What AB 32 and Rail Service have in Common

Editorial by Noel T. Braymer

AB 32 is a law passed and signed into law in California back in September 27, 2006. Its goal is to reduce the state’s emission of carbon back to 1990 levels by 2020. This law has broad bi-partisan support. Environmentalists support the law because it would clean the air and they believe by lowering carbon levels it would prevent climate change. Other people support the law because it would reduce California’s and the Nation’s dependence on oil, particularly foreign oil. Supporting AB 32 is George Shultz. George Shultz was in the Cabinet of both Presidents Nixon and Reagan. He was Secretary of State under Reagan. Before that he was a Marine Corps Officer during World War II and a Professor of Economics. Mr. Shultz believes reducing oil dependence is critical to American Security. Shell Oil with headquarters in Europe supports AB 32. Such legislation is common in Europe and many other countries around the world. The other major oil companies: Chevron, ConocoPhillips, BP and ExxonMobil are neutral about AB 32.

AB 32 is in the news because Prop 23 which is on the ballot if passed would derail AB 32. Supporters of Prop 23 claim that AB 32 would increase unemployment and they want to delay implementation of it until the State’s unemployment rate drops to 5.5% or lower for an entire year. The chance of unemployment holding steady under 5.5% any time soon, let alone for a year is unlikely. No hard evidence is being given how this law would affect employment based on experience from other countries with similar laws. California’s Silicon Valley is a supporter of AB 32 and expects a major increase of Green Jobs and business because of AB 32.

Almost all of the money and support for Prop 23 is coming from the out of state oil companies. The majority of the funding for it comes from Valero Energy, Tesoro Corporation of Texas and Koch Industries of Kansas. These companies own oil refineries in California. Their reason for promoting Prop 23 is simple; AB 32 will cost them money. Part of the law will require that oil refineries change the way they make gasoline and reduce by 10% the amount of carbon in it. Refineries are also major air polluters and they would need to reduce the pollution they are emitting under AB 32. California is the largest market in this country for oil. What is also in the bill is a Cap and Trade provision which the fossil fuel industry fear most. This is why AB 32 has been ignored until now since the Cap and Trade provision will be implemented next year.  The Cap is the limit or goal an industry is suppose to not exceed in carbon emissions. An industry that exceeds the Cap must pay to mitigate for any overage. The Trade part come when other industries which are below their allowed carbon emission are able to trade (sell) their carbon credits to those companies that go over. Cap and Trade is run mostly by the financial industry (i.e. Wall Street) which loves the idea.

What types of industries might have credit to sell their low levels of carbon use? Well one would be solar energy. Another would be rail service. Rail is already energy efficient and should have “carbon credits” just doing business as is. Increased freight traffic, passenger use, railroads switching to biodiesel or electrifying could mean more money from selling their increased carbon credits. Cap and Trade has been around a long time. It was used successfully in the Clean Air Act of 1990 to reduce sulfur dioxide emission which causes Acid Rain. Cap and Trade has been used in several countries for several years. There have been some mistakes and problems. But what it did do well is reduce the amount of fossil fuel used before Cap and Trade. This has happened without economic collapse or increased unemployment in those counties with Cap and Trade.

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