California global warming law choking food processors

As California’s unemployment rate hovers above 12 percent, even the state’s Democratic leaders – notorious for regulating, taxing and complaining about California’s business community – are talking about jobs. They are championing the occasional job expansion in Silicon Valley (i.e., a new Dell research and development center) and proposing their jobs plans, even if such plans ignore the reasons businesses aren’t growing here. (Hint: high taxes, punitive regulations, regulators’ hostility to the private sector.)

Meanwhile, the state is embarked on a massive utopian experiment that will soon push thousands more California jobs to neighboring states and other countries. The California Air Resources Board voted Thursday on final rules to implement the state’s cap on greenhouse gas emissions and the so-called cap-and-trade emission system that will force California businesses that can’t reduce their emissions to 1990 levels to buy credits in a government-created emissions “market.” The net result: Most manufacturers will either face a large new tax or will be forced to cut back production. A new bevy of brokers who trade in these emission allowances will do well under the new system.

I attended a meeting Tuesday of food processors in Fresno sponsored by the Assembly’s rural caucus. Central Valley food producers and local farmers talked about the new regulations, which are scheduled to go into effect in 2012 with enforcement beginning in 2013. A CARB board member, Dorene D’Adamo, was there to address concerns. This was as close to an old-fashioned Midwestern-style town hall meeting as one will find in California.

Let’s first dispense with any notion that cap-and-trade will not reduce jobs in California. The state’s regulators and think-tank apologists for the status quo dismiss the business community’s job-loss fears as the equivalent of the Boy Who Cried Wolf. But the point of this meeting was to lobby CARB to place California’s food processing plants, which rely heavily on natural gas to dehydrate and can fruits and vegetables, into the “high leakage” category rather than the “medium leakage” category.

Assembly members Shannon Grove, R-Bakersfield, Linda Halderman, R-Fresno, and David Valadao, R-Hanford, all took issue with the term “leakage.” What it means, of course, is job leakage. CARB puts businesses in categories based on the likelihood that the new regulations will cause them to reduce production and shed jobs. The food processors were deemed by the bureaucrats to have a medium risk of such job losses; the processors contend they are at a high risk and therefore deserve exemptions from these onerous new rules.

“Bureaucrats believe that leakage is a proper term for people’s jobs,” Grove said.

In its letter to the state’s air resources czar, Mary Nichols, the rural-area lawmakers made the obvious point: “California’s food processors are valuable employers, providing thousands of jobs, and have been world leaders in the past. However, import pressures are mounting with foreign processors having entered our domestic market, and they want a bigger share. With unemployment at record highs in the Central Valley, our state needs to keep all the jobs possible.”

So at a time of record-high unemployment – and jobless rates in the valley are far higher than the state’s overall 12.1 percent rate – and tough competition, California is imposing a costly new regimen that will put the state’s agricultural processors at a competitive disadvantage. As one processing executive noted, these commodities trade internationally, so California processors aren’t going to be competing only with one another.

Ben Curti of Tulare-based cheese maker Land O’Lakes testified that his firm has spent millions of dollars on a new higher-efficiency boiler and yet only marginally reduced greenhouse-gas emissions. So the company is facing additional millions of dollars in annual obligations just in cap-and-trade costs.

And that’s on top of all the other outsized regulatory costs that California businesses face.

“Climate change is a serious environmental threat, and we are seeing it here in California,” said CARB’s D’Adamo. She said the rules will promote public health and later in the meeting talked about the importance of cleaning up Central Valley air.

But, as I pointed out in my question to her, greenhouse gas reductions have nothing to do with pollution. The cap-and-trade law, Assembly Bill 32, was signed into law in 2006 to address warming of the planet. That’s why it is utopian. Do we think that punishing food processors and what remains of California manufacturers is going to cool the Earth?

D’Adamo agreed that CARB does not believe that AB32 will reduce global warming, but rather was passed to encourage other states and countries to follow California’s lead.

Meanwhile, real businesses will be shedding jobs and losing them to Mexico and China, where the air-quality standards are far less stringent. We’ll be getting more real pollution as part of a plan to try to nudge others to do something about a global-warming theory.

Forget about balancing costs and benefits here.

CARB and the agricultural lobbyists there were mainly concerned with passing the new costs of the regulation on to consumers. Regulators not only admit that jobs will be lost, but recognize that food costs will rise.

Halderman, a physician, focused on public health issues. Regulators and environmentalists talk about public health in a general sense – potential problems from an overall warming trend that humanity has limited ability to change. Meanwhile, Halderman focused on the real-world health problems caused by unemployment and poverty.

Two lobbyists publicly praised CARB officials for their helpfulness. I understand that these folks are in the business of gaining access to government and tweaking rules to the benefit of clients. But it was nauseating. “Kissing butt only empowers them,” Grove told me after the meeting.

This was a depressing reminder of how bureaucratic our state has become. The only good news: Watching Halderman, Grove and Valadao suggests that the GOP has a good farm team.


Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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