenarios to keep California addicted to the old, dirty, dying fuels of the past.
CMTA response: You must not have been around California for very long. By 2006 California manufacturers were already the most energy efficient in the country and paid electricity rates 50 percent higher than the rest of the country. Added costs from AB 32 will cause production and emissions to “leak” to less regulated states and countries, hurting the environment. To minimize leakage, we advocate that AB 32 be implemented in a cost effective and technologically feasible manner, and any true environmentalist would agree. Still waiting for information that proves us wrong that there are billions in needless costs.
But poll [after] poll shows broad public support for AB 32 for a reason: it’s an economic engine for California, attracting $3.5 billion in private clean-tech investments. Since AB 32 was passed more than five years ago, it has propelled clean energy into the spotlight and ensured its place as a bright spot in our economy.
CMTA response: Actually, clean-tech investment was high even before AB 32 passed. Too bad clean-tech investments in California are not translating into manufacturing jobs for the middle class, and green jobs are not any higher here than Texas. Our polling shows that the public generally supports AB 32 but are not willing to pay higher energy or gasoline costs. Hoping to see something soon about where we are wrong on the billions of dollars!
Let’s face it, big business groups have a long history of claiming that any given regulation will drive them out of business and/or create an economic slowdown. These predictions of gloom are seldom realized.
CMTA response: It’s actually pretty gloomy in the manufacturing sector. Lost over 630,000 jobs in the last 10 years, more than the national average. California is among the worst in the last five years for new manufacturing facilities and expansions per capita. Starting to think there isn’t going to be any credible argument that we are wrong about the billions of dollars.
And by putting a price on carbon, AB 32 invests polluter fees into the transition to cleaner and less expensive energy sources.
CMTA response: Now we are getting somewhere! But you are confused – the “polluter fees” are not necessary to “put a price on carbon” - that is accomplished by freely distributing permits under a declining cap and allowing trading of permits. The sale of permits simply imposes a huge new tax. You seem reluctant to put a dollar figure on the “polluter fees”. Billions of dollars perhaps?
I represent thousands of California businesses and they understand that market-based solutions – like a cap and trade program – are the most effective ways to send clear signals to companies and investors. Those signals create a financial incentive for reducing pollution, and a profit motive for developing clean technologies.
CMTA response: Right! A cap and trade program will accomplish AB 32 goals. We don’t need “polluter fees” to raise extra revenue that comes from imposing a multi-billion new tax on manufacturers. We might be getting somewhere here!
But don’t take my (or California’s) word for it. Look at cap and trade in the northeast. The Regional Greenhouse Gas Initiative generated $1.6 billion in net economic benefits to the region with the average industrial consumer saving $2,500 per year.
CMTA response: Apples and oranges. RGGI is electric generation only, it doesn’t directly regulate manufacturing, natural gas and gasoline as we are doing in California. California has been doing energy efficiency in the electric sector for decades. We have lost track of the billions of dollars, could we get back to that?
AB 32 is not just one policy, and it’s about more than the proceeds of one auction. It’s a portfolio of strategies to transition California to a clean energy economy.
CMTA response: Sorry, ignoring the multi-billion dollar tax from multiple auctions and surrounding it with other policies won’t make it go away.
Yet, after being proven wrong time and again, CMTA continues to cry wolf. But I’ve never heard a howl.
CMTA response: You won’t hear a howl. Manufacturers will leave the state silently, without a word, 630,000 jobs and counting.
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California's cap-and-trade auction creates billions in needless costsPosted by Gino DiCaro, VP, Communications on April 25, 2012
The California Air Resources Board's (CARB) cap-and-trade auction will create needless costs for employers at a time when our state must compete, scrap, wrangle, advocate and fight for every high-wage job we can get.
These costs will seriously hamstring our ability to grow. What most people don't know is that CARB is asking employers to pay for far more emission credits than are needed to reach our goals. California will reach it's 1990-level greenhouse gas emissions without the economy-debilitating cap-and-trade auction, but CARB continues to move forward.
In the charts below, the red zone represents the amount that two particularly critical sectors -- refiners and food processors -- will have to pay to purchase emission credits in CARB's auction over the next eight years. Those credits will be purchased even though the particular sector will already be on track for 1990 levels, with annual 2 percent reductions.
This punitive energy tax equals $2.96 billion in California-only costs on the refining industry and $163 million on the food processing sector. Remember too, while this auction raises a windfall of money, the 2006 AB 32 legislation prohibited revenue collection beyond the administration of the program.
(click images for larger pdf)
The high price of the proposed cap-and-trade system was also highlighted in the following Sacramento Bee piece authored by CMTA President Jack M. Stewart:
ARB twisted cap-and-trade into a job killer
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Moody's says climate change rules are emerging risk for California refinersPosted by Gino DiCaro, VP, Communications on March 23, 2012
Only time will tell how much AB 32 will actually cost California.
Since our landmark global warming bill passed in 2006 there has been no shortage of guessing about the costs and benefits of mandating greenhouse gas reductions on California's economy. Now all the rules are in place and experts are sharpening their pencils and assessing the outlook. The most recent regulation, cap and trade, requires manufacturing facilities, refineries, and large public agencies to hold “allowances” for their emissions starting in 2013. California is preparing for the first auction of allowances in August.
Cap-and-Trade joins one of the earliest regulations under AB 32, the Low Carbon Fuel Standard to require more biofuels and alternative transportation fuels in the mix. The third policy to purchase 33 percent of our electricity from renewable sources was adopted last year.
Now, instead of guessing, we can see early indicators of higher future costs. Last week the independent credit ratings company -- Moody's Investors Service -- reported that California's rules create an emerging risk to the operating costs, competitiveness and growth of the in-state refineries. This is information important to bankers and investors as they figure out how much risk is involved in loaning or investing dollars into a business.
And after paying almost $4.50 per gallon for gas this month (highest in the country, sans Alaska and Hawaii) every California consumer should be concerned about "emerging risks" on California refineries.
Here’s what Moody’s said:
Meanwhile New Mexico abandoned its cap-and-trade program last month, one of the last remaining holdouts in the United States. New Mexico Environmental Improvement Board Chairman Deborah Peacock said, "the intent was that all these states would be doing this cap and trading, and everyone’s dropped (out) except for California and New Mexico. That, to me, was very significant."
New Mexico saw early indicators of high costs that we have ignored, so far.
(You can purchase the Moody's report here)
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AB 32 was not intended to be a revenue raiserPosted by Gino DiCaro, VP, Communications on Jan. 30, 2012
This weekend, Gov. Jerry Brown proclaimed that revenue from the cap-and-trade system under AB 32 will go toward the construction of California's High Speed Rail project.
AB 32 was not intended to be a revenue raiser for the state of California. We dug up then-Assembly Speaker Fabian Nunez' 2006 letter of legislative intent before the bill was passed, which made it unequivocally clear that revenues raised under the regulations were not to go beyond the administration of the AB 32 program. Have a look:
Click image for full pdf
While more than 500 facilities struggle to pay for a costly cap-and-trade system in just the first year of the program, the State of California is already finding other ways to spend the money they weren't supposed to collect in the first place.
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