May 24, 2007 - From the May, 2007 issue

California Has Gone Green: Legislature & Governor Align on Climate Change

Though climate change presents a global challenge, some of the most profound solutions to it have started with one person. AB 1493 and AB 32 address, respectively, emissions from cars and stationary sources, and combined they represent the most aggressive effort to fight climate change by a U.S. state. Much of the credit for both these crucial pieces of legislation goes to former State Assemblymember Fran Pavley, who authored and shepherded them through Sacramento's maze. To discuss the challenges of implementing AB 32 and the future of California's emerging green tech market, MIR was pleased to speak Ms. Pavley.

Fran Pavley

You must be watching with pride as Governor Schwarzenegger makes the rounds in support of AB 32 and touts its significance for California, the country, and global climate change. How will this bill impact California and the United States?

During my six years in the Assembly, I learned what a unique place California is. Our state can lead the way on just about any issue. One out of every ten Americans lives in this state, so when we do something, it resonates with other states and even other countries.

I authored the Clean Car Regulations, AB 1493, which was signed into law in 2002. This law will require the reduction of tailpipe emissions from automobiles by 30 percent by 2016. The EPA Supreme Court decision of two weeks ago is relevant to the implementation of AB 1493. The EPA now has the authority to grant California a waiver under the Clean Air Act and consider greenhouse gas emissions as pollutants. I went with the governor to a meeting with EPA Administrator Stephen Johnson in Washington, D.C., to ask for that waiver. California has the legal authority to require more stringent mobile emission standards than the Federal government.

AB 32 is a broad umbrella that imposes a cap on emissions, and in order to reduce those emissions back to 1990 levels, we will implement a variety of programs, some of which are already in place. But a big component of the 20–25 percent reductions we envision will come from passenger automobiles and light trucks. Those are the AB 1493 regulations. I call them the Clean Car Regulations; other states call them Pavley regulations. Eleven other states have already adopted the California standards.

What has most encouraged the diffusion of green technology and innovation in California?

The biggest change in the last couple of years is twofold: First, global warming is accelerating faster than any of us thought it would. It's important that California continues to lead on these issues, and we're close to accomplishing those goals. The governor's Solar Roof Initiative, which is now being implemented by the PUC, is part of the solution. We need to incentivize alternative energy sources, whether they're solar or wind; I'd also like to look at increasing our geothermal capacity. I know the city of San Francisco is interested in tidal energy.

Conservation will also be part of reducing our carbon footprint. 17 percent of all the energy we use just moves water. So water conservation is going to be part of the solution. There are exciting opportunities in alternative fuel including cellulosic ethanol and biodiesel. California and other states are looking at biomass as a source of energy. We need to do a lot of work to understand carbon sequestration in forests or underground. The second biggest change in the last year or so is the increasing corporate interest in AB 32.

What motivates this corporate interest? How is it being encouraged and leveraged to promote alternatives?

Corporate interest is primarily coming from investors or supporters of renewable energy, clean technologies and alternatives fuels. Venture capital money is pouring into those fields so that California will become the home of new, clean technologies. Some of the bigger supporters aren't traditional environmentalists, but labor organizations and business leaders who see California as a place for new jobs and business opportunities.

I've been told by many venture capitalists that after biotech and communications, clean technologies and alternative fuels is where the money is going. This is the wave of the future and the transition from the old economy to the new economy. Large businesses-international businesses, like DuPont or Alcoa-are also interested in what we're doing. They see California as a potential model for federal legislation. Many businesses are interested in a cap and trade system that will allow for emissions trading opportunities in other states and countries, especially the European Union.

How green is California compared to Europe and others globally?

The European Union is ahead of us, and the United Kingdom has shown that they can achieve reductions targets that are even more stringent than Kyoto and maintain a booming economy. I think that's what the governor is trying to accomplish in California.

Some American green tech companies, such as former Assembly Speaker Bob Hertzberg's G24i, are setting up in Europe. What do we have to learn from Europe?

We have to learn that there are a lot of good reasons for shifting to a more green economy, not only because of global warming but also because of the growing demand for limited resources, the growing concern about importing oil from countries that don't have a good relationship with the United States, and the impacts of fossil fuels on public health.

The European Union has been a leader on these issues. Germany, for example, is doing some wonderful things with solar and wind as well as energy efficiency measures for businesses as well as homes. They're finding that because of the cost-effective reductions in energy consumption they're saving on their utility bills and reducing their carbon footprint. Germany, like a lot of other countries, has also invested in wind farms. Some countries are looking into geothermal and biomass for sources of energy. Germany's Parliament recently voted to phase-out nuclear power, so they're going to have to accelerate their production of alternative fuels and renewable energy. Their big challenge, as well as for some parts of the United States, will be in reducing their dependence on coal. One thing California has done that will help to discourage new coal-fired power plants in neighboring states is to pass SB 1368, by Senate Pro Tem Don Perata, which prohibits new long-term contracts to buy out-of-state-coal.


Last month, VerdeXchange interviewed Cabinet Secretary Dan Dunmoyer about the efforts by the governor's office to implement AB 32 and the overwhelmingly positive responses from business and the environmental communities that the bill has invoked. What do you hope for in the implementation of this legislation?

The bill includes a timeline for a stakeholder process for implementation. The first step is mandatory reporting. It's essential to establish a baseline on carbon emissions for all major greenhouse gas emitters. If we are talking about implementing an emissions trading program down the line, we need to have ways to quantify and verify reductions.

Our Climate Action Registry is working with other states to adopt similar protocols and baselines. The next step will be for us to analyze each sector of stationary emission sources, such as power plants or cement factories, and to assign each of them a target for reducing their emissions. Some sectors can reduce more than others. Throughout this process the California Air Resources Board will facilitate a lot of stakeholder discussions on market-based mechanisms.

Implementing an emissions trading program will be a challenge. I support the concept, but how would it work? The primary purpose of AB 32 is to reduce global warming pollution. Does an emissions-trading program in California work by itself or do we need other states? How do we quantify, enforce and verify real and permanent reductions of greenhouse gas emissions in other states or other countries? Should offsets and auctions be allowed? And are we all operating under the same protocols? How do we avoiding repeating the EU's mistakes of granting too many allowances by allowing the self-reporting of emissions?

The New England states are working on a cap-and-trade program, but that's just for the utility sector. This effort will require our best efforts, but I'm encouraged by the broad stakeholder discussion. It'll play-out over the next several years in order to meet our reduction goal of reducing emissions back to 1990 levels by the year 2020. The good news is that by being out in front, California businesses have the potential to benefit economically and become the home of new clean technologies and alternative fuels.

Given that AB 32 is now part of California law, the state passed $40 billion in infrastructure bonds last year, and cities and counties are investing in capital projects throughout the state, what is the buying power of California for the green market?

I think California is an amazing place. As I mentioned earlier, one out of every ten Americans lives in California. So when we require, for example, appliance standards for refrigerators, companies will manufacture more efficient refrigerators across the whole United States. California has tremendous influence because of our buying power. To answer your question a different way, a man from Montana said to me, "If you're not going to buy more coal from us, we'll go ahead and build new wind turbines." But who's going to pay for the transmission lines from Montana to California? Infrastructure questions are relevant to the discussion of AB 32. The transportation bond includes some money for goods movement and air quality that relate to greenhouse gas emissions. Senator Alan Lowenthal is looking at smart growth strategies in the Senate Transportation Committee as a way to reduce our dependence on foreign oil and reduce our greenhouse gas emissions.

Many cities and companies, including Google, for example, are enthusiastic about investing in green. What are some other examples of enterprises in California that can serve as models for other companies and cities to follow?

Google is a very good example. In Silicon Valley, many of the business are engaged in a variety of programs. A lot of smaller businesses are implementing energy-efficiency strategies and are working towards on reducing their carbon footprint. Wal-Mart has decided that it's good for their public relations, and it's also good for their bottom line. One big business that is becoming a dynamic player is Fox, which is seeking to become more carbon-neutral through energy efficiency and perhaps the use of offsets. Energy efficiency can accomplish one-third or more of all our targeted reductions, and companies save money by reducing their energy consumption. A lot of large businesses in California-like Arden Realty-will tell you how implementing green building designs is a smart thing to do.

The LEED standards, just by their existence, have created incentives for public and private sector developments to consider green. But isn't there a need to update LEED and make the standards more practical?

I haven't looked at different possibilities or modifications of LEED standards. I am a big supporter of cities, especially the city of Los Angeles, implementing and developing incentives for using LEED standards in new construction. Many architects will say that if you're not building to LEED standards or close to LEED standards today, that new buildings will be obsolete in ten to fifteen years.

Another environmentally-minded legislator and friend of yours, State Senator Sheila Kuehl, will term out next year. You have announced that you're running for her seat. Why do you want to go back into the vortex of state capitol?

I spent six years on these issues, and when I started in 2001, global warming was not a hot issue, no pun intended. California has the momentum to be a great model for sustainable living on the national and the global stage. If we don't address what may be the most critical challenge of this century, the impacts of global warming will hurt us, not only environmentally but also economically. I'm excited about getting back to the Legislature. I know I can make a difference on policy. During these two years away from political life-I'm calling it a sabbatical-I've been able to focus on this issue and work with other states and countries. I hope to bring that expertise back to Sacramento. Sheila Kuehl has endorsed me.

I'm excited about the future of California, and I would be honored to continue my work as a state senator.


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