Climate in California: It's Business Not Politics.

Climate in California: It's Business Not Politics.

October 9 2020

Without federal leadership, states have taken climate change and air pollution into their own hands. And out of all the states, California has led. It has done so out of economic necessity. It is our largest state with 39 million of the country’s 328 million people. Its GDP is $3.1 trillion, 15% of total US GDP of $20 trillion. It is the world’s fifth biggest economy -- bigger than India and just behind Germany. It produces one- third of US vegetables and two-thirds of our fruits and nuts. California is the #1 US producer of milk, tomatoes, lettuce and hundreds of other foods. The state is also home to the most valuable tech companies (APPL, GOOG, HPE, ORCL). Notwithstanding the health and safety effects, climate change impacts the prosperity of Californians. To that end, California is revolutionizing its energy system and is setting an example for the rest of the US and the world.


For a long time, America thought of California as Hollywood, the Beach Boys and smog. The smog became so intense that people were regularly stricken with nausea, itchy eyes and burning lungs. In 1967, Republican Governor Ronald Reagan created the California Air Resources Board (CARB) to cut dirty vehicle and other emissions. When the federal Clean Air Act later allowed California to enact stricter pollution laws than the rest of the country, it did so. Many other states then adopted California’s standards as their own. At the outset, CARB required that all vehicles be installed with catalytic converters to cut emissions of carbon monoxide, nitrous oxides and other pollutants. Once California demanded catalytic converters, Detroit had no choice but to install them in all vehicles. In 2006, under Republican Governor Arnold Schwarzenegger, CARB added greenhouse gases to the list of pollutants it regulates in vehicles and has since pushed through further aggressive climate legislation. With modest exceptions, California’s air is no longer toxic.


California cannot afford climate change, which has brought on devastating wildfires, prolonged droughts, and record temperatures. In 2020 alone, wildfires burned over four million California acres (bigger than the state of Connecticut), twice the previous mark of two million acres set in 2018. Northern California’s leading utility PG&E is being forced to pay $13.5 billion because its equipment sparked the deadly Camp Fire that killed over 85 people in 2018. Climate scientists believe that these extreme events are now the status quo and may only get worse.


California aims for a 100% shift to clean energy by 2045. Governor Gavin Newsom has even called to fast-track this initial goal. By 2018, California had already pushed renewables to 34% of the state’s electric energy mix, making California the national leader in renewable power. This effort has strongly benefitted from the shrinking cost of solar power for residential, commercial and utility-scale projects. The cost of solar has declined by around 85% between 2010 and 2020. For example, the private company 8minutenergy, one of the largest developers of solar projects in the US, recently signed a 400 MW PPA with Los Angeles to build a solar farm at just 1.9 cents per kWh. The project will also include a massive 300 MW component of battery storage. The 1.9 cents price is much less than natural gas-fired generation and even less than Texas wind power. The largest US utility Nextera (NYSE: NEE), has a pipeline of 2,700 MW of battery storage projects in California. (Nextera surpassed Exxon Mobil in market capitalization this past week.)


Although California is the second largest energy consumer in the country behind Texas, its per-capita energy consumption is the fourth lowest due to its extensive efforts to increase energy efficiency. This has been driven by extensive outreach and regulation related to new building codes, HVAC systems, refrigeration, lighting, pool heating, and other demand centers that have made energy usage in California flat since the 1970s, while the rest of the nation increased 33%. Nonetheless, California still faces a steep road to net zero, as the 2045 mandate will require doubling its current portfolio of renewables every seven years and developing three gigawatts of new solar, wind, and batteries each year.


The end of gas powered cars. In September 2020, Democrat Governor Gavin Newsom signed an executive order to phase out all sales of new gasoline-powered cars by 2035. It is the first move of its kind in the US and it could come close to eliminating California’s greenhouse gas emissions from transportation. Electric vehicles and other clean energy vehicles currently make up less than 10% of California’s new vehicle sales even as the largest market for EVs in the country. California’s public utilities commission also recently approved $437 million for 38,000 electric vehicle charging stations and is looking into similar incentives to power hydrogen networks.

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