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Greener California could impact business

Scott Jagow Aug 31, 2006

SCOTT JAGOW: Sometimes, California behaves like a country. We have a good example of that today. The state senate has passed what could be a ground-breaking measure to attack global warming. It would force major industries to cut their greenhouse gas emissions by a quarter. Governor Arnold Schwarzenegger hopes other states .. And countries… Will follow suit. Daniel Kammen co-directs the Berkeley Institute of the Environment.

DANIEL KAMMEN: The California bill is estimated to reduce almost 200 million tons of carbon emissions by 2020. So that’s about six times the total reductions from the New England and Mid-Atlantic states combined. So it’s just a big jump up in the amount. And it also puts in place a trading mechanism so that we can really use the market as our friend here to find the economically most efficient ways to do this reduction.

JAGOW: Well, in Europe they’ve tried this. And it’s fair to say that the idea has struggled. Some people would even say it’s even failed. Why do you think it’s going to work here?

KAMMEN: Well, I think the European experiment is really one that’s very much in progress. And they’re working across many more national boundaries. It’s harder to harmonize among the different European nations. What California has going for it is two things: One, it’s a major supplier and consumer of energy, so there’s lots of energy being traded. It’s got a diverse mix with nuclear and gas turbines and wind and solar all being used in the mix. And, it imports power, importantly, from its neighborhing states — including neighboring countries Mexico and Canada — so it’s going to have reach in a lot of places. So it’s got a much more healthy market dynamics from the outset.

JAGOW: That sounds good in theory. But there are companies that are opposing this. So they obviously think that the costs will outweigh the benefits.

KAMMEN: Well, that’s right. And so, if you think of, for example, your fossil fuel company — a traditional pump-oil-and-refine-it company — and if you think of yourself as an oil company, then you’ve got to find ways to buy credits and offset the emissions from that. But, increasingly, energy companies are finding themselves not thinking about that “I’m an oil company or a coal company” but “I’m an energy company.” And the leaders in that regard — British Petroleum is a notable example — they’re seeing this as a market-expanding opportunity.

JAGOW: Well, what I want to know as a consumer of electricity and gas here in California . . . How is this going to affect my power bill? How’s it going to affect my gas bill?

KAMMEN: We actually expect utility bills to remain roughly level or go down a bit. And that’s largely because what you’re trading off is easy access to more natural gas supply for more power plants, with lower volatility. Because, as you build up the amount of renewables in the mix, you’re going to have more price certainty. And many companies and many consumers are more sensitive to volatility — seeing your bills double and triple on a given month — than the potential downside of initially higher cost of renewables.

JAGOW: Well, it sounds like you’re fully in support of this measure. I guess, coming from a skeptical point of view . . . I don’t know if you saw the documentary, “Who Killed the Electric Car”?

KAMMEN: I certainly did.

JAGOW: Well, California was fingered as an accomplice in that because the state caved under corporate pressure and the electric car disappeared. So what’s the risk that could happen here?

KAMMEN: Well, I think the risk is greatly reduced because the end part of the story of the electric vehicle — the so-called zero emission vehicle — is that California effectively traded their requirement to have pure electric vehicles on the road for a portfolio of emissions from all of our cars that was actually lower. So, we effectively traded command and control for some market forces. We’re going to see the same thing here because not only is AB32 going to institute this market mechanism, but it’s going to make us do the full carbon accounting for power, whether it’s generated in California or outside. So I think that “Who Killed the Electric Car: Detroit’s Drive-by Shooting,” as it’s often called, is unlikely in any scenario to result from AB32.

JAGOW: Alright, Daniel. Thanks so much.

KAMMEN: It’s a pleasure. Thank you.

JAGOW: Daniel Kammen is a professor at the University of California – Berkeley.

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