Cap-and-trade key to green energy future

Windmills generate electricity in Palm Springs. (Photo: Chris Rubino)

Clean energy is taking over the world, driven by a combination of climate change policies and market economics. California has paced America in seizing this opportunity, building a thriving green economy through smart policy.

But the fate of California’s cap-and-trade program, a cornerstone of the state’s green growth strategy, depends on the state Legislature extending the program beyond 2020.  California’s economy has recently notched billion dollar gains from clean tech exports, and data show even larger future potential.  If California fails to lock in the program’s long term future, we risk failing to fully exploit the opportunity presented by surging global markets for clean technologies.

The clean energy sector employs 519,000 Californians, and grew by 14 percent last year.

Clean technology costs have fallen dramatically since 2009: Wind has dropped 66 percent and solar has fallen 85 percent.  In many places, including 12 states, they are now cost competitive without any government support.  Renewable electricity investments have averaged $300 billion annually since 2010, beating all other technologies, and are forecasted to win 75 percent of all new electric power investments through 2040.

The economics of electric vehicles (EV) costs also appear poised for that technology to take off.  EVs are already cheaper to drive and will soon reach purchase price parity with conventional cars, and while Trump’s administration considers weakening fuel efficiency standards, the rest of the world is not turning back, with California’s vehicle standards in large part providing a global policy template.  Two million EVs are on the road worldwide, including one million in China, and are forecast to reach 60-200 million by 2030.

Clean tech is already contributing to California’s impressive economic performance.   Since 2012, California’s economy has grown twice as fast and produced 50 percent more jobs than the rest of the nation, bolstered by clean energy companies and jobs.  The clean energy sector employs 519,000 Californians, and grew by 14 percent last year.  $32 billion in clean tech venture capital has poured in—half of North American’s total – since 2006, when the state launched its climate crusade in earnest.  As a result, California leads America in clean tech patents, including more than 35 percent of solar patents since 2013.  In turn, these patents seed the clean energy giants of the future.

Potential benefits from greater clean tech exports are already evident.  California’s clean vehicle standards and visionary companies have driven vehicle export growth from $600 million in 2013 to over $2 billion in 2016 according to federal government data.  These data only account for foreign sales and not “exports” to other US states, but surely sales to other states are growing apace as well.

Growth in Tesla sales are mainly to behind growth in exports data so far, but California clean clean vehicle manufacturing is more varied, extending to electric bus manufacturers.

California-based Proterra is building electric buses at its City of Industry factory.  Foothill Transit, which operates in 22 cities in Southern California, purchased 17 Proterra buses in 2010 and has ordered 13 more, promising to be all-electric by 2030. Proterra will increase its California workforce by 50 percent this year to build 300 buses on back order, most from transit agencies outside of California.

Cap-and-trade creates a level playing field, ensuring carbon pollution costs are factored into market decisions.

State officials helped lure the Chinese company BYD, to set up shop in southern California.  Its Lancaster factory is building electric buses for Long Beach, while ramping up production to meet demand from new contracts across the country.  The factory’s workforce is unionized and is expanding.  The company expects to have more than 1,500 employees by the end of 2018.

Twenty-five percent of California’s green jobs are in manufacturing, so these are not isolated examples, but represent broader opportunity for the state’s workers.

In addition to technology, expertise can also be exported.  Because of their experience as a low-lying nation, Dutch firms dominate the global market for climate adaptation engineering and water management. California’s grid management technologies and technical expertise will likely be in heavy demand in China, the largest grid in the world, especially given the incredible strength of the California brand in China and increasing policy coordination.

California’s climate leadership is obvious. Governor Brown’s international efforts are counterbalancing Trump’s hostility to climate action. But the importance of establishing cap-and-trade certainty beyond 2020 as a capstone for the state’s exemplary suite of policies is just as clear.

Cap-and-trade creates a level playing field, ensuring carbon pollution costs are factored into market decisions, playing an integral role conditioning the market for clean tech success, and helping to create sustainable prosperity.

California’s policymakers should come together to finalize the cap-and-trade extension. If not, we will fall short of fully seizing the green growth opportunity.

Ed’s Note: Chris Busch is research director for Energy Innovation,  a San Francisco-based think tank, directing the organization’s California Climate Program.  Busch, who holds a PhD in environmental economics from UC Berkeley, has written extensively about California’s cap-and-trade program.


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