1. Are California’s Global Warming
Policies a Model for the Nation?
Thomas Tanton
Senior Fellow, Energy Studies
Pacific Research Institute

2. Climate Policy/AB 32
The California Global Warming Solutions Act of 2006 (AB 32) mandates
Reduce California GHG to 1990 levels by 2020.
Reduce greenhouse gas (GHG) emissions by 80 percent by 2050.
California has a target 427 million metric tons by the year percent reduction from base case: if the regulators actually know what happened in 1990.

3. AB 32 CARB adopted “scoping plan” Dec 12, 2008
Includes three mechanisms
Direct Regulations
Cap and trade
Western Climate Initiative
Required economic analysis
Slammed by own peer reviewers and LAO
Fundamental structural failures in analysis
Missed opportunity
“Dueling Models” problem

4. Follow California?
Many, including President and Congressional leaders assert that the rest of the country should follow California carbon policy

5. Current Situation California’s unemployment >10%
Foreclosures amongst Nation’s highest
State budget deficit highest, even with highest tax rates
Electricity prices #4, gasoline #3
#5 to #8 in last 15 years

6. Economic Overview AB32=$510 Billion Hit to CA economy
Less than ½% reduction in global emissions
California will be hard hit on balance, even though some specific sectors might benefit

7. California Energy
Today, California consumes 65 percent more electricity than it did in Coal-based electricity imports from other states grew by 60 percent from 1983 to 2005, and is now 10 percent of California’s total generation, growing from 9 percent in 1983.
Transportation similar increases, mostly from imports.

8. Low Carbon Fuel Standards
California consumes 44 million gallons of gasoline and 9 million gallons of diesel every day
LCFS requires 10% less carbon in fuel; Established by Executive Order, now part of Scoping Plan
Means at least 5 million gallons of “something else”
Only if “something” else has zero life cycle emissions can we get by with 5 million. The real problem is that each replacement either requires technical miracles—such as cellulosic ethanol and other renewables; or political miracles as they are not favored by some environmental groups EVEN THOUGH THEY COULD CONTRIBUTE SIGNIFICANTLY; natural gas (via LNG) and nuclear could help meet LCFS but aren’t “allowed” in CA; technologies that are “allowed” are not technically nor economically ready.

9. Energy Content Ethanol BioDiesel Other Alkanes 76,000 Btu/gal 118,170
110,000
0.66
Gal equivalent
0.88
0.95 (rel: gasoline)
This is just a comparison of energy content of some of the options; note that bidiesel regardless of it’s feedstock is close to pet diesel—this adds tremendously to the issue of convenience—refueling frequency—as well as distribution issues (not entirely energy content related) Same factors relate to renewable alkanes as options for gasoline.

10. Life Cycle Analysis Right Idea: but averages don’t count in real life
Accounting nightmare if done correctly; meaningless if not
The LCFS is predicated on using life cycle analysis which is the correct approach. However, using averages (e.g. crop yield for feedstock, conversion efficiency, year/year differences) miss the sub-average as well as the above average effects. (stove and freezer analogy) and from a policy perspective ASSUMES that all meet the average. If done correctly this is an accounting nightmare; if done using averages (for each step in the well/farm to wheels) it is essentially meaningless.

11. Issues with LCFS
Safety and environmental standards that limit significant reformulation of gasoline (e.g. Reid VP) and diesel fuel impact costs and consumer acceptance (e.g. refueling)
Life cycle analysis demonstrate the futility of lowering total carbon emissions by solely lowering the carbon content of fuel at the consumer level (e.g. ethanol)
Counterproductive that will stifle achievement of the goals of the LCFS. (e.g. refusal to allow offshore production of petroleum, which also denies access to additional natural gas, a key alternative for lowering carbon content of transportation fuels)

12. CA Economic Structure

13. Real Estate/Construction

14. Weather and Housing
California’s mild climate aids dramatically in reducing consumption for heating and cooling of homes and businesses.
California’s high residential property prices tilt the housing market towards smaller homes and apartments and encourage more people to live in the same household.
Heavily populated L.A. has >3 people per household compared to 2.6 nationally; often several families
Average residential square footage <78% average

15. “Pavley Bill” Sets GHG Emission Standards/MPG Requirements
Subject of EPA Waiver/lawsuit
NO modeling done ex-ante
Little to no effect on Global CO2
Heavy cost to manufacturers and consumers
Adds $3000 per car

16. Nation Cannot Follow CA
Much of California “success” NOT due to regulations
California is Unique in Many Factors
Fallacy of Composition
All Pain and NO Gain

17. Glimmers in California
SB 295 (Dutton)
Delay implementation until economy improves
AB 118 (Logue)
Repeals AB32
Other Western states (WCI) having second thoughts

18. Questions?