Policy Brief

Analysis of California’s Propositions 7 and 10: Renewable Energy Mandates and Handouts

Policy Brief 75


California has just set out on a highly ambitious mission, a decades-long effort to reduce greenhouse gas emissions to the equivalent of 1990 levels by 2020, and 80 percent below 1990 levels by 2050. Two propositions on the California General Election ballot for November 4 exemplify the kind of bold thinking that makes the state an environmental and economic leader: Proposition 7, which would raise state standards for renewable energy procurement, and Proposition 10, which would authorize bonds to finance a variety of alternative energy research and development. Unfortunately, the two propositions fail to transcend the legislative shortsightedness that has burdened California with high budget deficits and poor economic performance in recent years.

Proposition 7 would require unprecedented and costly alternative energy acquisitions that far exceed the alternative energy goals set by Governor Schwarzenegger, state legislators, state energy agencies and expert advisors to the California Air Resources Board for the purpose of reducing greenhouse gas emissions. The goal set by Proposition 7 probably can’t be met, which will mean penalties on utilities that will be passed on to customers as rate increases. Worse, it would mean diverting state revenues and household budgets away from more cost-effective greenhouse gas emission reduction strategies. Tough economic times mandate that we are allowed to use the most cost effective means to reduce greenhouse gases.

Proposition 10 is likewise badly flawed. It gives subsidies to people who already buy clean energy cars or solar or wind, and of course lots of grants to some special interest companies that are pushing for this plan. It would not effectively increase the use of alternative energy. Worse, among other provisions, it would give out rebates (at an eventual taxpayer expense of more than $1 billion) to buyers of the Honda GX CNG, a natural-gas-powered car that emits more greenhouse gases than the more popular and more easily fueled Toyota Prius. The $10,000 rebate to Honda natural gas car buyers comes as no surprise, as this proposition is bankrolled by T. Boone Pickens, founder of Clean Energy Fuels Corporation, a company that makes natural gas refueling stations. Pickens has already secured at least $107 million in public grants for its private projects and would almost certainly line up more contracts with the money provided in Proposition 10.

This situation has prompted another California rarity: virtually every major environmental group in California opposes Proposition 7, and Proposition 10 has earned criticism from the state’s top energy experts.