Governor signs landmark bill to cap greenhouse gas emissions

By CMTA Staff

Capitol Update, Sept. 29, 2006 Share this on FacebookTweet thisEmail this to a friend

On Treasure Island on Sept. 27, with the San Francisco skyline in the background, Governor Arnold Schwarzenegger signed into law landmark legislation establishing a mandatory cap on greenhouse gas (GHG) emissions.

Now comes the hard part.

California must cut its GHG emissions by 25 percent by 2020; the California Air Resources Board is required to develop a plan by 2009, with a cap in place by 2012.  And all of this is supposed to happen without seriously damaging the state’s economy.  It is a tall order, and it won’t come cheap.  The cost of climate change mitigation – and the economic risks of California going it alone – could impact the competitiveness of businesses for years to come.

Industries consuming large amounts of energy – electric power, manufacturing, refining, steel and cement production, among others – will bear the brunt of compliance costs, further disadvantaging California manufacturers whose electricity rates are already 80 percent higher than for manufacturers in other Western states.

In a statement released on the day of the bill signing, CMTA president Jack Stewart pledged "to work with Governor Schwarzenegger to achieve his goals for climate change improvements and a growing California economy, and to help him renew California’s historical commitment to be the home for innovative, high-tech advanced manufacturing firms."

But Stewart offered a cautionary note about the potential impact of AB 32 (Fabian Nunez, D-Los Angeles) on the state’s manufacturing sector: "We are concerned that the existing severe cost disadvantages for companies in California might keep the Governor from achieving his goals, and would simply move more good jobs, investments and emissions outside the state."

Stewart pointed to a new cost study released the same day by the National Association of Manufacturers comparing the cost of manufacturing in the United States to the nine largest industrialized nations in Europe, North America and Asia. The result is a 31 percent cost disadvantage. If you add to that the 24 percent cost differential between California and the rest of the U.S. [Milken Institute, 2005] California's cost disadvantage in the global market is a staggering 55 percent.

"Manufacturers need to grow in the state in order for us to achieve the goals of AB 32 – actual reductions in global emissions at the lowest possible cost," said Stewart. "High energy costs have made California manufacturers the most efficient in the world. We need them to expand rather than have California simply import products from locations with less efficiencies, higher emissions."

"If California's global warming initiative fails and has a discernible negative impact on the state's economy, it would set back any national or international initiatives to do the same," said Stewart.

An immediate concern is that manufacturers will perceive AB 32 as an additional risk for making new investments in the state. Stewart challenged the Governor and legislators to encourage new capital investment by pledging to improve the competitiveness of California manufacturers.

"The legislative debate on AB 32 is over, but California’s opportunity to set the stage for meaningful reductions in global greenhouse gas emissions began this morning when Governor Schwarzenegger put his signature on AB 32. If we implement policies that encourage investment and economic growth along with emission reductions, California and the environment are both big winners. But, if we fail to deliver on Governor Schwarzenegger’s promise that environmental progress and economic growth are not mutually exclusive, California faces a very rough road ahead."

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