Prop. 23 could curtail California's clean energy industry

By Erin Voegele | October 28, 2010

A proposition up for vote in California could suspend the state’s Global Warming Solutions Act (AB 32) until in-state unemployment drops to 5.5 percent or less for a full year. If passed, the measure, known as Proposition 23, could significantly curtail the development of cleantech industries within the state.

According to a voter information guide posted to the California Secretary of State’s website, those in support of the proposition argue that the measure will prevent energy tax increases and save more than a million jobs that would otherwise be destroyed. Alternatively, those arguing against the proposition note that the measure was designed by oil companies to kill the state’s clean energy and air pollution standards, and that it would increase dependence on oil by reducing competition from job-creating renewable energy industries.

An organization called "No on 23-Californians to Stop the Dirty Energy Proposition," says Prop. 23 will stop job development in the clean technology and renewable energy industries. While proponents of the measure argue it will save jobs, No on 23 states that it will effectively kill off California’s fastest growing industries, leading to higher—not lower—unemployment. In addition, opponents to the proposition note that passage could delay implementation of AB 32 almost indefinitely, as in-state unemployment has rarely been reduced to 5.5 percent or less for an extended period of time. Major funders of No on 23 include Thomas Steyer, founder of Farallon Capital Management LLC, and the National Wildlife Federation.

Alternatively, "Yes on 23-California Jobs Initiative," argues the proposition will save more than 1 million jobs and up to 60 percent in higher electricity rates, $3.7 billion a year in higher transportation fuel prices, and up to 56 percent increases in natural gas rates. In addition, Yes on 23 notes that Prop. 23 wouldn’t completely negate AB 32, but rather suspend the program until the economy stabilizes, unemployment drops, and affected parties can better afford investments in clean energy and fuels. Major funders of Yes on 23 include Valero Energy Corp. and Tesoro Corp.

OriginOil Inc. President and CEO Riggs Eckelberry agrees with No on 23 that, if passed, the proposition stands to significantly—and negatively—impact the development of clean technology industries within the state.

"Right now 50 percent of the algae activities in the world are in California," Eckelberry said. What we risk doing by passing Prop. 23, is ensuring that technology scale-up happens elsewhere, he continued. Eckelberry also notes the measure would impact the credibility of California’s developing clean technology industries. When you are trying push new technologies in the rest of the world, it’s very important to adopt them locally, he said. It would be very, very hard for a state like California to cash in on money coming in from cleantech without actually adopting cleantech itself. "California needs to be perceived as the home of cleantech industries in order to benefit," Eckelberry said.

The impact of Prop. 23 on California’s clean energy sector would be akin to trying to grow out California’s traditional high-value industries, such as aerospace and the internet, without locating airports or providing internet service within the state.

If supported by AB 32, the state’s clean energy sector also has the potential to help reduce unemployment. "We’ll have far greater growth of cleantech jobs," Eckelberry said. "These are better jobs, by far, than the ones in legacy energy." Green energy is one of the few existing industries with the potential for long-term growth in this country, he continued. "You have to ask yourself, do we want to build jobs in an industry that is going to provide jobs long term, or are we just going to provide more fast-food jobs. We have to make a decision there, and cleantech is the high-paying, fast-growth job market that we want to be in, and it requires a commitment."

California is an expensive place to operate, Eckelberry said, and that’s not going to change. The state can’t compete with other regions of the country in regard to operational costs. "You have to make a choice," he continued. "Either you are going to try to compete with Texas or Mississippi, or you’re going to go for high-value industries that we’re known for, like aerospace and high-tech—and cleantech is exactly that. You can get away with being an expensive place to operate if you encourage the industry very, very aggressively. That’s key."

Eckelberry also notes that there is some industry concern over Proposition 26, which would require certain state and local fees to be approved by two-thirds vote. This would include feeds that address adverse impacts on society or the environment that are caused by the fee-payer’s business, which could make it difficult to enforce environmental regulations.

Although Prop. 23 could have negative consequences for clean energy industries within California, a recent poll conducted by the Public Policy Institute of California has found that public support for the measure had declined. Nearly half (48 percent) of those polled in October said they will vote no, with 37 percent intending to vote yes. In September the two were much more closely divided, with 43 percent noting they would vote yes with only 42 percent intending to vote no.