California Dreamin'

No-one has ever accused California of being timid. Certainly, in the area of energy and environmental policies, California has long been considered the leader among the 50 United States. But, maybe, California has bitten off more than it can chew -- or at least, more than it thought it had bitten off.

The issue is the Global Warming Solutions Act of 2006, better known as AB 32, which compels the state to plan to achieve CO2 emission levels in 2020 equivalent to the emission levels in 1990.

As covered well in an article entitled "California Plans a Carbon Diet" by Heather Mehta, Briana Kabor and Dr. Robert Weisenmiller of MRW & Associates in the January 2009 Project Finance Newswire, a publication produced by the law firm of Chadbourne & Parke, two years after the passage of AB 32, California continues to struggle in implementing a regulatory approach for enacting the program.

Meanwhile, economically, the state is suffering, as well profiled in this recent article in The Economist, which argues that "California makes Washington DC look like a model of fiscal probity." Facing a massive budget deficit of about $42 billion, the state government reached a painful agreement to slash spending and raise taxes.

In turn, these fiscal concerns are putting pressures on AB 32. Earlier this month, Stephen Moore in the Wall Street Journal wrote a highly negative piece entitled "California's 'Green Jobs' Experiment Isn't Going Well", in which the state's employment and budget downturn are implicitly linked to the passage of AB 32, while few of the "green jobs" and other economic benefits suggested by advocates of AB 32 have yet to materialize.

This is a damaging line of argument for the "green economy promoters". In my opinion, Mr. Moore's story is way too negative -- most of the economic downturn in California has nothing to do with AB 32, and almost everything to do with the simultaneous collapses in housing, credit and equity markets, which are completely independent of AB 32.

But, underneath it all, Moore is onto something: that proponents of climate action have often been far too fast and loose with the promises of economic growth, and too-easily-dismissive of the economic costs and dislocations that will be endured. Those of us in the cleantech community must respect the near-certainty that there will be losers in the move to a low-carbon economy, and we can't simply ignore that "inconvenient truth", just as we are appalled when others deny the "inconvenient truth" of climate change.

At a micro-level, it's interesting to see how one entrepreneur has responded to the doldrums in California. As profiled in the February issue of Fortune Small Business, Bob Hertzberg launched a company called Solar Integrated Technologies in Los Angeles, got fed up by government bureaucracy and changing of policies/programs at a whim, and moved from sunny La-La land across the ocean to cloud-shrouded Wales, where he started another solar company, G24i.

A solar company in Wales, as opposed to California? Hertzberg is convinced its a better place to be. Maybe some of the other VC-backed PV companies in the Bay Area could take note? Word through the grapevine suggests that the Sand Hill Road gang is now beginning to recognize that maybe other geographic areas are better-suited (i.e., lower cost) for building-out their ventures.

California may be the place of dreams, but with the hard realities it's facing right now, the state is tossing and turning through nightmares.