Schwarzenegger to push global warming tax

San Francisco Chronicle | February 17, 2006

Sacramento -- Gov. Arnold Schwarzenegger's administration is expected this month to release a plan to combat global warming that recommends raising petroleum prices and requiring industries to report, for the first time, their greenhouse gas emissions.

The increase in gas prices would fund research into alternative fuels.

Nine months ago, Schwarzenegger garnered international headlines by calling for California to mount an aggressive effort to address global warming. Now he faces the difficult part: shepherding new policies into place that could affect every car owner, farmer and big industry in the state.

The proposal, drafted by the governor's senior environmental advisers, has both business groups and clean-air advocates girding for a fight in Sacramento that could have profound national environmental and political implications. With President Bush reluctant to steer federal policy toward lowering greenhouse gas emissions, states and cities have taken the lead on what most environmentalists agree is the most critical issue facing the planet.

"What you're considering in California is much broader than anything being discussed in other states -- it's very significant,'' said Ned Helme, president of the Washington, D.C.-based Center for Clean Air Policy, a nonprofit environmental think tank.

For Schwarzenegger, global warming could be a tricky political issue this year.

Sources at the state Environmental Protection Agency -- which is charged with writing the recommendations to achieve Schwarzenegger's goals -- say the proposal will call for a new charge on petroleum equal to less than a penny per gallon of gasoline. Conservative activists have begun to complain about the idea, branding it a gas tax.

The proposal could be released just before the state Republican Convention, which begins Feb. 24, where GOP activists already are preparing to debate resolutions condemning other Schwarzenegger proposals they disagree with.

And environmentalists, who have had a rocky relationship with the governor, will watch closely this year to see if Schwarzenegger is willing to champion changes likely to be opposed by some of the governor's big-business allies. Many in the environmental movement complain that Schwarzenegger has done far more talking about clean-air policies than enacting them.

"So far, it's been policy by press release,'' said V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies. "The key is whether the governor will stand by these proposals and actually do them.''

In a speech before a U.N. environmental conference in San Francisco in June, Schwarzenegger said there is no denying the threat of global warming and set short- and long-term targets to reduce emissions of gases like carbon dioxide, which is produced by everything from cars to power plants. The governor's targets are to reduce greenhouse gas emissions to year 2000 levels by 2010; lower emissions to 1990 levels by 2020; and reduce emissions 80 percent below 1990 levels by 2050.

Most scientists believe gases like carbon dioxide, methane and nitrous oxide are altering the Earth's atmosphere and are leading to higher temperatures and changes to things like sea level and precipitation.

Schwarzenegger instructed a team of administration officials, led by state EPA head Alan Lloyd, to compile a report detailing how emissions could be cut. A draft of the report was published in December; the final version is expected to be released by the end of this month.

The draft report listed dozens of options -- many already under way -- to lower emissions, ranging from requiring farmers to change the way they handle animal manure to ramping up the state's use of the wind and sun to generate electricity.

The report will be delivered to the governor's office and the Legislature. Many of the proposals would have to be enacted through legislation.

The report noted that the state faces numerous problems, from less water to increased strength and frequency of storms, if it does not act to reduce greenhouse gas emissions. It also argued that stimulating innovative technologies to reduce pollution can create jobs and save consumers money.

Among the report's recommendations are two that are likely to become hot-button issues in Sacramento: adding a so-called public goods charge on gasoline and requiring industries like cement makers, electricity generators and oil refineries to report their greenhouse gas emissions.

Industries are regulated with respect to many emissions, such as sulfur dioxide, but don't face the same controls on greenhouse gases.

The added charge on gasoline would pay for research into alternative fuels and other ways to make cars more fuel-efficient.

Advocates for the idea and the report's authors note that a similar public goods charge is included in every Californians' energy bill and that money has gone to funding renewable energy and energy efficiency programs that have lessened pollution and saved consumers money.

"It's very appropriate to have a small charge on petroleum to mitigate its impacts,'' said Bill Magavern, a Sierra Club lobbyist.

Business groups say further driving up the price of fuel will hurt the economy.

"I think if you look at most polling, Californians want their taxes on gas to go toward improving the transportation system, not toward something that might marginally improve carbon emissions,'' said Allan Zaremberg, president of the California Chamber of Commerce, which is spearheading a new coalition called Sustainable Environment and Economy for California, or SEECalifornia, that intends to represent business interests as the global warming initiative progresses.

Zaremberg said the new business coalition will argue that many of the ideas in the draft report would do little to address global warming.

He noted that restricting cement makers, for example, could lead manufacturers to leave the state.

"You're not going to reduce the demand for cement, you'll just move the production to China or Arizona or anywhere else with fewer restrictions,'' he said. "Then you have a situation that is actually worse for global warming, with lesser environmental standards than California already has, and you add in the truck traffic needed to get the cement back to California.''

In addition to opposing the new charge on gas, the group opposes requiring companies to report their greenhouse gas emissions, arguing that it should be voluntary.

But supporters of the idea say it is a crucial way to develop a benchmark for emissions.

Requiring companies to report how much greenhouse gases they produce is seen as a first step toward a growing trend in combating global warming, called a cap-and-trade system in which emission levels are capped and industries can buy and sell credits with each other to reach mandated reductions.

The report describes a cap-and-trade system but does not make it a primary recommendation.

There already is some movement toward capping emissions in the energy sector, however. The state Public Utilities Commission voted 4-0 Thursday to begin capping emissions on power plants used by the state's three investor-owned utilities.

And combatting global warming appears likely to be an election issue this year. State Treasurer Phil Angelides, who hopes to be Schwarzenegger's Democratic opponent in November, unveiled a plan Thursday that he said would reduce California's use of gasoline and diesel fuel by 25 percent in the next 10 years.

What Schwarzenegger will do with the final report remains to be seen. Many clean-air advocates were disappointed that the governor didn't mention the issue in his State of the State speech last month.

Katherine McLane, a spokeswoman, declined to comment on whether the governor supported a new charge on gas or forcing new mandates on business, but said the report, and meeting Schwarzenegger's targeted goals, are a top priority.

Democrats are preparing legislation related to global warming, some of which goes further than the report's suggestions. Senate President Pro Tem Don Perata, D-Oakland, is authoring legislation, called for in the draft report, that would better coordinate funding for research into energy efficiency programs.

And Assemblywoman Fran Pavley, D-Agoura Hills (Los Angeles County), is pushing legislation that would actually cap greenhouse emission from several large industries. Pavley wrote the landmark law requiring automakers to provide more fuel efficient cars in California beginning in 2009 and said the idea of reducing the same emissions from factories and other stationary sources is the logical next step.
Reducing emissions

An early draft of a report by the governor's senior environmental advisers recommends:

-- Requiring some industries to report greenhouse gas emissions

-- Adding a charge on petroleum that would pay for research into alternative fuels and automotive fuel efficiency

-- Better coordinating state programs that invest in energy efficiency and other emission-reduction technologies

-- Developing ways to reward companies that reduce emissions before reductions are mandated.
Climate changers

Sources of California’s climate change emissions, 2002

Transportation: 41.2%

Electric power: 19.6%

Industrial: 22.8%

Others: 8.4%

Agriculture and forestry: 22.8% Note: Expressed in terms of CO2 equivalence (adapted from CEC, 2005)