California Dreaming

The San Andreas Fault separates California from the rest of America, but politicians in the Golden State aren’t waiting for the “Big One” to split from the rest of country. Last October, the General Assembly in Sacramento triggered a legislative earthquake by imposing draconian, state-wide limits on carbon dioxide production, the byproduct of human activity and purportedly one of the leading causes of global warming.

Assembly Bill 32, the “California Global Warming Solutions Act of 2006,” makes California the first state in the nation to broadly limit CO2 emissions. Cosponsored by radical groups like Environmental Defense and the Natural Resources Defense Council, AB 32 establishes an overall cap on the production of CO2 and a mandatory new reporting system to track emission levels across the state. This law will force California to ramp CO2 production back to 1990 levels by the year 2020.

Thanks to AB 32, the new powerbrokers in California are not Hollywood studio chiefs or Silicon Valley venture capitalists, but rather the officials in an obscure state bureaucracy called the California Air Resources Board (CARB). These bureaucrats now have a broad mandate to develop the regulatory framework to force compliance with the new emissions restrictions.

California’s population was 29.7 million people in 1990, and is expected to grow to 42.2 million by 2020, according to the U.S. Census Bureau. These new residents will create a staggering 41% gap between projected emissions and the limits set by AB 32.

How can the state close this gap? Californians’ electricity rates are already about 40% above the national average; and state law currently prohibits construction of nuclear power plants, a low-cost source of CO2-free power. Dr. Margo Thorning, the chief economist at the American Council for Capital Formation, wrote in a study last summer that “technologies simply do not exist to reduce total (and per capita emissions) over the next 14 years by the amounts mandated in AB 32 . . . without severely reducing the growth in California’s Gross State Product (GSP) and in employment.”

Less allowable carbon means less energy. Less available energy, coupled with higher expected demand, means higher energy prices. Higher energy prices mean a booming market in “carbon offsets” for wealthy movie stars and their patrons and extremely unaffordable energy for the rest of working, commuting California.

Even worse, these new burdens on California’s economy will do almost nothing to reduce the planet’s total production of CO2. That’s because commodity markets, like those for fossil fuels, are global. Carbon abstinence in California will drive the market price down for other consumers, whether they live in Nevada, Canada or China. Lower prices stimulate new demand.

Thus, even if one agrees that global warming is occurring and that human activities are the cause, California’s unilateral restrictions are counterproductive and will simply force businesses to leave the state. Indeed, California is already one of the most carbon-efficient economies in the world. Pushing manufacturing out of California to other states and to competing nations might actually result in greater net carbon dioxide production. As a spokesman for the California Chamber of Commerce noted last year, “Our primary concern is that [this legislation] will drive our costs higher and take jobs and greenhouse gases elsewhere.”

So what is California to do? Handicapped by a deeply flawed legislative mandate, some Golden State pols are hoping that their newly empowered congressional delegation in Washington, D.C., can force the rest of the nation to drink the same carbon-free Kool-Aid. One of San Francisco Democrat Nancy Pelosi’s first acts as House Speaker was a tactical end-run around Energy and Commerce Committee Chairman John Dingell (D., Mich.), no friend of extreme environmentalists. Promising House consideration of national global warming legislation by July 4th, Rep. Pelosi created a new Select Committee on Energy Independence and Global Warming, and put Rep. Henry Waxman, who represents Beverly Hills, in charge of it.

In the Senate, California’s Barbara Boxer is perhaps the most extreme congressional voice on this issue. As the new chairman of the Senate environment and public works committee, she wields an influential gavel. Her well-orchestrated March 21st committee hearing on the dangers of climate change turned into a public relations circus — the de facto East Coast coronation of former Vice President Al “The Goracle” Gore. Sen. Boxer claims that unless Congress enacts new taxes and other limits on energy consumption, “we could risk global climatic disasters on an unprecedented scale, ranging from dangerous sea level rise, to increasingly damaging hurricanes [such as Hurricanes Katrina and Rita], increased deaths from air pollution and disease, to widespread geopolitical instability.” Scripts this scary used to be produced in Hollywood, but ever since the Oscars, it is getting harder and harder to sort fact from fiction.

The first real casualty of all the hype surrounding global warming seems to be simple economic common sense. Just a few years ago, in 1997, a Senate resolution sharply criticized proposed CO2 limits under the Kyoto Protocol, calling on then-President Clinton not to sign it or any other international climate change agreement that “. . . would result in serious harm to the economy of the United States.” The Kyoto Protocol would have compelled the U.S. to reduce carbon dioxide emissions to 7% below 1990 levels by the years 2008 to 2012. Adopting Kyoto-style restrictions would have cost the economy 4.9 million jobs, something Sen. Boxer and 96 of her Senate colleagues apparently found morally, or at least politically, unacceptable.

Unfortunately, with AB 32, California has adopted its own mini Kyoto, so Sen. Boxer, Rep. Pelosi and Rep. Waxman are “all in” at a high-stakes game of tax, cap and trade. This push from the California delegation stands American federalism on its head. Competition and innovation among the states are the driving force behind federalism, but Sen. Boxer and Speaker Pelosi hope to take an extravagantly expensive idea from their state and force it on the rest of us, even as similarly draconian carbon restrictions are failing miserably in Europe.

In reality, continued economic prosperity is essential to addressing real environmental challenges. Congress should be considering a positive environmental agenda that strips away agriculture subsidies, drops tariffs on cleaner and cheaper fuels, and eliminates other barriers to technological innovation like excessive taxes on new capital and investment. Unfortunately, environmental stewardship informed by the laws of supply and demand will do nothing to bail out California.

Mr. Kibbe is the president of FreedomWorks.