Policy Documents

California's Green Nightmare

Stephen Moore –
October 12, 2010

It's hard to know where the fairy tale of "green jobs" first came from. It was probably a clever marketing scheme by radical environmentalists who realized that their anti-growth climate change agenda wasn't going to sell among the American electorate if workers realized how many jobs would be eviscerated by the new taxes and regulation. So, from somewhere out of Madison Avenue or K Street, the left devised the green jobs story line: we can impose a $1 trillion new tax on the U.S. economy over the next decade, and it will save jobs, as hundreds of thousands of Americans begin assembling windmills and solar paneling.

If we want to see how green policies work in the real world, we don't have to look any further than America's left coast. California has become the poster child of green jobs. Gov. Arnold Schwarzenegger boasted in his 2007 State of the State Address that "California has taken the leadership in moving the entire country beyond debate and denial [on global warming] to action. As goes California, so goes the nation."

He's right. California is the nation's laboratory in green job initiatives of the type that so many politicians in Washington, D.C., and the states see as America's economic passport to the future. The Golden State was first in the nation in renewable energy standards, it is the home of the most stringent cap and trade legislation (called AB 32) to reduce carbon emissions, and it has poured hundreds of millions of state tax dollars into renewable energy research.

So where are all the green jobs? A new 2010 study by the University of California-Berkeley comes to the sobering conclusion that "the green economy accounts for just 1 percent of California's jobs."

That's right: of the roughly 15 million California workers, only about 159,000 have green jobs (and this was an expansive definition of green jobs, including trash sorters at the dumpsters). That same study did find that green employment is "growing about 50 percent faster than the economy overall." But that's mostly a reflection of anemic job generation in California's industrial base, and not a sign that green jobs are going to sprout all over the state like avocado plants.

California's heavy "investment" in green job projects -- on the types of initiatives that President Obama is all gaga over on the national level -- hasn't added at all to overall state employment. As of June, California had 2.2 million unemployed workers and the fifth-highest unemployment rate in the nation at 12.3 percent. Even if the state were somehow to quadruple its green jobs, the Golden State would still have an unemployment rate above the national average.

Nor has "going green" helped the state's finances. The budget deficit in Sacramento is expected to reach $20 billion and the state's credit rating of A- is the worst of any state in the nation, while its default risk is rated on par with that of Libya. California voters are partly to blame. In 2008 they approved a $9.95-billion ballot initiative to build a high-speed "green" rail project from San Diego to San Francisco and beyond. The state can't pay its bills already. Most rail experts believe the actual cost will be multiples higher than anticipated, and that's only for the construction costs. The train figures to be an albatross around the neck of the state budget every year in operating subsidies, much as Amtrak is in Washington. By the way, you can take a Southwest flight from San Francisco to San Diego for as little as $59.

Amazingly, even Gov. Schwarzenegger's own economics team concluded this year that the state's green regulatory structure is a menace to the state's economy. The governor's office study concluded that California's already iron-fisted environmental and workplace regulations translate into about $176 billion in lost output and nearly 4 million lost jobs. This study was so embarrassing to the legislature and the Schwarzenegger administration that it was suppressed for many months, until several Republican legislators demanded its release.

Meanwhile, California's celebrated AB 32 climate change law will take effect in 2012. But it is already causing an outsourcing of manufacturing, construction, and utility investment in anticipation of the new regulations. A Riverside construction company, CalPortland Cement, announced in late 2009 it was closing its plant because of AB 32's impending regulations. The CEO wrote: "A cement plant cannot be picked up and moved, but the next new plant probably won't be built in California," but rather in Nevada or China.

Last year, researchers at the college of business at California State University in Sacramento estimated that higher energy prices from AB 32 will increase consumers' food, utility, and housing costs by $50 billion. That's the equivalent of a 4.5 percent sales tax on most consumer items Californians buy. Small business costs would rise by $60 billion annually to pay for a policy that will have at best a microscopic impact on global temperatures.

The Golden State is also first in the nation in stifling renewable portfolio electricity standards. These are expected to raise electric power costs on every Golden State business and homeowner by 2 percent, which is like a $250 tax on a typical family. Another expensive initiative, the 1 million solar roofs project, will pour tens of millions more scarce tax dollars into green programs the debt-drenched state can't afford.

How does this all translate into jobs? Well, of course, it doesn't, and last year California Republicans held field hearings in Reno, Nevada, to discover where all the businesses have fled. The presidents and founders of more than 100 businesses, all formerly in California, almost all said much the same thing. Although taxes are excruciatingly high in the Golden State, the businesses said they could tolerate those if it weren't for the regulatory climate. They couldn't stomach the anti-business attitude of so many of the California regulators. One former manufacturer in Los Angeles complained that "the regulators come onto your facility, and they want to shut you down. They view businesses as enemy combatants." Earlier this year, the EPA chased out of town the last steel foundry in Los Angeles, a firm that had hired hundreds of Southern California workers with good wages for decades.

Joseph Vranich, a business relocation expert, has a database of firms that move in and out of California. "Thanks mostly to California's hostile regulatory climate," he says, "for every three new businesses that move into the state of California, about 100 move out." He's compiled an exit list of A-list home-grown California-based companies that are expanding operations elsewhere. It includes Intuit, StarKist, Facebook, Northrop Grumman, and Apple. Perhaps even more embarrassing is that when California's investments do generate new jobs, they are increasingly located outside the state. In June, the hot Silicon Valley firm MiaSolé reported that its planned home for one of the largest solar factories in North America, a 500,000-square-foot 1,000-worker plant, will be built in Atlanta.

Similarly, CalStar Products has erected its newest green plant in Wisconsin. Since then, it has been awarded nearly $2.5 million in federal clean energy tax credits through the American Recovery and Reinvestment Act, and the company said, "We expect to build additional plants down the Mississippi Valley and East Coast over the next couple years" -- and conspicuously, not in California. Another green firm announced it will build its new plant in Wales. Other states and nations are getting rich on California's green spending. Much like Europe, California is discovering that for every green job that has been created, several more conventional hardhat jobs have disappeared. The term "green jobs" is a fancy way to say 12 percent unemployment.

Even the politicians in Sacramento are starting to realize the tomfoolery of one state trying to stop planetary global warming all on its own. So Mr. Schwarzenegger has been trying to persuade the governors of other neighboring states like Arizona, Idaho, Nevada, Oregon, and Washington to sign a Western state cap and trade treaty. The other governors have declined, no doubt having observed how well climate change legislation has worked in California.

The whole fight of jobs versus greens comes to a climax in November, when voters will decide on a ballot initiative to suspend the state's global warming law until unemployment falls back to 5.5 percent.

The initiative is polling well, but green groups around the country are raising millions of dollars to defeat the measure. This is Waterloo for the Green Movement. If California rejects expensive job-killing remedies to climate change, other states will surely follow. California, ironically, could be the state that says, "Whoa: jobs first."