California's Green Policies Shine

Thirty years ago, California embarked on an ambitious path to reduce carbon emissions and promote energy efficiency. Today, the Golden State is a shining example of how simple policies, such as adopting green building codes and appliance standards, can both benefit the environment and provide economic stimulus.

For example, the process of decoupling – disconnecting utilities’ sales from their profits – has allowed California to steadily reduce its energy intensity. Decoupling removes the disincentive for utilities to encourage energy conservation, since their revenues are no longer tied to the amount of energy they sell. Since California adopted decoupling for its natural gas and electric power industries 30 years ago, per capita energy use has remained relatively flat in California, compared with a 50-per-cent increase in the rest of the country.

The economic benefits resulting from energy-efficiency policies are even more impressive. The measures have, according to a recent study, resulted in household energy savings of $56 billion from 1972 to 2006. Those savings have gone back into the local economy, leading to the creation of 1.5 million jobs. Reduced energy usage has also resulted in massive savings from not having to construct new power plants.

“We have demonstrated that every dollar we’ve spent produces an additional two dollars that gets pumped back into the economy,” says Stanley Young of the California Air Protection Board, the state’s air pollution control agency and part of the larger state environmental protection agency.

Young says energy-efficiency standards set the stage for recognizing how forward-looking policies can save energy, stimulate technological innovation and benefit every sector of the economy. California is now building on that experience, placing a hard cap on greenhouse gas emissions to drive technological innovation and further transform an already green economy.

The California Global Warming Solutions Act (AB32) became law in 2006. The initiative requires California to reduce greenhouse gas emissions to 1990 levels by 2020, approximately a 30-per-cent reduction. A further commitment by Governor Schwarzenegger, in a 2005 executive order, will increase the reduction to 80 per cent by 2050.

The act, which contains aggressive deadlines and milestones, involves every sector of the economy. It will most likely contain incentive and subsidy programs encouraging everything from solar systems in homes to zero-emission public buses to retrofit programs for small businesses.

Over the next 12 years, California’s investment in fighting global warming and improving energy efficiency will create as many as 403,000 jobs and increase household incomes by $48 billion, according to a study by the Center for Energy, Resources and Economic Sustainability at University of California Berkeley.

“This is an example of policy pushing creativity,” says Young, noting the prospect of low-carbon fuel standards is already spurring innovation in the next generation of biofuels. “The nation is looking very closely at what California does. We are aware that we’re a pioneer in this field, and we’re also aware that the steps we take here are, in a sense, an innovation lab for the rest of the nation.”