Obama May Not Realize It, But California Is A Dependant Neighbor

President-elect Obama wants to base his greening of America on the great policies that California has followed for years. The global warming crowd embraces that idea, but skepticism is much more in order.  

California’s model is broken:  the state is bankrupt and so are its ideas on “green” economics.

At a mid-December press conference, President-elect Obama said, “Consistently, California has hit the bar and then the rest of the country has followed,” referring to the Golden State’s approach to green issues. “And rather than it being an impediment to economic growth, it has helped to become an engine of economic growth.”

Obama’s remarks naturally drew praise from environmental groups, which have long hailed California as a shining example of growing the economy while protecting the environment. They consistently tout California as a paragon of green awareness and a model that other states — not to mention policymakers in Washington, D.C. — should follow. The Natural Resources Defense Council, for instance, paid tribute to California’s four decades of environmental consciousness with a 2006 cover story in its magazine OnEarth entitled, “California Illuminates the World.”

Of course, anyone who recalls the California electricity crisis of 2000-2001 will recognize that title as a fantasy, since California proved painfully incapable of illuminating itself. Yet the incoming president seems to buy into environmentalist delusions about California that could have disastrous consequences for America’s energy future and economic security.

California’s vaunted reputation as an environmental and economic leader hinges on two misleading facts. The first is the state’s seemingly dynamic economy. With a gross state product of more than $1.6 trillion, California’s is arguably the eighth-largest economy on the planet. The second is the fact that since the mid-1970s, the state’s economy has grown while per-capita energy consumption stayed flat. Given that such consumption has increased by roughly 50 percent elsewhere in the country over the same period, such a statistic seems particularly impressive.

But California’s environmental leadership is a mirage. Under the mantle of environmental consciousness, California operates a free-rider energy economy that relies on other states for the goods and services it refuses to produce at home. Green activists and left-wing politicians have helped spread the California smokescreen; they fail to see the folly of policies that require the rest of the country to be as unlike California as possible.

Take energy production. California imports lots of energy from neighboring states to make up for the shortfall caused by having too few power plants. Up to 20 percent of the state’s power comes from coal-burning plants in Nevada, New Mexico, Utah, Colorado, and Montana, and another significant portion comes from large-scale hydropower in Oregon, Washington State, and the Hoover Dam near Las Vegas. This energy colonialism — relying on other states to supply California with power generation that its policymakers have proved unwilling to build for themselves — is one of the state’s dirty secrets. California gets not just the power it needs but the smug self-satisfaction of having no coal plants located within its borders. Other states get the emissions, the pollution, and other hassles of large-scale energy production.

The truth behind California’s specious claim to be an energy-efficiency leader is another well-kept secret. The state has kept per-capita energy consumption flat while growing its economy partly because the mild climate in population centers like San Diego, Los Angeles, and San Francisco minimizes heating and cooling costs. No other state is similarly blessed with geography and climate. More significantly, California’s regulations have produced some of the highest, business-crippling energy prices in the country, driving out heavy manufacturing and other energy-intensive industries. Two decades ago, the state boasted eight automobile factories. Today, that’s down to one. It’s the same story with other industries, from chemicals to aerospace.

Yet Californians still enjoy the fruits of those manufacturing industries — driving cars built in the Midwest and the South, importing chemicals and resins and paints and plastics produced elsewhere, and flying on jumbo jets manufactured in places like Everett, Washington. California can pretend to have energy consumption under control, but it has only displaced it.

The best exhibit of how California’s energy smokescreen works in the real world is Google. Silicon Valley is the face of California’s 21st century information technology economy; industry leader Google is the IT poster boy. Yet Google must locate its new energy-hungry server farms — the actual engines of its growth — anywhere but California, which is too expensive for anything but the company’s headquarters. Despite the company’s own preening eco-awareness, when it comes to dollars and cents Google recognizes that economic growth is incompatible with the anti-energy and overly regulatory approach California has enforced for decades.

It’s not just high costs. California’s energy economy is marked by the unreliability of its power supply. In 2001, Intel’s CEO vowed not to open any new chip-making facilities in the state until it could guarantee reliable supplies of electricity. It still can’t, and each summer Californians are warned about possible rolling blackouts. Intel, meanwhile, recently opened a $3 billion microprocessor factory near Phoenix.

The mess California has made of its energy affairs provides no model anyone should follow. Given how the state manages — or mismanages — its own money matters, that’s hardly a surprise. “We are running out of cash,” said Gov. Arnold Schwarzenegger recently of the state’s fiscal implosion. “We are on track to a disaster.” Schwarzenegger has suggested that a broke California should receive its own federal bailout.

What is a surprise, however, is how anyone could think that Horace Greeley’s admonition to “go west” will provide the answers Washington needs. The president-elect is right in saying there are lots of things we can learn from California. Unfortunately for him, the lessons the Golden State teaches us are exactly what not to do.