Money, Votes, and Climate Change

Alec Weisman

Who were the winners and losers from the passage of California Assembly Bill 32 and the failure of Proposition 23. These were some of the important questions that I asked as I dove into a final paper for my ENVR 120: Global Warming class.

Brief Background

AB 32, also known as the Global Warming Solutions Act of 2006, is a California “law that designates the California Air Resources Board (ARB) to develop and enforce regulations to reduce greenhouse gas (GHG) emissions in the state of California to 1990 levels by 2020. All 47 Democrats in the California Assembly voted yes in support of AB 32, and all 33 Republicans voted no in opposition to AB 32.

Proposition 23 was the attempt to suspend AB 32 until California’s unemployment rate had dropped to 5.5% or less for four consecutive quarters. It was nicknamed the California Jobs Initiative by supporters and the Dirty Energy Proposition by opponents. In addition, Proposition 23 lost by a vote of 38.5% in favor and 61.5% in opposition

Assembly Bill 32 and Proposition 23 are a classic example of industry vs. industry, with the more politically popular using big government to give it special incentives or drive competition out of the market.

Some of the key findings:

• Primary Donors in support of Proposition 23 (opposed to AB 32) were predominantly out of state oil corporations.
• Only 19 donors contributed $25,000 or more to the Yes on 23 Campaign, and all but two are directly connected to the oil industry.
• The majority of these big donors primarily give money to Republican politicians over Democrats.
• A key exception was the California Truckers Association, which prior to 2006 consistently gave the majority of their donations to Democratic politicians.
• Primary Donors opposed to Proposition 23 (in support of AB 32) were predominantly from the Bay Area or Silicon Valley, which is also the source of much of California’s alternative energy and venture capital industries.
• 80 donors gave at least $25,000 to the No on Proposition 23 campaign, and could be divided into the categories of non-profits/lobbying organizations, philanthropists, venture capital/investment industry, and alternative energy industry.
• Major California oil corporations such as Shell, Chevron, Exxon Mobil and BP either opposed Proposition 23 or did not take a position. In addition, the utility corporation Pacific Gas & Electric ($500,000) actively opposed Proposition 23.
• Many of the major donors opposed to Proposition 23 tend to donate predominantly to Democrat politicians. The notable exceptions are the real estate company DMB Associates and NextEra Energy which slightly favored Republican politicians.
• Proposition 23 was a heavily mismatched fight. The major California politicians during the 2010 November election cycle all opposed to Prop. 23. The No on 23 campaign was well organized and raised nearly four times as much as the Yes on 23 Campaign. The Yes on 23 Campaign, was limited in support to the California Republican (and Libertarian) Parties, which ran a half-hearted and confused campaign. In addition, the only two major newspapers in California to endorse Prop 23 were the Orange County Register and the San Diego North County Times due to their opposition to AB 32.
• Proposition 23 had its highest support in Northeastern California, and had its greatest opposition in Silicon Valley and the Bay Area.
• The alternative energy and venture capital industries are the greatest beneficiaries of AB 32, which requires that 33% of energy usage in California must come from renewable energy sources by 2020. The increased demand for renewable energy also attracts the venture capital/investment industry. If alternative industry increases from 12% of California’s current retail electric load to 33% by 2020, that produces a 275% increase in the size of the potential return from the market’s growth.
• The transportation, construction, manufacturing, and oil industries will be the most heavily regulated and affected by policies established by the Air Resources Board. However the additional costs will likely be passed off from the companies onto consumers leading to higher priced goods and services. The biggest emitters will be regulated first.
• Although those utility and oil corporations which opposed or took no stand on Proposition 23 such as Pacific Gas and Electric, Shell, Chevron, Exxon Mobil and BP, will face increased regulations as major GHG emitters, however will be able to take advantage of the carbon markets and cap and trade as they move toward increased production of alternative energy. These major corporations have large alternative energy portfolios and can shift their businesses to capitalize upon alternative energy, while the highly regulated market can prevent competition from out of state and smaller oil corporations such as Valero and Tesoro.
• The transportation industry faces a mandated 30% reduction in vehicle greenhouse gas emissions by 2016 and more efficient trucking.

Full Report: Money, Votes, and Climate Change

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