The Agenda

Brief Note on California’s Prop 23

A number of left-of-center observers have noted that Flint Hills Resources LP, a subsidiary of Koch Enterprises, has contributed to the campaign for Proposition 23, a ballot initiative in California that would suspect certain provisions of AB32, California’s sweeping 2006 climate change legislation. Flint Hills has donated $1 million of the over $8 million raised by the campaign, according to Margot Roosevelt of the Los Angeles Times

So far, the Prop. 23 campaign has raised $8.2 million. Opponents of the measure, who have raised about $6.6 million, got a boost last month with a $2.5-million donation from San Francisco hedge fund mogul Thomas Steyer, the first installment of a $5-million pledge. Steyer, founder of the $20-billion Farallon Capital Management, assumed the co-chairmanship of the “No on 23″ campaign, with former Secretary of State George Shultz..

Assuming Roosevelt wasn’t including Steyer’s second installment of $2.5 million in her total, one gets the impression that the two sides are just about evenly matched, and that’s leaving aside the influence of citizens and editorial boards and other parties. The Washington Examiner’s Tim Carney recently referenced a post by Dan Heffernan that surveys the debate:

 

Proposition 23, whose primary backers include oil companies Valero and Tesoro (and now, the Adam Smith Foundation of Jefferson City, MO,) aims to “suspend” AB32 by making enaction contingent on a sustained and unrealistic 5.5% unemployment rate in California. Currently the rate is somewhere north of 12%.

There’s big money behind the effort to derail California’s climate bill, and a lot of it comes from out of state. 

To his credit, Heffernan adds that there is big money on the other side of the debate as well:

Tom Steyer, founder of San Francisco-based hedge fund Farallon Capital Management LLC, has given $2.5 million to support a No on 23 marketing campaign, and promised another $2.5 million to come.  “Proposition 23 is designed to derail a green technology revolution that we are in the early innings of and that is the engine for California’s growth,” Steyer said in an interview. Steyer and his wife donated about $40 million to fund renewable energy research at Stanford University last year.

Internet giant Google, a strong supporter of renewable energy generation, especially wind power, recentlyco-hosted a forum with the Silicon Valley Leadership Group to discuss the future of clean energy in California.   Speakers came out strongly in favor of AB32 and against Proposition 23, saying the future of green jobs and investments in California’s struggling economy are at stake.

The list goes on. Others who’ve weighed include venture capitalist Vinod Khosla and other investors who’ve made big bets on green technology firms angling for federal and state subsidies.

Many of the supporters of Prop 23 are, as Cathy Bussewitz of the Associated Press reports, major polluters. Yet it’s also worth noting that public support from measures like AB32 tends to weaken in a recession, as economists Matthew Kahn and Matthew Kotchen suggested a few weeks ago:

 

In recent research (Kahn and Kotchen 2010), we use data on Google searches as a measure of public opinion in order to investigate how changes in the business cycle affect interest in the headline environmental issue of the day, climate change. Using data from Google Insights, we have created a weekly database from January 2004 through February 2010 of keyword searches by state for two terms – “global warming” and “unemployment.” We then ask the question: How do changes in a state’s unemployment rate affect internet search activity for these two keywords within the state?

We find that higher unemployment rates within a state decrease internet search activity for global warming, but increase search activity for unemployment. Based on this revealed preference for interest in global warming, therefore, it appears that recessions crowd out concern for the environment, while not surprisingly increasing concern about unemployment. Interestingly, the magnitudes of the two effects are very similar despite having opposite signs, which is at least consistent with the notion that one crowds out the other.

Kahn and Kotchen explicitly reference the campaign for suspending AB32:

During recessions there may be diminished political will and interest to enact new environmental legislation and to enforce existing laws intended to internalise externalities. At the state level, for example, there is an upcoming ballot initiative (Proposition 23) in California to delay the state’s climate-change policy (AB32) until the unemployment rate falls below 5.5%. At the national level, momentum in the US to pass ambitious energy and climate legislation has come to a complete halt. While similar patterns are occurring throughout Europe, understanding more about the relationship between environmental concern and the business cycle in European nations is a subject for future work.

The campaign against AB32 is cleverly designed. Rather than propose rolling back the legislation, it merely calls for delaying its implementation until the economic climate improves. My sense is that this is a view many Californians would embrace with or without large corporate donations. But who would then activate this inchoate constituency if not interested parties? One can imagine a newspaper or television network leading the charge, capitalizing on popular support for the idea to build a brand identity. Yet this would invite charges of Berlusconi-like media manipulation. A grassroots citizen group might do the job, but of course it is difficult to coordinate large groups of citizens on a narrow public policy issue without resources. 

Given that there is a network of foundations, editorial boards, business interests, and well-funded grassroots organizations that support AB32, how should we understand the effort to discredit Prop 23?

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