In California, Proposition 23 heats up

Proposition 23 has support from oil companies.

In California, a battle is in full swing over a ballot proposition that would halt the state’s landmark emission reduction law, with both sides claiming their defeat would spell disaster for the state’s already troubled economy.

If approved by voters in November, Proposition 23 would suspend AB32, a 4-year-old law requiring greenhouse gas emission levels to be at 1990 levels in 2020. Proposition 23 would suspend implementation of AB32 until unemployment falls below 5.5 percent for four consecutive quarters.

Proposition 23’s supporters—which include Valero (NYSE: VLO) and Tesoro (NYSE: TSO), two Texas-based oil companies with refinery operations in California that have provided much of the funding for the proposition—say implementation of AB32 would cost the state more than 1 million jobs, drive up gas and electricity prices, and place economic burdens on small businesses, driving them to other states.

Meanwhile, AB32’s overall effect on greenhouse gas emissions is negligible, they say.

“What we’re doing in California is important symbolically, but it will have no impact when it comes to global warming,” says Dave Fogarty, a spokesperson for the Yes on 23 campaign.

The California Air Resource Board in 2010 found that implementing measures to meet AB32’s requirements could save residents more than $2 billion in household and transportation fuel spending, while spurring $1.5 billion in residential efficiency measures.

In July, San Francisco–based Pacific Gas and Electric (NYSE: PCG) voiced its opposition to the proposed suspension, citing the potential costs of unchecked climate change and the need for “thoughtful and balanced implementation of AB32.” Meanwhile, a host of cleantech business leaders and investors have said implementation of Proposition 23 would sink cleantech and renewable energy investment in the state by creating uncertainty and removing clear market signals.

Since AB32 was passed, private investors have directed about $9 billion in cleantech investment into the state, according a report from the Clean Economy Network, a cleantech advocacy group. “There is a correlation between AB32 and cleantech investment in California,” says Donald Simon, an attorney at Oakland, Calif.–based law firm Wendel Rosen Black & Dean, which hosted a forum on AB32 in July. “Business investment is based on long-term prospects.”

Additionally, opponents say passing Proposition 23 could hamstring national climate change legislation, and subsequently hamper global action.

“California leads,” Simon says. “The rest of the nation, the rest of the world, follows. … If California pulls back on climate change, there is zero chance of any federal bill getting passed. … At the end of 2012, we’d be back to where we were in the 1970s.”