March 19, 2007 - From the March, 2007 issue

Governor's Office Begins Studying Ways to Implement AB 32 & Reduce Greenhouse Gas Emissions

AB 32, California's landmark greenhouse gas law, was signed last November, but many years will pass before it takes effect and begins to contribute to a cleaner environment. In the meantime, state policy makers are collaborating with a range of business and environmental leaders from around the world to craft AB 32 into effective, realistic regulations and markets to protect the global environment and stoke the state economy. Preliminary talks have already begun, and MIR was pleased to discuss these crucial early efforts with Gov. Schwarzenegger's Deputy Chief of Staff and Cabinet Secretary Dan Dunmoyer.


Dan Dunmoyer

CalEPA recently hosted a meeting with representatives from European countries that have already begun to implement regulations to stem global warming. What did you learn from them, and how applicable are the efforts of German and Great Britain to California?

Their perspectives are very valuable. The governor is an international individual. He sees the world through the eyes of the entire world, not just California. Obviously he loves California, but because of his personal background he is always asking his staff not only what the other states do but what other countries do. Europe has done some very positive things and dealt with some challenges. As we develop processes for implementing AB 32, we can learn from their experience in developing a market in a manner that is understandable and also economically viable for business.

Former Speaker Bob Hertzberg is leading an environmental firm producing 4th generation solar products in Wales. He has suggested, in a CBS evening news special report, that more green innovation is happening in Europe than in California. Is he right?

That's a premature statement only because our greenhouse gas emissions reduction law has been in effect for about nine weeks. We actually held meetings before the law was enacted (in January), and we established an executive order within the first couple days of the law's coming into effect to make sure that we're on top of these issues. I don't know how much faster a governor can act. The week before last, we even entered into regional cooperation with the entire western United States to make sure that the implementation of AB 32 doesn't negatively affect business but still moves more quickly than the federal government.

This was all about action. We're ahead of schedule based on the law. The law says we have to do something by July, whereas we've already had multiple meetings. That doesn't mean we shouldn't be moving faster nationally, and that's why the governor took a state action rather than waiting for the feds to act. On the federal level, that's right: we have not moved quickly enough.

What reaction has AB 32 generated from environmental groups and industry now that they've had a chance to look at and weigh in on the legislation?

From the environmental community, it's been off-the-charts excitement, on a state, national, and international basis. I receive emails and requests for meetings from people all over the world wanting to partner with California. We're very excited about this. Members of parliaments, prime ministers, and premières have all asked to meet with the governor.

From the business community, there's been a mixture of reactions. There's a group that's very excited and interested in partnering with us on the market systems. Others are still interested in working with us, but they're anxious about its implementation. I don't think that's a negative, because this is one of the most profound pieces of legislation in the world and its impact on business will be noteworthy. It's a little early to say that they've fully signed on, but they're actively participating. We have about a ten-to-one ratio of applicants to positions available on the different committees and advisory groups.

How will California's regulatory and market-based approaches play out?

The law is clear that there have to be regulations, standards, timeframes, and goals. The issue of markets, which was a point of controversy and challenge, is a voluntary option for the governor. He has made it clear that along with the regulatory side he's going to build in a market mechanism. Generally speaking, that's been well received by both the environmental community and by the business community, because it's the most cost-effective way to implement these aggressive goals so that it has a positive effect on the environment without having a negative effect on the economy. That balance has been the trademark of the Schwarzenegger administration.

Unlike many of those European countries, you're working without a template. How hard is it to be a trailblazer and to do so without federal support?

Because of the nature of the regulations, AB 32 is the most aggressive greenhouse gas reduction act so far in the world. That in and of itself makes implementation a daunting task. Our goal is to move back to 1990 levels, and it's hard just to determine what those are. We have to set those levels accurately; if we don't, the market won't operate effectively.

It can have two effects: first, it is too lax and doesn't really mean anything, or second, it is overly aggressive and the only way to achieve the reduction in GHG is to reduce output-as in manufacturing output, not just greenhouse gas output. The daunting task right now is to set the benchmarks for industries that were in place 17 years ago. That's where European countries ran into some of their problems. We need to establish a vibrant marketplace that is aggressive but not overly aggressive.

CalEPA has been charged with coming up with measures that they can present to the advisory board in June. What measures do you have so far?

Scores of projects have been presented to the Air Resources Board, and they're going to have more meetings in March and April to go over some of them. Based on the governor's interest, one of the areas they've focused on is low-carbon fuel standards. That is the one that I'm aware of, but that doesn't mean there aren't many others. But low-carbon fuel standard seems to have the greatest focus because of its great impact. They are looking at all the different options presented by various parties to see if they qualify. We'll know more about these measures in a few weeks.

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Canada's assistant director of Energy Technology Policy, Robert Arnot, attended the international meetings, and he told the Sacramento Bee that "having 32 million informed decision-makers...is going to drive the market over the long term." Can the public in fact drive policy if they're well informed?

They can, and what makes California a good place to address this issue is not only a governor who is committed to it but also an electorate that is open to making different choices. We are purchasing more alternative fuel vehicles and hydrogen cell vehicles than any other place in the United States. We have done a lot to conserve our energy in warm months and cool times. Energy companies such as BP are investing research dollars here. People are keen on these issues, and as a result we have some of the best universities in the world.

All that combined allows for a very informed and involved electorate, and there's a lot of support for what the governor is doing here from both sides of the legislative aisle and from citizens. That's made it easier for the governor to lead in this area because so many people are willing to follow him.

Let's turn to other infrastructure issues: As John Barna told MIR this month, the CTC has announced its CIMAC allocations for Prop 1B, which is a large component of the governor's Strategic Growth Plan. How do the projects approved for funding by the CTC align with the governor's bond investment plans?

I'll actually stay on the environmental issues, because that's what these bonds were for. The goal of the first $4.5 billion allocation was to deal with corridor mobility; the first step for the governor is action and congestion relief.

Many times we'll allocate resources and then a city or county will spend the next ten years trying to find the money to pay for it. Here, we are funding projects that can be built, repaired, and enhanced within the next 24 to 30 months and that have the greatest potential to reduce congestion. In the context of the environment, the governor wants these roads built because he knows that when people are sitting in two hours of traffic because of inadequate infrastructure, the emissions and greenhouse gas impact is far greater than when they can get home an hour earlier. So there's the congestion relief and human/quality-of-life side, but there's also an environmental benefit.

Some people were a little anxious that not enough bond money reached rural areas without much congestion. Other components of the $19.9 billion are to be fairly allocated to other regions of the state, including rural areas. The first focus was congestion relief, quality of life, and air quality, and that's why the CTC allocated the monies the way the CTC did. That was statutorily driven and was what the governor was pushing for in the bond. There's always intrigue behind allocation of resources, but the governor will say that California was the winner because of the congestion relief and the ability to do this more quickly as a result of the way we're partnering with the local governments.

Let's talk about goods movement and also the water bonds and levees. We've carried a number of interviews about goods movement, and we also just had an interview with Michael George and Ron Gastelum about the water agenda for 2007–08. What is happening with the other bonds and the governor's priorities?

The key macro question is to ensure accountability and transparency so voters have a true sense of whether the $42 billion in bonds is being used for what they voted for. In the near future, the governor will be talking more and more about accountability in a very transparent and hands-on way. In all these areas where voters have given the authority to move forward the governor wants to see quick, palpable action that people can look at and know that these things are improving.

The governor is pushing for the improvement of our levees. We are all reminded of the impact of Katrina on our nation and those who suffered directly from it. We live in Sacramento, and the governor sees the impact throughout the Central Valley. He's aware that a flood could be devastating not only to the Sacramento region, but also to the quality of water to meet Southern California's needs; the indirect impacts on water quality and transfer of water would impact 21 million Californians. The governor is focused on making a tremendous number of repairs already but wants to do more. He's also committed to water quality.

You said accountability is important to the governor. In a world in which newspapers and other media are increasingly under reporting government, how do you get the message out? What must media do to give voters a full appreciation of the governor's vision and agenda for California?

I see that MIR has been interested in informing citizens about these issues. It's a matter of making it a priority to show consumers, constituents, and voters-and non-voters-why the things that are happening impact their lives. Whether it's greenhouse gas and global warming education, or roads and transit, to me it's a matter of raising the bar on communication from the media on these issues.

I realize it's all about business and people have to sell their papers and publications, but I think there are still ways to bring government to citizens in a way that is understandable. I talk to people as young as 10 years old and about government, for example, helmet laws, schools, and school lunches-all the things that affect them. People don't realize how government impacts every aspect of their life. There are 1,000 ways government can positively touch or negatively touch lives, and we have to make people aware of that. I appreciate the fact that MIR is willing to drill down on these issues more than others; these are issues that will impact quality of life for centuries to come.

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