by Bill Lockyer, California Treasurer
We must address climate change and its potentially destructive effects on our environment, our economy and society. Climate change is the direct result of global warming. There aren’t many Californians left who would disagree with that proposition.
To mitigate climate change we must curb the emissions of greenhouse gases like carbon-dioxide that are so rapidly accelerating global warming.
Our success in this effort will require more than curbing emissions from current activities. We also must also ensure that new activities in the public and private sector minimize and offset any emissions they create.
If we don’t act to reduce the environmental footprint of new public facilities, existing sources will have to reduce their emissions even further to compensate for increases caused by new sources.
I also want California’s green tech industry to be the nation’s leader. The genius of Californians’ creativity can make renewable energy more plentiful and affordable, and better our environment and quality of life.
That’s a big reason I’m proposing what I believe to be the largest investment in renewable energy technology, including solar energy, in our state’s history.
My plan calls for investing $3.5 billion in solar energy as part of a $5 billion bond package to green state government buildings, expand use of renewable energy, increase energy efficiency and spur innovation and cost-reduction in California’s green technology industry.
As a companion to this investment, I propose that the state operate a carbon credit bank to make it a constructive force in any market-based system to reduce global warming emissions under AB 32.
Together these proposals would make California a leader in reducing greenhouse gas emissions, provide an economic stimulus through the bonds, and at the same time support environmental justice through the carbon bank.
First, the bonds:
The plan would cover facilities owned or operated by state agencies, the University of California and California State University. These state government facilities occupy 206.6 million square feet of space and rank among the state’s top energy users, spending more than $525 million annually on energy.
The Green Bonds would finance the purchase and installation in state buildings of solar technology, fuel cells and other renewable energy, and other measures to increase energy efficiency, reduce global warming emissions, cut costs and substantially cut state buildings’ reliance on the power grid. The plan would allow the state to produce an estimated 1,700 MW of increased energy efficiency and renewable energy.
” The $3.5 billion investment in solar installations would produce an estimated 450 megawatts (MW) of non-grid, renewable energy.
” $600 million would be dedicated to retrofitting and retro-commissioning state buildings. Based on informal numbers provided state officials in 2004, I believe a $600 million investment to increase efficiency by 40 percent will produce at least $863 million in savings over 10 years, and probably much more.
” Another $900 million would fund fuel cell installation, biofuels and other renewable technologies, generating an estimated150 MW of power.
Under this proposal, to the full extent permitted by law, California technology, California businesses and California workers would receive a preference in the program’s implementation.
This plan complements the strong action on global warming taken by our two state-government pension funds. CalPERS has invested more than $1.2 billion in green buildings, clean technologies and screening companies for compliance with environmental standards. CalSTRS, meanwhile, has put $425 million into a private equity program for “Clean Sector” investing and worldwide equities for sustainable investments.
State government can make an important contribution to the overall climate change effort while serving as a role model for others. If the state is calling on others to reduce climate change emissions, state government should live by the same rules.
California’s government must stop being a contributor to the problem of global warming and, instead, lead the way to a solution. Our ultimate goal should be reach the point where government buildings, in the aggregate, generate at least as much energy as they use. In other words, government should be “net-zero” on the energy consumption/generation scale. The Green Bonds plan aims to help us achieve that goal.
To help government reach the net-zero target, all new government facilities in California state, cities, counties, schools and colleges should be “carbon-neutral” by 2030. Carbon-neutral buildings would operate without using any fossil fuel energy sources, and would meet all their power needs with renewable sources. The Green Bonds will provide the investment resources to help us achieve that goal in stages:
New government buildings would use 60 percent less fossil-fuel energy by 2010, 70 percent less by 2015, 80 percent less by 2020, and 90 percent less by 2025. By 2030 state buildings would use no fossil-fuel energy.
This “carbon-neutral by 2030” goal for new buildings has been endorsed by the U.S. Conference of Mayors, the American Institute of Architects, the U.S. Green Building Council and the Illinois State Legislature, among others. California government should embrace it, too.
We can do this. We know that a two percent, upfront investment to include green elements in new buildings produces energy and operational savings equal to 20 percent of total construction costs. So, if you spend $200,000 for green elements on a $10 million project, you save $2 million over 20 years. (California Sustainable Building Task Force, October 2003 report)
As for existing facilities, we must move aggressively to implement current rules to increase energy efficiency and expand renewable energy in government buildings.
There are currently 27 retro-commissioning projects underway or completed that will yield an 8 percent to 10 percent reduction in energy usage and corresponding green house gas emission reductions for each building.
The state is also retrofitting many older buildings to provide them with new energy efficient heating and cooling systems and mechanicals and with, upgraded energy management controls.
For example, at Napa State Hospital the department of mental health is retrofitting a 1.5 million square foot facility with new lighting systems, a new boiler and an energy management system (Department of Mental Health Energy Efficiency Forum, Power Point, 9-27-2006):
” The projected cost $1.3 million.
” Project annual savings $207,000
” Payback time 6 years
This is one of a number of retrofit projects at state hospitals, installing energy efficient systems that will cut costs and offer quick payback on the investment. Other retrofitting projects are under way at a variety of other state facilities.
My proposal would provide the funding to dramatically expand this retrocomissioning and retrofitting effort. We must continue to set our sights higher. It’s time to make the investments needed to implement, and go beyond, what we already have on the books.
My green investment proposal is frugal. It will conserve resources, and contribute to a better quality of life the people of our state want and deserve. Bonds are the smart way to move government to the point on climate-change because they allow us to make the needed investments now, in today’s dollars, and ensure taxpayers and the environment reap the benefits sooner.
Taxpayers would save money because initial capital expenses would be far outweighed by the savings from energy efficiency and operating-cost reductions. And global warming emissions associated with buildings’ operations would drop, resulting in better air quality and improved public health. Additionally, the plan helps California businesses by ensuring the private sector does not bear a disproportionate, unfair burden as the state moves to meet mandated reductions in global warming emissions. State government will pull its own weight and more.
One of the most important benefits of the California Green Bond program will be the nourishment it provides to California’s green economy. It will foster green technology advances in architecture, engineering and construction, and create jobs and prosperity by nurturing the green tech and renewable energy industries crucial to the long-term health of our state’s economy. And with the money they earn from bond-funded projects, solar companies will be able to make the investments needed to increase the supply of solar energy in the private sector. That will reduce consumer costs for homeowners and businesses.
Meanwhile, in the effort to implement AB 32, most observers agree any system to reduce global warming emissions ultimately will include some mix of market-based approaches such as cap and trade and regulatory approaches.
I’m among those observers.
If policymakers adopt a cap-and-trade system, the state should participate in that market. That’s why I’m proposing that, in any cap-and-trade system, the state should operate a Carbon Credit Bank.
The bank would hold in trust global warming emission credits attributable to government action, and participate in the market in a way that would benefit the environment, create jobs and generate business opportunities.
The bank’s emission credits would come from projects that receive tax-advantaged financing. They also would come from credits earned by state agencies, and credits deposited by local agencies, earned from global warming-friendly projects financed through tax-advantaged means.
The carbon bank would use the credits in a variety of ways:
” Sell them and use the proceeds to finance environmental cleanup projects in communities that suffer from acute pollution problems.
” Retire them. They could not be used again and, as a result, emissions would be reduced.
” Use them to back revenue bonds that would finance renewable energy and green projects, helping create jobs and economic opportunity.
” Provide them to businesses as an incentive to locate in California.
Here, a few points are worth mentioning.
Carbon emission trading already is happening around the world, with robust markets functioning in Europe and developing in the United States through the Chicago Climate Exchange and elsewhere. A number of California entities already are selling or plan to sell carbon offsets. And as carbon markets develop further, it’s quite likely the state will be in a position to develop offsets and hold carbon credits.
As banker for the state of California, the Treasurer’s Office would be a good place to hold credits that belong to the state. The State Treasurer’s Office already holds and manages assets on behalf of state and local governments through our Pooled Money Investment Account. Running a carbon credit bank would be a similar function.
My proposals for California Green bonds and for a workable, state-run carbon bank will expand the realm of what is possible in sustainable technologies. These investments will help make our state the cradle of green tech, just as it was for high tech. We can act now and invest today’s dollars in the resources it will take to stop the destructive march of climate change. Or we can pay a far higher price tomorrow to engage in a fight it may be too late to win.
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