Abstract
It is a long-held belief among scholars and practitioners that the State of California is a notable subnational leader in environmental and climate change policy. This article focuses primarily on four essential contextual factors that explain why and how within the United States’ federal system of government California has become such an important leader, performing far in excess of the national government and most other states. These essential factors are preferences, authority, capacity, and effectiveness. The article then moves to the multifaceted implementation strategy California policy makers have employed to realize their environmental goals. Finally, despite the history of strong leadership, the state continues to face a host of significant challenges in realizing its ambitious climate change goals for the coming decades.
Four essential factors—preferences, authority, capacity, and effectiveness—provide the context for California’s exceptional state-level leadership in pursuing strong climate change and energy policies as a subnational actor within the U.S. federal system of government. After describing these four factors, we turn to the multifaceted strategy California policy makers have developed to realize their goals and see them to fruition. The four factors and the policy-making strategy together largely explain why California is at the environmental forefront nationally. The four factors and the policy strategy also help explain why the California experience runs counter to the conventional wisdom that states in a federal system will see it in their self-interest to avoid stringent environmental regulations lest they disadvantage themselves in the competition for economic development and investment, thereby creating a “race-to-the-bottom” in environmental protection (Potoski & Prakash, 2004). In terms of environmental protection, climate change, and energy policies, California is the most notable exception in the United States to this conventional reasoning (Bernstein, 2009; Karapin, 2016; Mazmanian, Nelson, & Jurewitz, 2013; Vogel, 1995). It has also been the case that aggressively pursuing these policies has not diminished, but instead has enhanced, the state’s economic development while accommodating a growing population (NEXT 10, 2018b). After describing California’s environmental, climate change, and energy policy successes, we conclude with a discussion of the significant challenges that will need to be met to achieve the state’s expanding climate policy aspirations for the coming decades.
Assessing the California Context
We begin with the foundational building block of policy in a democracy, namely, the preferences of California citizens and their political leaders to act on environmental and climate change concerns even if this means being a first mover and “going it alone,” at least initially, within the U.S. federal system. We then turn to a discussion of California’s legal authority to act independently within the U.S. system, its administrative and technical capacity to do so, and its successes in tackling the frequently problematic step of moving from policy aspiration to effective implementation.
Preclimate Change Environmental Preferences
Since the end of World War II, in responding to the adverse environmental and health effects of significant and visible levels of air, water, and land degradation, California has engaged in aggressive environmental policy making. This did not occur overnight nor without significant pushback from affected businesses, the state’s major utilities, organized labor, and the communities dependent on them. The state’s aggressive actions can only be explained by the long-standing public demand for, and continuing support of, governmental action to control and reverse environmental degradation. This underlying demand was mobilized and amplified through the emergence of organized environmental and community interest groups who directly engaged in policy making in the 1960s (Vogel, 2018), the transformation of the Sierra Club from a progressivist outdoors club following in the footsteps of John Muir, and a new generation of environmental activists including the emergence of the Environmental Defense Fund and the Natural Resources Defense Council. The rise of these groups all took place in response to the worsening air pollution that started with the World War II expansion of industrial activity to support U.S. forces in the Pacific and was followed by the dramatic postwar explosion in the state’s population as many returning soldiers chose to settle in California and were subsequently joined by decades of in-migration from the rest of the country. The environmental effects of the population explosion were exacerbated by individual and public decisions that increased reliance on automobiles, creating the world’s first “automobile culture” and all its associated environmental problems (Jacobs & Kelly, 2008; Starr, 2009).
Not without qualifications and occasional hesitancy, throughout all of this economic development, California voters have supported environmental advocates’ proposals to preserve and protect California’s environmental amenities. This support has shown up in opinion polls, ballot initiatives, and support for candidates, legislation, and regulatory rulemaking. Early on these concerns were galvanized by concerns about smog and air quality, coastal oil spills, and water pollution. But they rapidly spread to encompass land use and control of sprawl, loss of farmland, loss of unique resources such as the giant redwoods, and commercialization of the coastline. This support now extends to policies aimed at addressing the postfossil energy transition and climate change: improved energy-efficiency standards for buildings and appliances, increased renewable power generation, and strong commitments to reduce greenhouse gas (GHG) emissions. At the foundation of this public support is an expressed willingness to make some economic sacrifices to preserve overall environmental quality.
Local and state leaders began to regard ambitious environmental regulations as being in the state’s best interest despite risks to growth and development. The public came to regard environmental quality as essential for preserving and creating jobs, safeguarding the quality of California’s attractive outdoor lifestyle and natural amenities, and preserving and promoting the state’s economic well-being. The argument was made that preserving environmental quality would not only improve the health of people and the environment but also provide a competitive advantage for California in attracting people and substantial new environmentally friendly investments and businesses. There is ample evidence that this belief has been borne out (NEXT 10, 2018b).
Climate Change Era Preferences
In the late 20th century (Intergovernmental Panel on Climate Change, 1990, First Report) and early 21st century, concerns over GHG emissions grew within the international scientific community. The Intergovernmental Panel on Climate Change (2001) Third Assessment found that “there is new and stronger evidence that most of the warming observed over the last 50 years is attributable to human activities” (p. 10). The alarm bell was echoed by California’s leading research scientists at the University of California and affiliated researchers and institutes (California Energy Commission [CEC], 2019). The state confronted the question of whether it made sense to be a first mover in addressing this new environmental challenge.
California’s strong proenvironmental public preferences provided the foundation for the state’s policy response. Yet, the policy challenges faced in the pre–climate-change era were much simpler than those presented by climate change. What made these earlier policies simpler to evaluate and build support for was that the costs and benefits of remedial policies to reduce local and statewide air, water, and land pollution accrued almost entirely to Californians. But with climate change, the environmental effects and political implications of taking action are considerably different. The benefits from reducing GHG emissions in the atmosphere would primarily be global, not local, while costs would be borne primarily locally. With California contributing only about 1.5% of global GHG emissions, it appeared that imposing stricter regulations on these GHG emissions could be costly in terms of state gross domestic product and economic growth while offering only minimal benefits to Californians in terms of reducing overall global climate risks. Thus, the key new policy consideration was that California—although having a significantly large economy—could not make much of a dent in the global climate change problem by simply reducing its own GHG emissions unless enough other jurisdictions also acted similarly. At least initially, it seemed that preferences to take unilateral action could be difficult to support on simple parochial cost-benefit terms considering only the impacts on California citizens.
Nevertheless, California struck out on its own to regulate GHG emissions. It did so through the California Global Solutions Act of 2006 (AB32) and a succession of supporting legislation. AB32 was the first, and remains the only, U.S. state-level mandate for comprehensive, economy-wide reductions of GHG emissions and transition to renewable energy (Hanemann & Farrell, 2006; Mazmanian, Jurewitz, & Nelson, 2008). It called for GHG reductions from all six main sectors of the state’s economy: industrial, electricity, agricultural, residential, commercial, and transportation. Introduced by General Assembly Democrats, it took the artful selling of the policy by Republican Governor Arnold Schwarzenegger, who made the case that doing good for the planet—that is, reducing GHGs—would result in doing well for Californians—in the form of an inflow of investment capital in low-GHG emitting and renewable technologies, employment in the manufacturing and installation of solar and wind technologies, and development of exportable technologies as a first mover on the world stage of climate change mitigation (Peevey & Wittenberg, 2017). Supporters echoed Schwarzenegger’s viewpoint—especially as it relates to GHG controls and renewable power—that California’s ambitious environmental policy might be “costless” or even provide net positive dividends in terms of encouraging virtuous cycles of investment in new cutting-edge technologies and businesses to offset any losses in other sectors (Hanemann, 2007).
AB32 set the goal of reducing GHG emissions back to their 1990 levels by 2020—which as of the time of this writing has been attained (California Air Resources Board [CARB], 2018d)—and called for even more ambitious aspirational goals for subsequent years. In 2016, with the achievement of the 2020 emissions goals within sight, and under a Democratic-controlled legislature and with Democratic Governor Jerry Brown, the policies of AB32 were further extended and expanded under Senate Bill 32 (SB32), raising the bar by adopting a goal of reducing GHG emissions to 40% below 1990 levels by 2030. Accompanying legislation (SB350) increased the state’s electricity renewable portfolio standard (RPS) to 50% by 2030 and mandated a doubling of cumulative energy efficiency savings by electric and gas utilities by 2030. Subsequently, in 2018, SB100 increased California’s RPS to 100% renewable electricity generation by 2045. Thus, the environmental preferences of a majority of Californians and their elected leaders were clearly revealed in adopted policies.
A particularly telling indication of this public support came after California was hit hard by the national recession resulting from the 2008 financial crisis. In November 2010, California’s unemployment rate stood at 12.4% compared with the national average of 9.8%. Nonetheless, in 2010, Californians rejected a ballot initiative sponsored by firms in the oil and gas industry (Proposition 23) that would have suspended the implementation of AB32 until California’s unemployment rate fell below 5.5% for at least 1 year. Public preferences for strong climate change policies were again confirmed in polling, indicating an overwhelming public belief that the horrible forest fires experienced in California have been due to global warming (Public Policy Institute of California [PPIC], 2019).
Some major shifts in preferences and politics were revealed during the negotiations leading to the passage of SB32. Although “environmental justice” (EJ) was certainly a designated concern in structuring the original AB32 legislation, during the intervening decade, the importance of equity and justice had risen to the forefront of the political agenda due to a growing inequality of wealth and a rapidly diversifying population. When SB32 was introduced, the EJ community vociferously opposed the initial draft of the bill, not because they disagreed with its basic goals per se but because the cobenefits promised by AB32 in the form of reducing toxic air pollution “hot spots” in poorer and diverse urban neighborhoods, especially in the Los Angeles area, had not been realized. This led to a political compromise whereby SB32 was supported by EJ-promoting legislators in both the Assembly and Senate on the condition that a substantial share of climate change adaptation state funding—primarily from funds collected through the state’s cap-and-trade program—be channeled into poorer and more diverse communities. The EJ community was also able to secure the passage of an accompanying bill, AB617, requiring the CARB to create more local air monitoring stations, develop a statewide plan for reducing toxic air pollutants in high-exposure areas, and expedite upgrades to best available control technology on existing air pollution sources in nonattainment zones. As part of the compromise, the EJ community was forced to agree to a provision that preempted local air districts from imposing any further regulations on sources of GHG missions already covered under the cap-and-trade program (Erb, 2018).
Bipartisan Leadership Preferences
Starting from the earliest days of California’s environmental initiatives, broad public support for environmental quality has provided the context for successful political bipartisan approaches. This strong bipartisan support is well documented by Peevey and Wittenberg (2017) in their book, California Goes Green: A Roadmap to Climate Leadership. Although California Republicans and Democrats have rarely seen eye-to-eye on the breadth and aggressiveness of environmental goals and the appropriate means for achieving them—for example, incentives versus sanctions, command-and-control regulations in industries versus emissions targets, and cap-and-trade versus fossil fuel taxation—decades of strong environmental policies could not have succeeded without a good degree of bipartisan compromise. There is ample evidence of this bipartisan support. Under pressure from Los Angles voters and civic leaders, Democratic Governor Pat Brown signed the law creating CARB, but it was Republican Governor Ronald Reagan who actually launched the agency and made the first CARB appointments. Republican Governor George Deukmejian promoted low-emission and zero-emission vehicles (ZEVs), and Arnold Schwarzenegger championed GHG controls and promotion of rooftop solar power generation. When in 2016 Democratic Governor Jerry Brown sought to extend California’s cap-and-trade program through 2030, this move was endorsed by former Republican Governors Pete Wilson and Arnold Schwarzenegger. Noteworthy as well, George Schultz, a prominent Republican and Ronald Reagan’s Secretary of State, wrote an endorsement stating that he was positive that President Reagan would have approved the measure. Peevey and Wittenberg (2017) provide an extensive chronicle of the broad bipartisan political leadership on the environment, as well as the willingness of environmental and industry groups to reach compromise. Even in the current political climate of heightened partisanship at the national level, California policy makers have managed to maintain a high degree of bipartisan support for a strong environmental agenda.
This bipartisan support has often been manifested in the form of governors’ executive orders subsequently codified through legislation, even when political control of the legislative and executive branches has been split. AB32 (2006) was preceded by Governor Schwarzenegger’s Executive Order S-3-05 in 2005 that set GHG reduction targets for 2020 and 2050. Similarly, Executive Order S-14-08 targeting 33% renewable electricity by 2020 was codified by the Assembly in SBX1-2 in 2011. This process of executive agenda setting followed by legislative action has been aided by California’s regulatory agencies’ high quality, its expert regulatory impact analyses, and its successful implementation of GHG policies.
California’s governors have not confined their climate leadership efforts to the state. For example, in 2015, former Governor Schwarzenegger went to Paris to support a nonprofit public–private partnership known as Regions of Climate Change, or R20. Under the auspices of R20, energy efficiency investments and numerous other climate-related projects have been pursued across Africa, Mexico, Algeria, Europe, and the United States. Likewise, in 2015, Governor Brown spearheaded the launching of the Subnational Global Climate Change Leadership Memorandum of Understanding (“Under2 MOU” or “Under2 Coalition”). The Under2 MOU was originally conceived through a partnership between the governments of California and Baden-Wurttemberg, Germany. As of 2019, more than 200 governments spanning 43 countries encompassing populations of 1.2 billion and covering about 40% of the world economy have become members of the Under2 Coalition (Under2 Coalition, 2019). The signatories have agreed to collaborate to expand the market for ZEVs, share research and technology on energy efficiency and renewable power generation, consistently and accurately monitor and report GHG emissions, reduce methane emissions, and assess climate change impacts on communities. In September 2018, Governor Brown convened thousands of state, national, and international climate change policy makers and activists to the Global Climate Action Summit (2018) in a rebuke of President Trump’s withdrawal of the United States from the Paris Climate Accord (Plumer, 2018).
Under Governor Gavin Newsome’s direction, California is extending its leadership to challenging the reversals of environmental and climate change policies by the Trump administration. California’s Attorney General Xavier Becerra led 17 states in 2018 in suing the U.S. Environmental Protection Agency (EPA) for its decision to rollback fuel efficiency standards for cars and light trucks. In July 2019, Mary Nichols, Chair of CARB, entered an agreement on behalf of the State with Ford, Honda, Volkswagen, and BMW to gradually increase the fuel efficiency of their cars and light trucks, thereby bypassing any less stringent fuel efficiency or other automotive standards that might be adopted by the U.S. EPA or other federal agencies (The Planning Report, 2019). This bipartisan leadership has not occurred in a vacuum, but instead within the context of strong bipartisan public preferences. The most recent PPIC survey reveals a high level of support for the state’s climate change policies, albeit, more so among Democrats and Independents than Republicans. The PPIC survey of July 2019 found that “two in three adults favor California making its own policies to address global warming” and that “three in four say it is very or somewhat important that California acts as a global leader on climate change” (PPIC, 2019, p. 14). This support has been fairly consistent since PPIC began surveying the public on support for California’s climate leadership (Baldassare, 2018).
Authority to Act Independent of the National Government
After reserving a limited number of enumerated powers to the national government, the U.S. Constitution grants states extensive authority to adopt regulations to advance the public welfare. In carrying out these powers, states are mostly limited only by the Constitutional constraints guaranteeing due process, protecting various freedoms, and prohibiting states from adopting regulations placing an undue burden on interstate commerce. When invoking its enumerated federal powers, Congress can enact legislation that explicitly or implicitly preempts the states from taking independent actions in these areas. Nonetheless, more often than not, the federal government does not explicitly preempt overlapping state actions, and courts allow state policies to prevail concurrently with federal laws unless these policy areas are reserved to the federal government under the Constitution (e.g., entering into foreign treaties) or inconsistent with existing federal legislation and regulations. This general federal structure provides the framework within which states can act independently from the national government. Traditionally, much environmental and energy regulation has been regarded as state and local policy domains, and states have enjoyed wide latitude to fashion their own environmental and energy regulations (Karapin, this issue). Many federal environmental and energy regulations that set minimum common national standards follow in the footsteps of successful state initiatives (Bromley-Trujillo, Butler, Poe, & Davis, 2016; Carley, 2011). The U.S. federal system has established the legal and political framework that gives California the ability to be ambitious. California has exercised this ability by adopting a wide array of environmental and energy policies, often more ambitious than those of the other 49 states (Bernstein, 2009; Karapin, 2016; Vogel, 1995).
The political balance between fear of economic loss and the quality of the state’s air, water, land, and recreational lifestyle has been hotly debated in California since the end of World War II. In 1969, the balance of power at the state level shifted in favor of a strong regulatory response due to strong bipartisan concerns about the terrible air pollution in the Los Angeles and San Francisco Bay areas. This shift set the precedent for how state leaders subsequently responded to the growing challenge of GHG emissions. In 1969, the state legislature created CARB and directed it to set statewide ambient air standards for sulfur oxides, nitrogen dioxide, carbon monoxide, and photochemical oxidants (Jacobs & Kelly, 2008). A year later, as the issue of air pollution took on national scope, the federal government adopted the Clean Air Act (CAA) of 1970 authorizing the U.S. EPA to take similar steps to adopt ambient air quality standards. Because a similar but more stringent California law was already in place, in structuring the CAA, Congress authorized an explicit procedural avenue for granting California a waiver of the customary federal preemption, enabling it to adopt more stringent air regulations. This waiver—thereafter known as “the California waiver”—authorized California to periodically apply to the federal government for a waiver that would allow it to establish its own emissions standards so long as they were at least as stringent as the national standards. In 1977, Congress amended the 1970 Act to broaden this California waiver to permit other states to adopt standards “identical to California standards for which a waiver has been granted” by the EPA. In response, many states have “piggybacked” on the federal waivers granted to California over the years.
Equally important as a precursor to the state’s energy transition policies in the 2000s, a shift to renewable power sources—especially solar and wind—and demand-side management began to be pursued to address ambient air pollution. Based on its state-level “delegated powers,” California fashioned its electricity regulations to ensure adequate electricity for economic and population growth while at the same time reducing ambient air and other toxic emissions and dependence on fossil fuels (Mazmanian, 1992). As with other states, California has enjoyed wide-ranging authority over all electricity regulatory issues that do not materially impact interstate commerce, including many environmental issues and utilities’ selection of electricity generation technologies.
A notable exception to this state-level autonomy in electricity policy occurred with federal adoption of the Public Utilities Regulatory Policies Act (PURPA) of 1978. PURPA established a federal mandate that utilities purchase power from renewable power producers and cogenerators (i.e., electricity producers employing combined heat and power). PURPA requires utilities to purchase power from these designated independent power producers at prices equal to the utility’s full “avoided cost”—that is, the cost that the utility would otherwise incur in producing the power itself or purchasing it from another source. But very important, the setting of specific prices pursuant to PURPA was delegated almost entirely to state utility regulators. Within this discretionary latitude, California adopted very aggressive pricing and contracting policies to implement PURPA and immediately became the leader among a handful of states also pursuing relatively aggressive implementation. By 1985, California had more PURPA facilities under contract than any other state. In 2002, California started to downplay its reliance on PURPA as the main avenue for implementing its renewable power policies, shifting to the use of an RPS. Today, 29 states have adopted RPSs. While there have been several attempts at the federal level to adopt a national RPS, these legislative attempts have failed.
Broadly speaking, states are federally preempted from creating energy efficiency standards for appliances and equipment specifically covered under the Energy Policy and Conservation Act of 1975. States may petition the Department of Energy for a waiver to develop their own energy efficiency standards for certain products. They also have nearly complete autonomy in establishing programs to encourage consumers to purchase more energy efficient appliances and adopt more energy efficient behavior. These programs are typically pursued by requiring state utilities to adopt and administer specific programs that frequently provide financial incentives to customers. Beginning in 1974, California began adopting very aggressive consumer energy efficiency programs through tightened appliance and building efficiency standards as well as utility-administered programs to incentivize greater energy efficiency in consumers’ behavior and investment decisions. The effect has been to markedly shift the traditional relationship between economic growth and per capita growth in electricity and gas use.
Capacity to Act
Although preferences and authority provide a necessary foundation, a state also must have the capacity to act. California’s environmental successes could not have been achieved without the backing of its powerful regulatory and administrative institutions. The main pillars of this capacity have been the following: strong administrative institutions with exceptionally capable expert staff, well-organized nongovernmental organizations and support groups, robust administrative procedures to assure these groups are given a voice, and a strong stable of world-class educational and research institutions.
Respected State Implementing Agencies
California has created and developed world-class, expertly staffed administrative agencies such as the California Public Utilities Commission (CPUC), the CEC, the CARB, and the California EPA (CAEPA; Carlson, 2012). The CPUC is an independent agency overseen by five appointed commissioners and exercises extensive economic and environmental regulatory jurisdiction over California’s investor-owned utilities. The CEC is an independent agency overseen by three appointed commissioners. Founded during the 1970s energy crisis, the CEC is responsible for long-range energy planning, establishing building and appliance energy efficiency standards, investing public funds in energy innovation, and certifying large thermal power plants. CARB is an independent agency overseen by a board of 16 members, with 12 appointed by the governor and 4 by the legislature. It oversees the protection of the public from harmful air pollution and acts as the head agency coordinating the programs to reduce California’s GHG emissions. CAEPA oversees the entire panoply of environmental protection laws and regulations, ensuring that the multiplicity of climate change policy threats and research on them is available to the public (California Environmental Protection Agency, Office of Environmental Health Hazard Assessment, 2018).
Due to California’s proenvironmental preferences and technical expertise, the state’s regulatory risk tolerance is higher than in other states. California has been consistently willing to push the limits of available, off-the-shelf technology (e.g., two-way catalytic converters, ZEVs, zero-emission buildings) and to set environmental standards that exceed the capabilities of currently well-understood technologies. This willingness to be “technology forcing,” or “technology leading,” although occasionally unsuccessful (e.g., ZEVs in the early 1990s), has been a state hallmark.
Technical and Scientific Expertise—Educational and Research Institutions
California has taken full advantage of its many world-class educational and research institutions. Its world-class technocrats conduct research and design policy proposals addressing environmental and climate change issues (CEC, 2019). These premier institutions include Lawrence Berkeley Labs, the Jet Propulsion Laboratory, UC Berkeley’s Energy and Climate Institute, California Institute of Technology’s Linde Center for Global Environmental Science, the University of California Los Angeles’s Center for Climate Science, the Scripps Institute of Oceanography at the University of California at San Diego, University of Southern California’s Earth Science program, and the Stanford University’s Precourt Institute for Energy.
Effectiveness (Practical Success in Delivering Outcomes)
California has developed a multifaceted strategy based on its early experience with air, water, land, and energy policies that has been carried forward into the climate change era (Brownstein, 2009; Mazmanian, 2015; Vogel, 1995, 2018). Taken together, they have created a uniquely effective approach for California policy. Their efficacy relies on a backdrop of strong and consistent public and policy maker preferences and administrative and research capacity. Without these supporting factors, California might have succumbed to the challenges and attempted roadblocks erected by affected industries, businesses, and communities, as well as the mixed signals coming from the national government. Instead, California has developed a well-trodden strategy that has enabled the state to achieve ambitious goals in environmental and natural resources protection, energy, and, most recently, a series of climate change and energy policies addressing GHG emission reduction and transition to renewable energy as listed in Table 1.
California’s Major Climate Policies.
Note. AB = Assembly Bill; SB = Senate Bill; GHG = greenhouse gas.
California’s Environmental Policy-Making Process
California’s well-known environmental and climate change and energy policies evolved through a multifaceted strategy affecting multiple agencies and stakeholders (Bernstein, 2009; Vogel, 2018). These can be distilled to seven key steps:
Adopt clear state goals based on prevailing science (auto emissions, water discharge, recycling waste, toxics emissions, GHG emissions, renewable energy), as well as explicit timelines to achieve these goals. Examples are as follows: • California’s original RPS adopted in 2002 under SB1078 to achieve 20% by 2017; its escalation under SB350 in 2015 to 50% by 2030; and its increase to 60% by 2030 and 100% by 2045 pursuant to SB100 (CPUC, 2018a). • AB32 and SB32 goals and timetables: AB32 (2006) goal of GHG emissions 20% below 1990 by 2020; SB32 (2016) goal of GHG emissions 50% below 1990 by 2030; 2018, SB100 goal of 60% below 1900 by 2045. Assign goal achievement to expert-based, largely independent, regulatory and implementing state and local institutions. Examples are as follows: CAEPA, CEC, CPUC, CARB, and regional Air Quality Management Districts. The CEC solicited extensive public and expert opinion in the design and implementation of the carbon cap-and-trade regime authorized by AB32 in 2006 and renewed by SB32 in 2016. Systematically measure, monitor, enforce, and publicly report program and policy results and provide transparency and a scientific and legally defensible data basis for fending off legal challenges and for supporting subsequent upward revisions in goals. Examples are as follows: California’s extensive electronic reporting system on air, water, toxics, energy policy progress; the periodic updating of state plans on climate change mitigation (AB32, SB32) and adaptation (California Natural Resources Agency, 2018). California’s highly transparent CO2 allowance auction process: Quantities and schedules are posted regularly, and grandfathered allocations are listed (CARB, 2018b). Provide financial and technical support to help industry and communities comply with environmental regulations. Examples are as follows: Training for participants in the CO2 allowance auction (CARB, 2018b), extensive workforce development training programs for the building industry, and many other programs to facilitate compliance. Grants to communities to develop climate change adaptation strategies (California Strategic Growth Council, 2018). Installation of electric vehicle (EV) charging infrastructure at commercial and public locations. Statewide adoption of time-of-use electricity rates with readily available feedback to consumers regarding their electricity usage levels. Provide cobenefits that reward environmental/green/renewable activities, jobs, and attract investment capital for technology. Examples are as follows: California residents get up to $7,000 for the purchase or lease of a new, eligible zero-emission or plug-in hybrid light-duty vehicle (California Clean Vehicle Rebate Project, 2018). California allows ZEVs to use the carpool lane on crowded state highways. California electric utility ratepayers receive a modest cap-and-trade funded rebate on their utility bill twice a year. Rely on environmental/green/renewable market policies to create new business constituents and bolster political support for environmental protection. Examples are as follows: California accounted for nearly half of EV sales in the United States in 2017. This is due to a combination of financial incentives, extensive charging infrastructure, special utility rates for EV charging, and complementary regulations. Clean technology stakeholders were the largest contributors to fight Proposition 23 (2010) that would have gutted California’s Global Warming Solutions Act (2006; Samuelsohn, 2010). California leads the nation in climate change research and development, with 60% of investment in clean energy technology in the United States going to California companies (NEXT 10, 2018a). Attack the problem from multiple angles (regulate, monitor, nudge business, community, and individuals; at the state, regional, local levels). Examples are as follows: AB32 and SB32’s “all sectors” approach. Rewards to SB375 sustainable city-level plans with accelerated project-level environmental reviews.
Taken as a whole, California’s strategy (a) brings together extensive stakeholder consultation; (b) creates policies with clear expectations for change to reduce scientifically documented harms; (c) specifies quantitative objectives for reducing harms such as GHGs emissions targets and deadlines for bringing on line less harmful technologies, such as renewable energy; (d) provides financial or other incentives and rewards; (e) uses markets and market forces, such as cap-and-trade mechanisms; and (f) requires performance reporting, agency monitoring, oversight, timetables, transparency, and regular policy review processes. While the strategy has usually worked, it has been insufficient to change behavior in several key arenas that will need to be addressed if California’s ambitious climate change and energy policy goals are to be realized.
Challenges to California’s Continuing Leadership
Despite all its successes, California faces major challenges in achieving its future emissions goals. Indeed, NEXT 10 (2019) just released its annual review of California’s progress, observing that the state must more than triple its recently achieved annual reduction rates to achieve the 4.51% annual rate needed between 2020 and 2030. NEXT 10 emphasizes that large reductions in the transportation sector will be necessary but especially challenging. In the following, we touch on four key sectors of the economy that pose significant challenges in going forward.
The Transportation Sector
California’s transportation sector presents tremendous opportunities for reducing GHG emissions. The sector also presents tremendous potential hazards due to the enormous political sensitivity of any policies materially affecting the cost of automobile driving.
While the combined efforts of business and industry, electric utilities, communities, and individuals have resulted in a significant reduction in total overall and per capita GHG emissions, far less has been accomplished in the transportation sector compared with other sectors. Transportation emissions have increased to account for more than 40% of all GHG emissions (NEXT 10, 2018b). This increase has occurred even though cars have become cleaner. California leads the nation in the adoption of EVs, and the state, regional, and local governments have invested heavily in public transportation.
In 2008, SB375 directed CARB to set regional targets for reducing GHG emissions. The goal of the law was to establish a “bottom-up” approach to ensuring that cities and counties would be involved in developing regional plans. Implementation of SB375 policy has been criticized as unlikely to materially change historical development patterns (Mawhorter, Martin, & Galante, 2018) due to a lack of dedicated funding and inadequate enforcement mechanisms. An evaluation of the program concluded, “structural changes and additional work by all levels of government are still necessary to achieve state climate goals and other expected benefits” (CARB, 2018c, p. 7).
Early in his administration, President Trump announced his intention to roll back the automobile GHG emission standards adopted by California pursuant to its CAA waiver. California embarrassed the Trump Administration, however, by signing a voluntary agreement with Ford, Honda, VW, and BMW to largely maintain current mileage standards (Phillips & Barboza, 2019). In response, Trump’s Justice Department launched a legally very aggressive attack on this agreement accusing the auto companies of violating the U.S. antitrust laws by jointly reaching this agreement with California. It remains to be seen just how successful the Trump administration will be in its various litigation strategies attacking California’s ability to set more stringent automobile GHG emissions standards under its CAA waiver.
The Electricity Sector
Facilitated by favorable geography, financial incentives, and strong RPS requirements, California has experienced an explosion in solar photovoltaic and wind power generation. This expansion of intermittent renewable power is, however, creating an increasing number of hours where the grid experiences “overgeneration” where total in-state generation exceeds customer demands. When this occurs, the system operator must either dispose of this excess generation to out-of-state buyers or curtail some generation, including renewable generation. The production of solar power—especially during the winter and early spring—also creates an increased number of hours in which the system operator must ramp-up generation very rapidly in the afternoon to compensate for rapidly declining solar power output (California ISO, 2016). In the absence of alternative coping strategies (such as increased electricity storage, out-of-state power purchases, and demand-side management), successfully meeting this steeper afternoon ramp will require the amount of flexible gas-fired power generation to be retained or possibly even increased. But this, in turn, will run counter to California’s desire to reduce its GHG emissions from natural gas.
Furthermore, certain institutional changes are rapidly taking place in the California grid that may present additional challenges. In 2002, AB117 was adopted authorizing the creation of Community Choice Aggregation (CCA) whereby contiguous communities can organize themselves under a joint power authority to create a local wholesale purchasing agent to procure power for all electricity customers within the community. For many years, this opportunity languished. Now, however, with prices paid for power under new renewable power purchase agreements containing considerably more favorable pricing terms than the average “legacy” renewable contracts contained in utility supply portfolios, there has been an explosion in the number of communities launching CCAs. These CCA institutions now cover more than 1.8 million customers in California (St. John, 2018). On its face, enabling communities to make their own wholesale power purchase decisions seems like a good avenue for potentially increasing the penetration of renewable power. However, ironically, it is possible that the explosion in CCAs could make it more difficult for California to reach its very ambitious RPS goals.
The impact of CCAs in driving investment in new renewable energy facilities is being debated. Critics argue that CCAs are simply entering into shorter term contracts with existing renewable power generators and are unwilling—and perhaps even financially unable—to enter into the longer term contract commitments necessary to support investment in the construction of new renewable generation facilities. By contrast, utilities have huge financial balance sheets (due to their ownership of billions of dollars of transmission and distribution infrastructure). These huge balance sheets have enabled utilities to finance the long-term contracts necessary to support the investments in the large amounts of new renewable generation needed to meet rapidly escalating RPS aspirations. However, with the increasing formation of CCAs, the utilities are left with fewer and fewer retail customers. Because a utility’s RPS obligation is based on the percentage of renewable power needed to supply its own shrinking retail customer base, utilities no longer see themselves as needing to procure much, if any, additional renewable power to add to their existing contract portfolios to satisfy their future RPS obligations. Therefore, utilities have severely curtailed their long-term contracting with new renewables (Sanders, 2018).
Although the CPUC has recently required CCAs to include peak capacity requirements in their procurement (St. John, 2018), there is little reason to believe that this requirement will be adequate to support the number of new renewable contracts that will be needed to meet California’s ambitious RPS goals. As the President of the CPUC, Mike Picker, observed with alarm: In the last deregulation, we had a plan, however flawed. Now, we are deregulating electric markets through dozens of different decisions and legislative actions, but we do not have a plan. If we are not careful, we can drift into another crisis. (CPUC, 2018c, p. iii)
But all is not doom and gloom. California’s ambitious climate policies will likely also require massive shifts toward greater electrification of the economy. This will present utilities with expanding business opportunities, especially in the electrification of transportation as well as the deep decarbonization strategies needed to convert water and space heating from natural gas to renewable electricity.
The Natural Gas Sector
Natural gas utilities are beginning to be concerned about their own death spirals for reasons going beyond increased electrification and interfuel competition. At one point, policy makers regarded natural gas with favor as a lower carbon “bridge fuel” to a postfossil world. However, improved measurement of leaking methane from gas extraction, distribution, and storage has revealed substantially larger emissions than previously thought, thereby resulting in a precipitous drop in enthusiasm for using natural gas as a temporary “bridge fuel” (Alvarez et al., 2018). Some jurisdictions are beginning to limit the use of natural gas for the residential new-building sector (Ravani, 2019). While this policy tool so far only applies to the very small fraction of natural gas demand comprising new connections, the trend toward beneficial electrification and reduced gas use is catching on with more and more policy makers.
Many policy makers now wish to expedite the transition to a “green” gas system by emphasizing increased production of renewable gas. Recently, SoCal Gas (2018) undertook several demonstration projects to crack the hydrogen molecules from water using low-cost overgenerated renewable electricity and inject this hydrogen into their retail gas supplies. This technology could help California to cope with the escalating amount of overgeneration in its power grid.
California’s CO2 Emissions Program
California’s headline GHG emissions trading program also faces challenges. Following the passage of AB32, California developed a cap-and-trade program whereby transportation fuel distributors, electricity providers, and major industrial sources of GHG emissions can buy and sell GHG emissions allowances. California has worked hard to entice other Western states to join its program. The Western Climate Initiative was initiated to link GHG emissions trading in California with similar programs in Arizona, Washington, Oregon, and New Mexico. Several other U.S. states and Canadian provinces joined the initiative but later abandoned it (Craig, 2011). Today, only Quebec is linked into the program (CARB, 2019).
The failure of the Western states to develop an integrated GHG emissions market has reduced the overall economic efficiency of the trading program (Tietenberg, 2010), as well as increased the likelihood that emissions reductions under California’s program will be partially counteracted by “leakage.” Leakage occurs when GHG production is shifted from regulated actors to unregulated regions (Cullenward, 2014). For example, for many years, Los Angeles Department of Water and Power (LADWP) owned a share of a coal plant in Arizona. In response to AB32, LADWP sold its share of the plant in 2016 and quit buying its electricity (LADWP, 2016). Nonetheless, the coal plant has continued to operate and sells power to other utilities in the Western United States. Therefore, although LADWP reduced its direct emissions, regional emissions remained basically unchanged; this is known as “leakage.” The coal plant is, however, scheduled for closure in 2019 and will join the ranks of many other coal plants that have closed for economic reasons, mainly due to competition with cheap gas-fired power generation (Hollenhorst, 2019).
Finally, one of the greatest challenges facing California’s cap-and-trade program is the low price of emissions allowances which have hugged the low end of the allowable auction price range that started at $10 in 2012 and increased by 5% each year. These low allowance prices are likely caused by two factors. The first is leakage, where regulated entities switch to lower emitting sources of electricity and then sell their freed-up allowances no longer needed for compliance. The second and most important has been an oversupply of allowances from “banked” allowances stored up when they were not needed in the early years of the program due to the Great Recession and other structural trends leading to lower emissions (Roberts, 2019). The net effect is that regulated actors have been able to meet their emissions target using previously banked allowances rather than actually further reducing current emissions (Taylor, 2017). This oversupply of allowances pushes prices to the auction floor and makes the cap-and-trade program equivalent to having a low-price carbon tax, with prices too low to trigger additional meaningful emissions reductions. Unless GHG reduction goals are further tightened, this will limit the GHG emission reductions associated with the cap-and-trade program going forward. If low allowance prices persist in a post-SB32 world—a possibility involving considerable uncertainty—these low prices will make it difficult to justify retaining the expensive and complicated compliance mechanisms associated with the cap-and-trade program.
Discussion and Conclusion
California emerged as an important policy leader in the pre–climate-change era based on conducive contextual factors and a multifaceted policy-making strategy. With growing warnings from climate scientists and rising concerns with the impending effects of climate change, California has applied its established policy-making processes in becoming a first mover among U.S. states in seeking to comprehensively control GHG emissions. It has set ambitious goals with the hope and expectation that others will follow. This independent process illustrates a positive feature of the U.S. federal system wherein states can innovate and lead, even in the absence of support from other states or in the presence of a hostile political climate at the national level.
A key question for the future is whether California can maintain its environmental leadership course and be successful over the long term given the numerous challenges facing its climate change policies. California’s broad public support and subsequent bipartisanship in pursuing environmental protection have been a necessary foundation for the state’s successes. Along with these preferences, the authority and autonomy given to California’s policy makers from the U.S. federalist system has been another necessary condition for its independent development of climate mitigation policies. Several other states have followed California’s lead in reducing tailpipe emissions and GHG regulation, but none have kept pace with California (Becker, 2019).
California’s capacity to take action has provided a sufficient condition to complement its preferences and authority. In its past pursuit and implementation of leading-edge environmental regulations, California took full advantage of its deep academic, professional, and government administrative resources. Through the cooperation of its governmental agencies, business community, professional community, and world-class academic institutions, California has developed a deep capacity to provide effective environmental regulation based on sound physical science and public policy principles.
As for the question of California sustaining its preferences to act, this is a foundational question that will only be revealed as events unfold, the costs and benefits of AB32 and SB32 become clearer, wise or unwise implementation choices are made, and political sentiments continually evolve. If previous preferences endure, there is every reason to believe that California’s research capacity and administrative institutional performance will remain strong. Taken as a whole, the historical record provides a sound basis for future optimism.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.