The Problem With AB 32

Much has been written lately on the advantages and disadvantages of California's Global Warming Solutions Act of 2006, also referred to as AB 32. This has become a hot topic, for at least two reasons. First, California Assemblyman Dan Logue initiated a bill to suspend AB 32 until the economy recovers from its present shambles (unemployment is 12.5 percent officially, and more likely 18 percent actually). When Logue's bill was defeated in the legislature, he started a ballot initiative for the November 2010 election so the people of California can vote on the issue of whether to suspend AB 32 or not. Logue's actions drew considerable ink in the press and the internet blogs.

Second, Republican Gubernatorial candidate Meg Whitman announced that her first act as Governor, should she be elected, will be to suspend AB 32 for one year. That position is in direct opposition to the leading Democrat candidate, presently Attorney-General Jerry Brown. Brown is on record as fiercely supporting the entire man-made global warming theory and AB 32. Whitman's statement also drew considerable ink.

Recently, the "google alert" that I set up for AB 32 has notified me of several publications each day, indicating that AB 32 is in the news much more than was the case just a few months ago. There are two basic camps, one for suspending the law until unemployment drops to 5.5 percent, and the other for pushing AB 32 to the limit. The impact on jobs, especially California jobs, is part of the disagreement. Proponents, including Governor Schwarzenegger, claim that the law will create jobs. Opponents state that the law will kill jobs by forcing companies to close their doors or move away from the state.

I am on record supporting the opponents, and have been since I first read this law several years ago. I have made speeches across the country on what AB 32 requires, and how it will kill the economy.

The fact is that yes, some jobs will be created by AB 32, and some jobs have already been created by AB 32. Chief among these are the consultants for ARB who perform studies, and those who write the regulations themselves. The regulations are complex and time-consuming, and will not be finished until late in 2011. There are also some reporting and auditing requirements already in place, and each of these functions requires people and creates jobs. There are also some new businesses funded by government (both federal and state) that seek to create markets and market share for the new "green economy." There also is some private venture capital that funds startup businesses in the green economy (more on that in a moment). Yet, the number of these jobs is very small. The unemployment in California overwhelms these tiny job numbers.

Proponents like to use an old but trusty statistical trick when the numbers are not in their favor: they resort to percentages. It works like this: if there are 100 people in a brand-new industry, doubling the number of people in that new industry creates only 100 jobs. But, out of a workforce of 16 million (the rough number for California's work force), no one wants to brag that their new industry created only 100 jobs in a year. Instead, one can say that the industry had a 100 percent job growth in that year. That sounds much more impressive. So that is what the AB 32-is-creating-green-jobs group does. They trumpet the percent increase in jobs. One report has it that green jobs are growing at 5 percent per year. That is a ridiculously low growth rate, and even more so because of the very low starting numbers. The proponents are grasping at whatever weak arguments they can find.

The proponents next argue that AB 32 is creating and will create millions of jobs in fabulous new industries that do not produce CO2. It is notable that few, if any, of these proponents are engineers and understand what they are talking about. As I have written elsewhere, fundamentals of physics can not be violated, ever. The key to green jobs' success is alternative means of producing energy; energy for electricity, for transportation, and for heating and cooling.

The reality is that we have had the means to produce energy without producing CO2 for many decades. The only question is one of economics, that is, how much will the energy cost when produced in this way. Whether the energy is from solar, wind, geothermal, fuel cells, or from fossil fuels with complete CO2 capture and sequestration, the technology exists. One problem for the AB 32 proponents is that fossil fuels are too cheap, so that their pet technologies cannot hope to compete. The governments (state and federal) have entered the fray, with mandated minimum production rates for renewable energy, and with liberal funding for the renewables. Examples of mandates include the Low Carbon Fuel Standard for biofuel usage in California, and the Renewable Portfolio Standard for solar, wind, geothermal, and a few other non-fossil fuel power sources. There are federal mandates for ethanol in gasoline, also. The governments have also mandated less transportation fuels be consumed, by increasing automobile mileage standards, and providing incentives for the purchase of hybrid vehicles.

There are industries and businesses working heroically to install solar power plants, wind-power plants, geothermal power plants, and fuel-cell power plants, all in an effort to make money and comply with the government's mandates. All of these non-CO2 power plants produce power but at much higher power prices compared to conventional fossil fuels. And that creates the argument for the opponents of AB 32. No matter what government-funded studies conclude, the reality is that private businesses must pay their bills, or go out of business. Some will declare bankruptcy. One of the bills that must be paid is the electric bill. As that bill increases due to high-cost renewable power plants, businessmen will find it more and more difficult to keep their prices low and compete with other providers of their products and services. California businesses must increase their prices or lose money. There are other bills to pay besides the electric bill. Diesel fuel must be purchased, if the business ships any goods to customers, or sends out workers to a job in a diesel-powered truck. Raw materials must be purchased, and their costs will also increase because they, too, arrived on a truck powered by diesel fuel. The price of diesel fuel is increasing because of AB 32 bio-fuel mandates. Finally, the employees will find that their wages do not extend as far as they did previously, primarily because the workers' electric bills at home went up, the grocery bill went up, purchasing a new car is much more expensive, and purchasing gasoline for the car (no matter if the car is new or not) costs much more due to the ethanol that must be added to the gasoline.

There are also increases in the water bill for all customers, entirely due to the increased electricity prices. Pumping water in California consumes great quantities of electricity, and the price will go up.

Throughout the history of capitalism and business schools, one key to success is to grow a business by reducing the costs of running the business. This is elementary, and is true because it works. Businessmen, and their consultants, devote much time to analyzing existing costs and evaluating alternatives to reduce those costs. Installing labor-saving devices such as computer-controlled machinery reduces the payroll and eliminates jobs. Installing a more efficient machine that uses less electricity, or produces less waste from the raw material, or uses an entirely different process, also cuts costs. Shipping products in bulk instead of small quantities reduces costs. Training employees to be more productive allows more product to be made with the same payroll costs. Each cost reduction allows the business to reduce the product price, thus gaining a competitive advantage when customers buy his products rather than the more-expensive products from another manufacturer.

And now, AB 32 proponents want to defy all the wisdom of all the business schools and the decades and centuries of hard-earned experience gained by tough, seasoned businessmen. AB 32 proponents want to increase the costs of doing business in California, and they claim that by doing so, more jobs will be created. Does anyone see this as nuts?

There are many businesses in California that cannot make further improvements in energy efficiency, because for many years they have been mandated to invest in "Best Available Control Technology." There are no inefficient motors remaining to replace, in their businesses. They must, however, pay the higher price for electricity as the renewable power plants cause power prices to increase. They might install cogeneration power systems, but those are mainly already done in California. For a small businessman, installing cogeneration is almost always not cost-effective, so that will not occur.

That then, is the problem with AB 32. Costs on almost everything will increase, from water, to electricity, to gasoline, to diesel fuel, to groceries, to goods in shops and malls, even coffee at the local coffee shop. As a colleague stated, if any of these changes were economically attractive, businesses would already be jumping on them without any government prodding. The fact that they have not is a clear indication that costs will go up under AB 32.

Because of all the above, I am firmly against AB 32. I will place my name on the petition to place the Suspend AB 32 initiative on the November ballot. And, I will vote to suspend AB 32 in November.

Roger E. Sowell, Esq.

Marina del Rey, California

Senator Pavley Wrongly Defends AB 32

My responses to an Article by Sen. Fran Pavley, Feb 4, 2010, in Capitol Weekly, link here.

[Note, the Senator's comments are in standard font, my comments and responses in italics - RES]

[Senator Fran Pavley is a member of the California Senate, the author of much of AB 32, and authored the automobile mileage standards commonly known as the Pavley Standards in California.]

When AB 32, California’s landmark global warming law, was being debated in the legislature, a coalition of polluters and their misguided allies opposed the bill. This week these same opponents, who have also fought against clean air and water quality laws, are unveiling an initiative to suspend AB 32, predicting the sky will fall if the law is implemented. They predict that thousands of Californians would lose their jobs, and it will crush small businesses. There are even blaming the current loss of jobs on AB 32, but new emission reductions don’t even begin until 2012, and then are gradually phased in by 2020.

The Senator should know that AB 32 is a very comprehensive and all-encompassing government mandate that has 73 separate items, many of which are already in place and affecting Californians now.

But just as these Chicken Little arguments didn’t fly back in 2006, they aren’t holding up now.

In fact, just the opposite is happening. By adopting policies that will cap dangerous global warming pollution, we have sent a signal to the market that California wants to become the home of these new jobs and businesses and a leader of the 21st century economy. Simply put, AB 32 has already stimulated innovation, efficiency and economic benefits.

The Senator is parroting the tired, worn, and untrue line that CO2 is pollution, and that CO2 causes global warming. Neither is true, and scientists know this. Engineers especially know this, as I have written and spoken on many times. AB 32 has, perhaps, stimulated jobs for consultants to ARB as the regulations are ironed out. Also, there may be some jobs similar to the boom-and-bust of the dot-com era, where hundreds of startups had high hopes that were ultimately dashed. As the science behind AB 32 continues to unravel, these startups will also bust.

Senator, I ask you and your staff just a few questions on CO2 as it relates to the climate: first, as CO2 rose from 1940 to 1975, why did the temperatures measured in the United States not rise also? (see this link) Second, if CO2 was so very low or constant in the early part of the last century, why did temperatures rise from 1910 to 1940? And, why did the 1910 to 1940 increase in temperatures essentially match that rise from 1975 to 2000? Science does not work the way the warmists would have it. If CO2 causes warming, as they claim it did from 1975 to 2000, then it must also have caused warming from 1940 to 1975. Yet there was a cooling. Furthermore, many individual cities show a distinct cooling post-2000, in particular three cities right here in California: Eureka, Los Angeles, and San Diego. The Hadley Center’s Climatic Research Unit data shows this very clearly. CO2 cannot do what warmists claim, it cannot be fickle, because physics is not fickle. Physics is completely impartial. And, lest one claims that California coastal cities are different and that explains the cooling, one must then explain the cooling in Washington, DC, Marquette, Michigan, and Portland, Oregon.

Finally, other industries and businesses in California have either announced their intention to close, or are contemplating their options in moving to other, more friendly environs.

Consider this:
• A 2009 study by the Pew Charitable Trusts listed California as the nation’s leading state in clean energy businesses (10,209), clean energy jobs (125,390) and clean energy venture capital funding ($6.5 billion for 2006-2008);
• The average Californian today uses 40 percent less electricity per year than the average American. Saving electricity saves money.

The Senator should not mislead the public by such statements, as the lower per-capita electricity usage in California is not saving the people money. The reason for lower usage is favorable climate both moderate in temperature, and low in humidity. The rest of the United States, particularly in the hot and humid Southern states, use far more electricity than California because their air conditioners must remove moisture (humidity) from the air. Most of California’s population lives near the coast where temperatures are moderate and humidity is low. Californians are burdened with high costs of housing, whether by mortgage or rent, also high taxes, higher fuel costs, and high automobile insurance costs compared to the rest of the states, thus more than eating up any savings on the electric bill.

• California’s landmark Clean Car Law, part of AB 32’s solutions, is giving consumers cleaner, more fuel efficient cars, reducing dependence on foreign oil and helping drivers save money at the pump. And it will soon become the Federal standard;

Californians must pay far more for smaller and more dangerous cars to achieve the overly-ambitious mileage goals set by AB 32, typically because these cars require hybrid technology to achieve the mileage goals. The savings in fuel does not justify the additional expense of the hybrid equipment.

• From GED’s to PHD’s, our community college and university students are demanding courses and degrees to make them competitive for jobs in this new 21st century economy; and
• California boasts five of the nation’s top 10 cities for clean tech investment: San Jose, Berkeley, Pasadena, San Francisco and San Diego.

Notice that this isn’t just about the future. It’s happening now.

Here in California, as the economy slowed between 2007 and 2008, total employment fell one percent. Green jobs continued to grow five percent. (according to the latest data, green jobs are growing 2.5 times faster than the overall economy). Stephen Levy, Director of Center for Continuing Study of the California Economy, recently concluded in a study that “it is likely that the first beneficiaries of green job growth will be workers who are currently unemployed.”

The Senator must not recognize that California has one of the highest percentage of unemployed in the nation, at 12.5 percent, that is if the count is correct. Recent revisions (today’s news) showed that the Federal government underestimated the unemployment numbers. In sheer number of people unemployed, California leads the nation.

President Barack Obama, who has made clean tech a cornerstone of his economic recovery plan, made reference to our state’s efforts in his State of the Union speech last week when he said “You can see the results of last year’s investments in clean energy … in the California business that will put a thousand people to work making solar panels.”

The President, and the Senator for quoting him on this, apparently do not understand that manufacturing jobs, such as making solar panels, will not be in California with our very high labor rates, high overhead rates, high real estate rates, high tax rates, etc., but will instead be farmed out overseas much as many other manufacturing jobs have been and continue to be.

That’s why we can’t afford to suspend AB 32. Killing AB 32 will chill billions of dollars in investments in our economy. It would risk the loss of more than $80 billion in Gross State Product and more than half a million jobs by 2020. We know that delay will allow China and our other global competitors, to steal our opportunity to create jobs and businesses right here in California.

That’s why the tired “jobs vs. environment” ploy that polluters have tried in the past will fail, even during these difficult economic times.

The jobs vs environment problem is not a ploy, Senator, but is very real. Many other countries not only pay their workers less than does California, but their factories, refineries, and chemical plants and other industrial facilities do not have the same investment in pollution abatement systems. Therefore, their costs of production are much lower. As I traveled the world as a consulting engineer over the past 30 years, I have personally witnessed the lack of pollution control equipment in many countries. One can easily see that California does not have today the manufacturing base it had in previous decades. The jobs are gone, the factories are closed, and this will only continue with the burdens imposed by AB 32.

Of course, proponents of the initiative say they don’t want to kill AB 32, they just want to “suspend it.” Suspending is code for destroying the law since the provisions in the initiative will send us in the wrong direction. Everyone knows that investors and businessman need economic certainty and favorable market signals.

Senator, this is quite an amazing statement, that investors and businessmen need favorable market signals. California does everything it can, it seems, to provide UN-favorable market signals for doing business in this state, as mentioned above. The cap-and-trade provisions of AB 32 will add yet another layer of cost to doing business in California, on top of high taxes, onerous and burdensome regulatory requirements, and high wages.

Besides, thousands of California employers are playing by the current rules by investing in clean technology, setting up training programs, retooling equipment and taking other actions to reduce greenhouse gas pollution and stimulate the economy. It makes no sense for a business to invest if AB 32 is implemented one quarter and suspended the next. Suspending AB 32 – or even the threat that the law could be halted – would dry up much of this investment.

The Senator is once again confused, as investment to reduce greenhouse gas emissions does not stimulate the economy. As just one example, adding catalytic converters to heavy trucks reduces one form of pollution, diesel particulate matter or smoke. The companies providing these devices have more business, it is true, but truckers must pass along the costs to comply in the form of higher fees for transport. Each customer then must raise their prices, and the consumer, once again, has fewer dollars in his or her pocket at the end of each week.

Also, as stated earlier, many employers are shutting their doors or have announced they will do so when AB 32’s more onerous and expensive provisions arrive.

That’s one of the many reasons why many leaders in California’s business community are supportive of AB 32. The state’s largest utility, PG&E, was an early supporter. Apple dropped out of the U.S. Chamber of Commerce when the Chamber opposed climate change legislation. Innovative companies such as Google, one of our fastest growing companies, also support AB 32.

Small business also is on board. Small Business California strongly supports the law, as does the Green Chamber of Commerce.

It makes no sense to introduce an initiative that would halt economic development and the energy we need to reduce our dependence on foreign sources of fuel and energy. In California, we have an unparalleled record of generating economic profit while controlling pollution. We have been doing both for the past 35 years!

Senator, I respectfully invite you and your staff to spend some time reading my writings on AB 32 and its damaging effects, these may be found at http://sowellslawblog.blogspot.com/search?q=AB+32. AB 32 was based on false premises, and is damaging to the economy.

If laws such as AB 32 and its cap-and-trade component, bio-fuels mandates, renewable electricity mandates, and other command-and-control provisions are such a good idea, why then did not the Copenhagen summit on climate (this past December) reach a favorable conclusion? Why did key nations refuse to participate? Why is California going it alone with AB 32?

Roger E. Sowell, Esq.

Marina del Rey, California

Senator Pavley Wrong on AB 32 Timing

Senator Fran Pavley, of the California Senate, is absolutely wrong when she recently stated in a newspaper Opinion to the Editor that AB 32 does not go into effect until 2012. Her exact words were, ". . . new emission reductions don’t even begin until 2012. . ." This is not true, and the Senator should know this. One can only wonder why the Senator would make such an untrue statement in public, one that is so very easily verifiable.

Lest I be accused of decontextualizing her statement, or taking it out of context so as to impart a meaning different from what the Senator intended, here is the paragraph from her recent Op-Ed with the key phrase in bold [my emphasis]:

"When AB 32, California’s landmark global warming law, was being debated in the legislature, a coalition of polluters and their misguided allies opposed the bill. This week these same opponents, who have also fought against clean air and water quality laws, are unveiling an initiative to suspend AB 32, predicting the sky will fall if the law is implemented. They predict that thousands of Californians would lose their jobs, and it will crush small businesses. There are even blaming the current loss of jobs on AB 32, but new emission reductions don’t even begin until 2012, and then are gradually phased in by 2020."

I wrote a response to the Senator's Op-Ed on my blog here. This article supplements that response, with factual statements showing several portions of AB 32 are already in effect, and already causing great harm to California and Californians. These items under AB 32 include Early Action Items, and at least two more that are in the process of enactment in order to meet hard deadlines (the GHG reporting measure, and Renewable Portfolio Standard. More on those two below.)

There are several pieces of AB 32, in fact, the Scoping Plan identified 73 separate items. The scope and depth of AB 32 is absolutely unprecedented in the manner in which all aspects of economic activity in California will be (and already is) impacted. This is extremely serious, especially in a state where unemployment is at or near an all-time high as a percent of the workforce, and exceeds all previous highs in terms of the sheer number of workers who are unemployed. Unemployment greatly adds to the state's budget deficit, both by taking state money as unemployment compensation, and reducing state tax receipts from payroll taxes. AB 32's specific measures further add to the economic woes by imposing additional burdens to businesses, which are passed on to consumers as higher prices. AB 32 is not a way to success.

ARB classifies the portions of AB 32 that are already in effect, or will be before 2012, as Early Action Items. The list of Discrete Early Action Items (as of Feb. 12, 2010) includes (see this link):

• Low Carbon Fuel Standard
• Landfill Methane Capture
• Reductions from Mobile AC
• Semiconductor Reduction
• SF6 Reductions
• High GWP Consumer Products
• Heavy-Duty Measure
• Tire Pressure Program
• Shore Power

To discuss in a bit more detail just a few of those items, the Low Carbon Fuel Standard goes into effect January 1, 2011. LCFS requires great amounts of imported biofuels (ethanol, for example) in transportation fuels (gasoline and diesel). One does not simply start a new regulation of this magnitude overnight, instead, there are substantial efforts already underway to have everything in place to meet the January 1, 2011 deadline. Costs to the public are already occurring as industries pass on their added costs to their customers.

Quoting from the LCFS regulation: "The provisions and requirements in section 95484(c), (d) and (e) apply starting January 1, 2010. [note, c, d, and e all refer to exemptions] All other provisions and requirements of the LCFS regulation apply starting January 1, 2011." [emphasis added]

From ARB's own website, the following may be found showing the SF6 measure's timing:

“Sulfur hexafluoride is a potent greenhouse gas, with a global warming potential (GWP) of 23,900, the highest identified by the Intergovernmental Panel on Climate Change. On October 25, 2007, the California Air Resources Board (ARB) approved sulfur hexafluoride reductions from non-electric and non-semiconductor applications as an early action measure . Accordingly, ARB staff developed a measure to reduce sulfur hexafluoride emissions from other uses including magnesium die-casting, fume vent hood testing, tracer gas use, and other niche uses. Sulfur hexafluoride emissions from semiconductor manufacture and electric utilities are being examined separately. ARB approved the regulation to reduce sulfur hexafluoride emissions in February 2009.

On January 1, 2010, the regulation became effective. Restrictions on use and sale occur on or after January 1, 2011. Registration, reporting, and recordkeeping requirements become effective March 30, 2010.” [emphasis in the original]

The Heavy Duty measure refers to heavy trucks, such as 18-wheelers and their cargo trailers. This requires trucks to install more aerodynamic skirts and other features to reduce the wind resistance and therefore use less diesel fuel. The measure became effective on January 1, 2010.

The Tire Pressure regulation is in effect as of July1, 2010. The tire pressure regulation is supposed to reduce gasoline consumption, and the CO2 emissions from cars, by requiring tire pressures to be checked and adjusted at most tire and car repair centers. This is what then-candidate Obama referred to (and was widely ridiculed for) as solving our imported oil problem by adding air to America's tires.

In addition to the Early Action Measures, the major sources of CO2 and other GHGs, such as refineries and power plants, have been required to measure and report their GHG emissions since January 1, 2009. State-mandated auditing of those major sources' GHG reports starts in April, 2010.

The most telling part of AB 32 is the RPS, or Renewable Portfolio Standard. RPS requires all electricity sold in the state to meet minimum percentages of renewable generation. By New Year's Eve, 2010 (only 10 months away), the RPS requires 20 percent of all power sold must be from renewable energy sources. There is a frantic effort to build such systems, with the costs being passed along to consumers. This effort is underway now, and has been for a few years, as power producers install wind, solar, and geothermal power plants in an attempt to meet the deadline of 12/31/2010. Happy New Year.

Clearly, the Senator is wrong in writing that AB 32 does not even begin until 2012. Perhaps the Senator is woefully misinformed. Perhaps she is not.

The Senator is clearly part of the orchestrated effort to discredit the ballot initiative for the November, 2010 election, which will place a hold, or moratorium, on all AB 32 measures until California's economy improves to where it might, just might, withstand the economic devastation that will result from AB 32.

For those who want to verify any of the statements in this article, or just want to learn more about AB 32 and the timing of the individual 73 items, please see this link, and the Measure Plan Timeline.

Roger E. Sowell, Esq.

Marina del Rey, California

ARB Desperately Defends AB 32 - With OIL!

Sometimes, the California Air Resources Board does some simply amazing (read: ludicrous) things. This week saw more than one, as discussed below. The language chosen for this missive is quite instructive. The ARB ship is in quite a panic over the looming possibility that AB 32 will be consigned to the big landfill in the sky, in November 2010's elections. (see this link for the ARB pronouncement, reproduced in its entirety below)

SACRAMENTO (3/22/2010)- Chairman of the California Air Resources Board issued the following statement on the study released today by the AB 32 Implementation Group on the implementation of AB 32, California's climate plan: "This study was conducted by a group dedicated to protecting oil companies and fighting environmental laws that hold them accountable for polluting our environment. It comes as no surprise that their findings support oil companies and oppose clean energy laws Californians overwhelming support. The California public isn't going to fall for the claim that continued dependence on imported oil is better for the economy than switching to more energy efficient vehicles and cleaner renewable energy which will result in green technology job creation and a cleaner environment." [emphasis added]

Because this is so carefully worded, I deconstruct this below, and offer a few comments. (my emphasis in bold)

"This study was conducted by a group dedicated to protecting oil companies and fighting environmental laws that hold them accountable for polluting our environment."

The AB 32 Implementation Group (link here), has dozens of members that includes environmental organizations, with quite a few chambers of commerce. The members range from small businesses to large. One must wonder if AB 32 Implementation Group has a basis for a defamation lawsuit, based on the mis-characterization by ARB. As to protecting oil companies, they are quite able to protect themselves. It is quite obvious that oil companies have a great deal of practice in that, as they are attacked at every turn and almost daily.

But really, ARB, must one go on and on about oil companies polluting our environment? Would you really like to live in a world without oil? Do you realize how much the oil companies (and by extension, natural gas) have done to REDUCE pollution in the atmosphere and elsewhere? As I wrote here:

"Petroleum has brought the world un-ending prosperity, health, wealth, medicines and materials undreamed of, and saved the planet by cleaning the air we breathe from coal-based and animal dung-based odors and particles.

Petroleum is the only resource that provides heating, electric power, transportation fuels, lubricants, chemical precursors, waxes, and many others. No other resource can do what petroleum does, not coal, not nuclear, not wind, not wave, not solar, not geothermal, and at such a low cost.

Rather than vilifying the petroleum industry, you should be praising it – and by extension, the natural gas industry - for all the good that it has brought mankind."

Next, ARB writes that "

It comes as no surprise that their findings support oil companies and oppose clean energy laws Californians overwhelming support. "

Note what ARB is trying to do here: turn the conversation (spin is the in-vogue word) so that "evil oil companies" are the focus. Why not tell the truth, ARB, and admit that AB 32 will have an enormous detrimental impact to ALL businesses in California - any business that purchases electric power, or gasoline, or diesel fuel, or any goods that move by diesel-powered trucks, which does include oil refineries, of course, but also millions of small businesses? Why the spin and focus on oil companies? Likely it is because in this battle of wits, ARB is out of ammunition and must resort to the tired old litany of "blame the oil companies." Why not admit that the Renewable Portfolio Standard, for one thing, does not impact the oil companies but instead attacks the electric power providers, such as PG&E and Southern California Edison?

As to opposing clean energy laws, who says those laws are good? California already has the most clean energy of any state, expressed as a percent of total electric power sold in the state. As a direct consequence, California also has one of the highest prices for electric power in the country. Yet, more renewable power is mandated under AB 32, with 20 percent required by this coming New Years' Eve, 12/31/2010. Thirty-three percent is required by 2020. If renewable power is such a good thing, why isn't the marketplace providing it without government mandates? After all, automobiles were made and sold in the millions early in the 20th century - and no law required that. Personal computers were unheard of 50 years ago - but began selling by the millions and billions when some smart guys starting making them - with no law requiring that. Same for cell phones. Same for hundreds of useful products and services (cable TV comes to mind).

The "overwhelmingly support" line is just not true, and ARB will soon find this out after the election. Californians want jobs, want to earn a living, want to have an income with which to pay their bills and take care of their families, as do most all people. Polls show that global warming is not a priority for most people, and the science is shown to be bunk. Even if there were something to the idea that CO2 causes global warming, California is far too small to make any difference. California consumes approximately 2 percent of all the energy in the world. Reducing that 2 percent by one-third, as AB 32 is supposed to do by 2020, will make no noticeable difference.

"The California public isn't going to fall for the claim that continued dependence on imported oil . . . "

Ah, now we see another switch, this time to imported oil. Hey, ARB? Isn't AB 32 supposed to be about stopping global warming? I read the entire law, several times, and did not see a reference to imported oil. In fact, no reference to oil, period. So, why the switch? Why are you not focused on the global warming disaster looming over us all, and how AB 32 will heroically rescue the world from that doom? Imported oil? Grasping at straws here, ARB. Comical, really.

Actually, ARB, the USA has been using less oil for the past 5 years (since 2005). Total crude oil runs to refineries has been dropping, and is expected to continue doing so. How can that be, ARB, since AB 32 was not even passed until 2006?

"is better for the economy"

Is ARB actually stating that importing oil is bad for the economy? Really? After decades of importing oil (from numerous countries, not just the Middle East), ARB wants to show that importing oil depresses an economy? How then, does ARB explain the Reagan-era economic boom (20 years at least) - yet the USA saw increasing amounts of imported oil? Distraction is a key debate tactic, but to be used only when one knows the debate is lost. Is the debate lost, ARB?

“than switching to more energy efficient vehicles . . . “

Here, ARB pulls out the more efficient vehicles topic, which does exist in AB 32 as the Pavley Standards. Note that ARB has relaxed the Pavley Standards, to match those recently imposed by the Obama administration for the entire country. More energy-efficient vehicles (ARB, yes, there is a hyphen in that phrase) may be very bad for the economy, as consumers find the added cost not worth the savings in gasoline. I wrote on this in several places, but the fact is that with gasoline price below $3, it is very difficult to justify hybrid technology with its added costs. No mention of that, ARB? Why not?

“and cleaner renewable energy . . .”

Now ARB again brings up cleaner renewable energy, but the same questions remain. How much will each consumer's electric power bill increase, and how will that higher price of power influence business decisions on when to leave California and start up somewhere with lower power prices?

“which will result in green technology job creation . . .”

Green technology job creation is ARB's standard line with AB 32. Yet, independent studies show that AB 32 will kill jobs - and ARB knows this. If green policies created jobs, why is California having such great unemployment? This state should be booming with economic activity, with all the environmental restrictions on air pollution, the California emissions laws on cars that for many years made California cars different from all others in the US, with California gasoline regulations unique in all the US, and many others. Where are the green jobs, ARB?

“and a cleaner environment."

ARB finally gets to the old stand-by, we need a cleaner environment. How clean, ARB? At what price, ARB? At what point do jobs and economic activity take priority over some arbitrary clean-ness of the air? How many auto assembly plants still operate in California, ARB? There have been many new plants built in the USA in the past 20 years, how many were in California? California already has the most restrictive air pollution laws in the USA, probably on the planet, so much so that economic activity is adversely affected. And now, ARB wants even more.

In conclusion, it is actually comical to watch ARB thrash about in such obvious pain over the specter of AB 32 being repealed, by the voters at the ballot box. Please, ARB, try to remember the basics of AB 32. It's in the law. The law states that CO2 causes global warming, and AB 32 is the Global Warming Solutions Act. There is nothing in the law about oil, imported or otherwise (there is one mention of petroleum, with reference to refineries). Experienced and independent analysts have repeatedly shown that forced measures of AB 32 will kill jobs, increase prices, decrease disposable income, and cause business to not choose California as their home.

Roger E. Sowell, Esq.

Marina del Rey

Global Warming Laws at AIChE Meeting in Nashville

I just returned from thechemical engineers’ conference(annual meeting) in Nashville TN, where I gave a condensed version of my speech on California’s climate change law – AB 32. I finally encountered quite a number of chemical engineers who are devout believers that Carbon Is Gonna Kill Us All. Their questions after my speech were quite “vigorous.” There were, though, quite a number of people who were very complimentary after my speech. One key point is that the attendees at this meeting were primarily academics and government, who generally have the view that CO2 is a deadly greenhouse gas and must be reduced. As always I very much enjoyed making the speech and the interaction with the audience. A vigorous exchange of viewpoints is quite healthy. As it turns out, I had heard all the objections before, but it appears that they had not heard my points.
After my speech, I related to a few people the fact that attempting to regulate the globe’s average temperature by adjusting the CO2 content of the atmosphere violates the fundamentals of process control, and that started quite a discussion. Many of those in attendance are in government positions, and had never heard the process control argument before. It is likely (at least this is my hope) that the seeds of doubt were planted.
For more on this process control issue, see:
http://sowellslawblog.blogspot.com/2009/02/chemical-engineer-takes-on-global.html
I also am delighted that I received additional invitations to speak on these matters.


I did not record my speech, but have displayed below the prepared text. When I discover how to insert the charts and graphs, I will do so.

Challenges for Chemical Engineers Under California's Global Warming Solutions Act

Author: Roger E. Sowell, Esq.*

Law Office of Roger E. Sowell, Marina del Rey, California

*Mr. Sowell is an attorney in Marina del Rey, California, who holds a B.S. in chemical engineering. He practices in the areas of climate change, energy, and engineering law.He worked for 25 years as a chemical process engineer before becoming an attorney.

Abstract

California’s Global Warming Solutions Act of 2006, also known as AB 32, requires large reductions in greenhouse gas emissions by 2020. Plants and facilities that consume fossil fuels or produce power will be required to meet the regulations established under AB 32.Achieving the reductions will present many opportunities and challenges for chemical engineers, especially in the areas of oil refining, general industry, cement plants, hydrogen plants, bio-fuels, and many others.Cap and trade issues will present chemical engineers with challenges.More jobs for chemical engineers likely will result, however some plants likely will shut down rather than comply with the burdens imposed by AB 32.

History of AB 32

California’s Global Warming Solutions Act, also known as AB 32, was adopted as law in California in 2006, ⁽¹⁾ after first being proposed as a bill in California’s Assembly in 2005.The Democrat-controlled state legislature had little hope of seeing a global warming law at the national level after Republican President George W. Bush was re-elected in November 2004. President Bush had made it clear that he would not ratify the Kyoto Accord that purportedly limits emissions of greenhouse gases (GHG) by signatory countries, nor would he sign any federal bill into law that limited Carbon Dioxide (CO₂) or other GHG emissions. In that legislative environment, California’s Assembly Speaker Nunez championed AB 32 into becoming the law in California.The text of AB 32 may be found in California’s Health and Safety Code §38500 et. seq. ⁽²⁾

Purpose of AB 32

AB 32 was intended to serve as a blueprint for others to follow in reducing GHGs and increasing economic activity. ARB states that, on average, for each dollar spent on AB 32 requirements, two dollars will be returned. Yet, ARB does not state when those two dollars will be returned, whether in 2 years or 40 years or more. However, many independent economic analyses concluded that the economics of AB 32’s Scoping Plan are seriously flawed. ARB states that AB 32 will increase electric power prices. The price of transportation fuels will also increase due to bio-fuels additions.For those segments of the population who are poor or on fixed incomes, who have few or no alternatives to reduce their consumption of electric power and transportation fuel, AB 32 will impose a harsh economic burden. ⁽³⁾

In addition, the very concept of controlling the earth’s temperature by reducing CO2 and other GHGs is fundamentally flawed. The primary goal of AB 32, reducing global warming by reducing GHGs, is very likely unattainable because of the almost non-existent correlation between CO2 and other GHGs and global temperature. A comparison of CO2 concentration in the atmosphere, either from direct measurements from 1959 or by very good estimates from 1900 (see Figure 1), with global temperature anomalies (see Figure 2), shows that CO2 rises continually while global temperature sometimes decreases, sometimes remains constant, and sometimes increases, all for decades at a time. Fundamental process control principles show that, whatever causes global warming and cooling, manipulating CO2 is not an effective means of controlling the earth’s average temperature. Dr. Pierre Latour, Ph.D. and P.E. in chemical engineering and expert in process control, also made a compelling argument in the February, 2009, Letter to Editor section of Hydrocarbon Processing on why adjusting CO2 cannot control the earth’s temperature. ⁽⁴⁾ Dr. Latour stated that measuring the earth’s temperature is very difficult if not impossible, and under control principles, if you cannot measure it, you cannot control it. Also, Dr. Latour pointed out that there is almost no response, dT/dCO_2, also indicating that CO₂ is not a candidate manipulated variable.

Figure 1

Figure 2

Requirements of AB 32

               AB 32 is an enabling act, providing a few specific targets but delegating the creation 

of the detailed regulations to the California Air Resources Board (ARB) (5) .   ARB is directed to 

coordinate with and consult with appropriate agencies and stakeholders, including the Public 

Utilities Commission. (6)   The specific regulations are to “minimize costs and maximize benefits 

for California's economy, improve and modernize California's energy infrastructure and maintain 

electric system reliability, maximize additional environmental and economic co-benefits for 

California, and complement the state's efforts to improve air quality.” (7)

           Two dates are critical in AB 32: 1990 and 2020.  The total quantity of GHGs emitted in 

1990 was to be determined by ARB, and the state’s emissions are required to be reduced to 

the 1990 level by 2020. (8)  Another date and requirement is critical, although not part of AB 32, 

which is 80 percent reduction below 1990 levels by 2050.  The “80 by 50” requirement is imposed 

by the Governor’s Executive Order S-21-09 of September 15, 2009.   ARB determined that the 

1990 emissions were 427 million metric tonnes of CO2 equivalent (MMTCO2e).   The expected 

emissions of GHGs in 2020, absent the requirements of AB 32 (the business as usual case), 

are approximately 600 MMTCO2e.  The GHGs reduction required by 2020 is 173 MMTCO2e, 

which represents a 28.8 percent reduction from the business as usual case.  This reduction by 

2020 may be achievable, although at a high economic cost.  However, the reduction by 2050 

represents a 93 percent reduction over the business as usual case, which is much more 

problematic (see Figure 3).

Figure 3
 
       Even if California achieves its goals of GHG reductions, there will be very little impact on 

the world’s energy consumption and GHGs.  California consumes approximately 2 percent of 

the  world’s total energy (see Figure 4).  With a 28 percent reduction by 2020, there will be 

no noticeable change, and any change will be overwhelmed by increases in growing 

economies around the world. 

Figure 4

The plan to reduce GHGs to 427 million tonnes per year by 2020 was described by 

ARB in the Scoping Plan document in late 2008, which divided the California economy 

into a number of sectors.  Each sector has its own requirements for reducing GHGs.   

The Scoping Plan identified 73 separate reduction items.  Opportunities for chemical 

engineers exist in almost every sector identified in the Scoping Plan.   These 

opportunities are described in the following section. 

        The Scoping Plan has three basic reduction mechanisms: specific targets or emissions 

limits, cap and trade, and a fee for emissions.  Each economic sector has one or more of the

three mechanisms.   Some of the 73 items with the largest reductions listed in the Scoping 

Plan are shown in Table 1 below, along with the anticipated reductions in GHGs.  Table 1 also 

has Scoping Plan items with low emissions reductions that will affect chemical engineers.

Scoping Plan Item	MMTonnes CO2e/Yr
Cap and Trade	34.4
Renewable Portfolio Standard	21.3
Low Carbon Fuel Standard	16.0
Energy Efficiency (Electricity)	15.2
Combined Heat and Power	6.7
Regional Transportation Plan	5.0
Refinery Flare Gas Recovery Systems	0.33
Energy Efficiency and Co-Benefit Audits	N/A

Table 1

               The timeline for ARB to write the regulations is 2009 through 2011, with full 

implementation beginning in 2012.  A few regulations have earlier implementation dates.   

The cap and trade regulation will be finalized in 2011 with implementation starting in 2012.   

           Reporting of GHGs emissions are required for some facilities, starting with 2009.  

GHG emission reports will be verified by independent, state-approved, entities beginning 

in April 2010 for the 2009 reporting year.  Chemical engineers will make good candidates 

for the verification jobs.  Mandated reporters include all cement plants, refineries with 

emissions of at least 25,000 MMTCO2e per year (50 MMBtu/h), power plants of at least 1 MW  

plus 2500 MMTCO2e per year (5 MMBtu/h), and any other facility with the same emissions 

criteria as refineries.  Those entities that are exempt from reporting include hospitals, electric 

power plants with renewable energy sources, primary and secondary schools, portable equipment, 

and backup emergency generators.   For a comparison of some common fuels and their emission 

of CO2 compared to MMBtu, see Figure 5.

Figure 5

Opportunities for Chemical Engineers

Oil Refining

The oil refining sector will have GHG reporting and verification, cap and trade, energy audits, and specific reduction requirements. The regulations are not yet final for specific reductions, but will likely include flare gas recovery systems, electric heating systems, and low-carbon-forming catalysts for Fluid Catalytic Crackers. Also, the fired boilers will likely be replaced by gas turbine generators with heat recovery steam generators to provide process steam. The cap and trade requirement will provide great challenges and opportunities for chemical engineers as they strive to reduce GHGs by 28 percent by 2020.

One such GHG-reducing project is hydrogen production by partial oxidation of petroleum coke, with CO₂ capture and sequestration. A plant to accomplish this is contemplated for Dow Chemical in Freeport, Texas. ⁽⁹⁾

It may be more attractive for oil refiners to cease the refining function, and purchase products from other countries and have the products brought in via ships. Faced with similar legislation in Australia, Caltex announced they would shut down their refineries and operate them as oil terminals. This would entail a loss of property tax, and several hundred high-paying jobs in the community. ⁽¹⁰⁾

Industry and Manufacturing

The Industry and Manufacturing sector includes semiconductor plants, cement plants, hydrogen plants, and other large facilities excluding refineries and oil and gas production facilities. Semiconductor plants are required to reduce their use of perfluorocarbons by 2012 to a level not to exceed 0.2 kg CO2e/ sq cm of wafer. This reduction in perfluorocarbons will reduce GHGs by 0.18 MMTCO2e/yr.

Cement plants are subject to cap and trade, and will likely be required to increase energy efficiency, capture and sequester CO₂, switch fuels from coal and petroleum coke to natural gas, and use alternative cementitious materials rather than limestone-based clinker. Also, the concrete industry will be required to reduce waste, and that in turn will reduce cement production. At least one cement plant in California has announced it cannot remain in business by making the proposed changes under AB 32, and will shut down its operations and lay off the employees.

Hydrogen plants will be required to increase energy efficiency, minimize fuel consumed, and likely will be required to capture and sequester CO₂.

CO₂ Capture and Sequestration

CO₂ capture and sequestration likely will be required for many processes and power plants. Such processes will present many challenges to chemical engineers, in finding appropriate CO₂ removal systems, materials of construction, and low-energy consumption. CO₂ sequestration also may require CO₂ purification, compression, liquefaction, or chemical conversion to another compound.

Low Carbon Fuel Standard

The Low Carbon Fuel Standard refers to bio-fuels, both bio-ethanol and bio-diesel, and likely eventually to bio-jet fuel. ARB in 2009 wrote the regulation for bio-ethanol based on corn fermentation. ⁽¹¹⁾ ARB’s analysis shows that corn-based ethanol consumes more energy than is obtained upon combustion in a vehicle engine; this was confirmed a few weeks later by the federal Environmental Protection Agency, EPA. Despite this, corn-based ethanol is mandated not only by California law but also by federal law. Also, there is a shortage of water in California, and corn production requires massive amounts of water. Furthermore, the Governor has issued an Executive Order that requires that 40 percent of all bio-ethanol consumed in California be produced within California. ARB estimates that 25 new ethanol refineries will be required to meet the state’s needs. It remains to be seen how the state will grow corn without sufficient water supplies.

Bio-diesel is made from both plants, usually soy beans, and rendered animal fats. Chemical engineers will have opportunities in processing the oils, but also in producing appropriate additives to ensure these bio-diesels meet all the cold temperature properties such as cloud point, cold filter plugging point, and pour point. Also, other diesel properties must be met.

At least one company, Rentech, has announced a plant to manufacture bio-diesel using the Fischer-Tropsch process with municipal solid waste as the feedstock. The bio-diesel will be used as fuel for airport ground service equipment at Los Angeles International Airport, LAX. ⁽¹²⁾

Renewables Portfolio Standard

The Renewables Portfolio Standard requires that a large portion of all power sold in California be from renewable sources such as solar, wind, geothermal, and small hydroelectric plants. The AB 32 target and deadline is for 20 percent renewables by 12/31/2010, and 33 percent by 2020 by the Governor’s Executive Order. At then end of 2008, the state produced only 13 percent of the electrical power by renewables. Chemical engineers will be challenged to discover and produce high-yielding batteries at an economic price to store electric power until it is needed. Also, solar thermal power plants present challenges to chemical engineers in the heat storage medium, materials of construction, and process control. Furthermore, geothermal power plants require chemical engineers in the design of the various power systems, including binary systems.

Low-Friction Oils

Low-friction oils, or synthetic oils, are required under AB 32 to reduce diesel fuel consumption in heavy-duty trucks. These oils are made from poly-alpha olefins, or PAO. Chemical engineers will be involved in designing and operating PAO plants.

Waste Handling and Recycling

Waste Handling and Recycling activities that involve chemical engineers include capturing landfill gas for use as fuel, anaerobic digestors for organic wastes such as manure, and conversion of municipal solid waste to synthesis gas as fuel for power plants. A U.S. utility patent, 7,452,392, was issued in 2008 to Peter A. Nick and his team of Southern California chemical engineers for a process to consume municipal solid waste and convert the material into a medium-Btu syngas. ⁽¹³⁾ As this technology gains acceptance, chemical engineers will be required for process design, construction, and operation.

Water

Opportunities for chemical engineers exist in water use, purification, and recycling. Processes that use water provide challenges to develop ways to use less, and purification to the point that water can be recycled instead of discharged. Water used as steam condensing heat sink may be replaced by air coolers or water-spray air coolers, with the corresponding reduction in power production. Municipal waste treatment plants will require upgrades to tertiary treatment so that effluent water may be recycled.

Cap and Trade

Many issues remain unresolved with California’s cap and trade regulations under AB 32. Chemical engineers will be affected by the rules no matter what form they take, as the required reductions in GHGs will shape the number and type of projects undertaken by the chemical engineers. The price for a carbon credit will greatly affect economic decisions, whether to build a process revision, or buy the carbon credits.

Federal Laws and AB 32

While there presently is no federal law on global warming, the U.S. House of Representatives early in 2009 passed the Waxman-Markey bill, and a similar bill is pending in the U.S. Senate. Both bills are loosely based on AB 32, with similar goals for GHG reductions by 2020 and 2050. A key difference is that California has no coal-fired power plants, although a small amount of coal is consumed in the state. Also, California is one of the few, if not the only, state with geothermal energy for renewable power production.

The federal law, if passed, will have precedence over the state law, as is the case with all such laws. California’s law may be more strict than the federal law, but may not be less strict. Therefore, it is possible that AB 32 will require amendment after a federal law is passed.

Conclusion

Even though reducing CO₂ and other GHGs will be futile in attempting to reduce the earth’s temperature, many opportunities exist and will be created for chemical engineers under AB 32. The state’s numerous refineries, cement plants, hydrogen plants, power plants, semiconductor plants, and other large energy consumers will all be affected by being forced to reduce GHGs. However, AB 32’s requirements may be too burdensome for some, perhaps many, plants. It is anticipated that these plants will shut down rather than be forced to comply with AB 32. A similar closing of nearly half the nation’s oil refineries occurred during the past 25 years, largely as a result of environmental and regulatory requirements. Therefore, the good news for chemical engineers is that there will be plenty of work. The bad news is that there may be fewer customers and clients who will need that work.

References

(1) see http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf

(2) see http://leginfo.ca.gov/calaw.html

(3) Sowell, R.E., http://sowellslawblog.blogspot.com/2009/06/ab-32-hypocrisy-vs-health-and-poverty.html

(4) Latour, P. R., Hydrocarbon Processing, February, 2009, Letters to Editor

(5) California Health and Safety Code §38501(f)

(6) California Health and Safety Code §38501(g)

(7) California Health and Safety Code §38501(h)

(8) California Health and Safety Code §38550

(9) see http://www.dow.com/facilities/namerica/texops/news/20071213d.htm

(10) see http://www.bloomberg.com/apps/news?pid=20601081&sid=axlU.9bewCsc

(11) see http://www.arb.ca.gov/regact/2009/lcfs09/lcfsisor1.pdf

and http://www.arb.ca.gov/regact/2009/lcfs09/lcfsisor1.pdf

(12) see http://www.foxbusiness.com/story/markets/industries/energy/rentech-lands-big-biomass-fuel-contract-lax-rtk/

(13) see http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=/netahtml/PTO/srchnum.htm&r=1&f=G&l=50&s1=7,452,392.PN.&OS=PN/7,452,392&RS=PN/7,452,392