California is proving to the rest of America that economic success does not require increased pollution.
The state recently reached an economic development milestone: It is achieving superior and sustained economic growth while also reducing climate changing pollution.
At a time when the California economy is growing faster than the U.S. economy, the California Air Resources Board reports that the state has reduced greenhouse gas emission by 1.5 million metric tons.
Breaking the link between economic growth and pollution
Since the Industrial Age, the foundation of economic development has been that increased pollution was a necessary evil to achieving economic success. The public policy positions of fossil-fueled electric utilities, the oil industry and the U.S. Chamber of Commerce has been, and continues to be, that America cannot afford more environmental regulation. They have held this position since the 1960s Clean Air Act. Their defense of pollution is that a community must accept increased environmental impacts or face economic stagnation.
The facts could not be further from the truth. Since the passage of the Clean Air Act in 1963, and subsequent increased regulation of pollution through amendments in 1970, 1977 and 1990, the U.S. economy has tripled in size. What the Clean Air Act did challenge was the competitive positioning of companies that gained economic advantage through pollution. These regulations forced businesses to successfully compete on price, product performance and environmental protection.
The International Energy Agency’s 2014 report further advances the delinking of pollution growth and economic growth. The Energy Information Agency reports that, for the first time in recorded modern human history, the world has achieved economic growth while also reducing greenhouse emissions. This achievement was driven by shifts to renewable energy and increased energy efficiency by China, the U.S. and other nations. The EIA reports that the U.S. use of energy and economic growth has decoupled as we continue to increase our energy efficiency.
California pioneers the carbon-free economy
California is moving past the question of whether pollution is necessary for economic success. It is pioneering a new economic model where economic success is achieved by eliminating, not containing, greenhouse emissions. The scale of California’s success in growing its economy while reducing its GHG emissions deserves the attention of all states.
California’s economy is booming even in the face of a historic drought exacerbated by global warming. For all the public attention on the economic success achieved by the great state of Texas, California’s economy is twice the size of the Lone Star State’s and is creating more jobs. California’s economy has grown to be the seventh largest economy in the world and is larger than Brazil’s, Russia’s and Italy’s. Only the U.S., plus China, Japan, Germany, France and the United Kingdom, have larger economies.
What state would not like to lure the companies now headquartered in California? They include Disney, Apple, Twitter, Facebook, Tesla, SolarCity, HP and Genetech. California’s San Francisco metro area accounts for over 40 percent of all venture capital invested in the United States. Boston, at 11 percent, ranks a distant second.
To ignore California is to turn a blind eye to the world capital of innovation. While some pundits compare California to Greece in terms of its economy or Russia in terms of its centralized controls, the economic reality could not be further from the truth. California has bet big on entrepreneurship and technology innovation. Its bet on entrepreneurship and innovation has resulted in the state leading the U.S. in agriculture, technology and manufacturing revenue growth.
California’s economic success has not come through taxpayer subsidies used by most states to pay a business to locate a plant. It doesn’t have an economic development government agency, nor does it fund economic development. California pursues economic development by creating markets for disruptive technologies to drive down their unit prices through economies of scale. The state’s Million Solar Roofs initiative created the domestic market for rooftop solar that is now challenging grid power prices across the U.S. California’s pricing of carbon emissions is driving automobile innovations. The California electric car market now accounts for 1 out of every 2 electric cars sold in America.
The green economic revolution
The green economic revolution I projected in 2007 is now a reality. China, Germany and California are investing in technologies and public policies that will delink economic success and pollution. The question is no longer if, but how quickly, this new economic model will replace the Industrial Age.
Significant barriers to this green economic revolution do exist. But they are not technological or economic. The barrier to the new economic model being pioneered by California comes from states and companies still dependent on pollution to win competitive advantage.
While these states and companies can retard our country’s path to a cleaner and stronger economy, they cannot stop the green economic revolution. America’s free marketplace will continue to open the door for companies that provide consumers with price competitive “in me, on me and around me” solutions. Companies that deliver products that cost less and mean more in terms of improved human health will win.
California is providing this. It is only a matter of time when the California path to economic development will become the norm for all states.
Image credit: Flickr/Brian Kusler