Californians Reject Suspension of Environmental Law

California voters rejected a ballot measure backed by oil refiners that would’ve suspended the state’s global-warming law signed by Governor Arnold Schwarzenegger.

Proposition 23 was losing 39 percent to 61 percent with 99 percent of the precincts reporting as of 10:34 a.m. local time, according to the California Secretary of State.

The vote clears the way for a state law restricting greenhouse-gas emissions to go into effect in 2012. The law requires the state cut emissions to 1990 levels by 2020. It will require utilities to get almost a third of their electricity from renewable sources such as solar power, and create a market for carbon-dioxide pollution permits.

The defeat of Proposition 23 by a wide margin sends a message to the nation that federal global-warming legislation, can be “jumpstarted again,” Schwarzenegger, a Republican who leaves office in January, said on a conference call today.

President Barack Obama and Democrats in Congress failed to get approval for legislation that would set a national renewable electricity standard and create a federal cap-and-trade program, in which companies buy and sell a declining number of carbon pollution permits.

Republican Gains

Republicans in the U.S. House of Representatives, who won control of the body in midterm elections yesterday, have said they will block cap-and-trade legislation, which they describe as a “national energy tax.” Republicans also narrowed the Democrats’ majority in the Senate.

Voter approval of Proposition 23 would’ve suspended California’s Global Warming Solutions Act until the state unemployment rate fell to at least 5.5 percent. The rate in September for the most populous U.S. state was 12.4 percent, the third-highest after Nevada and Michigan.

Backers of alternative energy, including Microsoft Corp. founder Bill Gates and Google co-founder Sergey Brin, raised more than $30 million for radio, television and print advertising saying the measure would undermine the nation’s largest solar market and threaten $9 billion in venture capital investments in the state’s fledgling clean energy industry.

The defeat of Proposition 23 is “certainly a positive for solar project developers active in the state,” said Nathaniel Bullard, the lead North American solar analyst at Bloomberg New Energy Finance, the London-based research firm owned by Bloomberg LP, the parent of Bloomberg News.

Renewable Power Requirements

California’s Air Resources Board, the agency responsible for enforcing the global-warming law, set a target in September for utilities to get 33 percent of their power from solar, wind and other renewable sources by 2020, the most ambitious standard of any U.S. state.

First Solar Inc., SunPower Corp., BrightSource Energy Inc. and Recurrent Energy are among the companies that stand to gain the most because they have large projects with long-term agreements to sell their power to utilities, Bullard said.

The air resources board is scheduled to vote next month on whether to move ahead with the state’s proposed cap-and-trade program for greenhouse gases. By 2015, the program would cover nearly 400 million metric tons of carbon dioxide from power plants, factories, refineries and the tailpipes of cars and trucks, the air-quality agency said in a report last week.

That’s more than double the emissions covered by a state- run carbon market for power plants in the U.S. Northeast and almost one-fifth the current size of Europe’s cap-and-trade program, according to data compiled by Bloomberg.

Expanding Market

California may expand that market by persuading other U.S. states and some Canadian provinces to enact similar cap-and- trade programs, which could be “linked,” the air quality agency said in last week’s report.

Tesoro Corp., Valero Energy Corp. and Flint Hills Resources LLC, a refining subsidiary of Wichita, Kansas-based Koch Industries Inc., raised about two-thirds of the more than $10 million that financed support of the proposition.

The greenhouse-gas limits won’t “translate into the jobs or economic activity” promised by environmentalists and alternative-energy investors, Jack Stewart, president of the California Manufacturers and Technology Association, said in an e-mail.

“Venture capitalists will come to California to cash in on the subsidies, but the lion’s share of the facilities, revenue and jobs will go to other places, like China, where the cost of doing business is much more affordable,” Stewart said.

Fee Proposition

Another measure on yesterday’s ballot, Proposition 26, may help opponents of the California law keep up their fight against greenhouse-gas limits, said Jon Costantino, a Sacramento-based adviser with law firm Manatt, Phelps & Phillips LLP and a former official at the state air resources board.

Proposition 26 would require some state and local regulatory fees to be approved by a two-thirds vote instead of simple majorities. The initiative was winning 53 percent to 47 percent with 99 percent of the precincts reporting, according to state election records.

The measure would mean a pollution fee proposed by the air quality agency to pay for the enforcement of greenhouse-gas limits “seems to be out the window at this point” and lawmakers will need to find another funding source in next year’s state budget, Costantino said in a telephone interview.

Proposition 26 won’t “derail” California’s ability to enforce its global warming law, Mary Nichols, chairman of the air resources board, said on a conference call today.

To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net; Simon Lomax in Washington at slomax@bloomberg.net.

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

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