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First of a two-part series on California's climate policies
California is about to try a radical experiment. A little over a year from now, the state will limit the greenhouse gas emissions from factories and power plants, and, eventually, emissions from vehicles.
The U.S. Congress tried to pass a similar plan for the whole country but dropped the idea last year.
Paying a price for emissions has many Californians worried about what they'll have to pay for electricity and fuel and everything that takes energy to make. But the state's argument is that this will be good for the economy.
The law, actually a suite of measures generally lumped under the name AB 32, is a risky step at a time when the state's economy is shaky. Essentially, the law puts a statewide cap on the amount of greenhouse gases coming out of smokestacks and tailpipes.
At a hearing recently in Sacramento, skeptics gave state regulators an earful. Among them was single mother Kathy West.
"I'm a maintenance mechanic at the ConocoPhillips refinery," she told the California Air Resources Board, which administers AB 32. "At our Santa Maria refinery, we just hired 12 operators and two mechanics. What's going to happen to their future, their families? What about your jobs when you get rid of the refining out of California?"
There's no doubt the new laws will make electricity and gas prices rise, but just how much is a matter of much debate — some say thousands of dollars a year for businesses.
The state says costs pale in light of new business the law will create.
Mary Nichols, who runs the Air Resources Board, says capping emissions forces companies to adapt. "Putting that cap on top of that whole system would be the best way to unleash the power of private capital to really get the most out of not just research and development, but actual deployment of green technologies," she says.
One businessman who believes that is Matt Horton, CEO of Propel Fuels. The company installs seals, gaskets, hoses, underground tanks and pumps that can handle new biofuels that are required by the emissions laws. At a gas station near San Francisco, he chats with customers pumping biodiesel into their cars and talks about why he's bullish on green fuels.
"We did start out in Seattle as a company, [then] we moved down here to California because it's a great market, a lot more consumers that are interested in renewable fuels," he explains. Horton says the climate laws create business. "We would not be here in the state if it were not for the favorable policies that the state enacted."
Propel will open its 27th station this year. Most are in California. Customers like Shawn Leong say, "bring it on." Leong owns a 1984 Mercedes that can run on straight biodiesel, like the recycled vegetable oil pumped at this station.
"It's my lifestyle," Leong says. "I choose. I own a florist and, you know, we don't create pollution, we try not to. My home has solar panels on it." In fact, Leong is disappointed that the station here only pumps fuel with 5 percent biodiesel — he prefers the pure stuff.
Some drivers are looking beyond the environmental benefits. Student Andre Savastru has modified his car to run on 85 percent ethanol, which is also sold at this station. "You get a great deal of difference in performance," he says. "Personally, I've got about 40 to 50 horsepower more" from using ethanol.
Putting A Price On Emissions
The biggest reductions in greenhouse gas emissions, however, will have to come from refineries and power plants. Each company will get allowances to emit a certain amount. If they can't live within the cap, they can pay someone else to reduce gases somewhere else.
And that means business for a company called Jaco Environmental. In a warehouse in the San Francisco Bay Area, hundreds of cast-off refrigerators are scattered across the floor. Michael Dunham cuts into one with a power saw. He calls it "filleting" the fridge, and he clearly enjoys hacking it up, first with the saw, then with a shovel.
The local electric utility pays people $35 each for these old, inefficient appliances — they're a drain on the electricity grid. Then they're brought here, to refrigerator purgatory, where Jaco takes over.
Cutting up old refrigerators sometimes offers surprises: "The most interesting thing we ever found was a rattlesnake," Dunham says. Dunham is head of energy and environmental programs at Jaco. He and his crew are after the 10 pounds of foam that's inside the walls of a typical fridge.
"Embedded in that 10 pounds of foam is 1 pound of CFC 11 gas," he explains. CFC 11 is a chlorofluorocarbon, a form of Freon and a very powerful greenhouse gas — the kind that warms the planet. There are other CFCs in the fridge's compressor as well: "It will all go up into the atmosphere if it's not taken care of," says Dunham. "So what we do is we capture it."
Jaco removes the foam and other CFCs in the refrigerator's compressor and sends it out to be destroyed. California's climate law sets up a system to verify that the CFCs are destroyed, and each pound that's eliminated creates a "credit."
A company called EOS Climate buys those credits and then sells them to California companies that need to reduce their carbon footprint.
Jeff Cohen, vice president of EOS, says CFCs are a climate time bomb buried inside old refrigerators.
"So what we did was create a financial incentive to pull this stuff out, to address the remaining banks of CFC, not only in the U.S. but around the world," Cohen explains.
Before he helped start EOS, Cohen worked at the U.S. Environmental Protection Agency to help draft the international treaty that banned CFCs because they create holes in the atmosphere's ozone layer. He says the California emissions controls are a way to get rid of the "legacy" chemicals that remained in appliances after the worldwide ban on CFCs.
What the California laws do is put a price on all these greenhouse gases: They will become a commodity, and people will pay to emit them but also make money by getting rid of them. The controls are scheduled to go into effect Jan. 1, 2013.