When Governor Schwarzenegger signed California’s landmark Global Warming Solutions Act, or AB 32, in 2006, the move was applauded as a bipartisan victory and as bold, visionary, forward-thinking legislation. But some industry groups are complaining that the implementation of the legislation, which calls for a statewide greenhouse gas emissions cap for 2020, based on 1990 emissions, will be too costly, will weaken the State’s economy and will actually harm the environment.
Late last year, the California Air Resources Board (CARB), which is tasked with developing the regulations and market mechanisms to achieve the reductions, finalized its plan of attack, called the Scoping Plan for AB 32. And in response, the AB 32 Implementation Group, whose stated goal is to “ensure that the greenhouse gas emission reductions required are achieved while maintaining the competitiveness of California businesses and protecting the interests of consumers and workers,” said in a statement that “CARB’s economic analysis doesn’t address what the actual costs will be for the State to implement AB 32,” and accused the board of not heeding the findings of groups such as the Legislative Analysts’ Office, which calls the funding plans for the bill unsustainable and suggests holding off on implementing budgeting for the Act until the Schwarzenegger can produce a stable, long-term funding plan.
Against the backdrop of an intense recession and the State’s $42 billion deficit, it would be irresponsible to not take a closer look at the costs associated with AB 32. But California Assemblyman Dan Logue’s bill to suspend AB 32, based on claims that it has already “crippled our ability to compete in the global economy, “isn’t the prudent way to address the twin needs of emissions reductions and jobs retention. A less radical reaction is articulated in this analysis by environmental think tank VerdeXchange, the main point of which is that yes, AB 32 is going to cost industry and taxpayers a lot of money, and that’ll be a waste if it does not also result in real transformation in how companies do business, whether they are based California or elsewhere.
Logue claims that AB 32 will result in greater environmental degradation because it will only encourage companies to outsource production to places such as China, where environmental regulations are, at best, poor. Good point. But that calls for more international cooperation in addition to regulations at home, not instead of them. In the end, companies that find ways to grow their businesses while limiting their environmental impacts will come out on top.
Case in point: DuPont used to spend $1 billion each year on environmental compliance (basically, cleaning up the messes it made). It spent the same amount on research and development. That was not a sustainable business practice.
In Part II, we’ll look at some companies that are making strides toward changing their business models not just to accommodate pending legislation, such as AB 32, but to pioneer better business practices. And we’ll look at innovations that might help businesses change.