Streetsblog Los Angeles

In financial reports that publicly traded companies file to their investors and the Securities and Exchange Commission (SEC), the words "material adverse effect" are often found.

Put simply, the phrase is a red flag for any factor that could significantly hurt a firm's profits or condition. But "material adverse change" clauses can also be written into deals to give businesses an escape hatch if disaster strikes, as the public learned during the congressional probe of the Bank of America-Merrill Lynch merger.

So with Congress weighing national emissions limits -- and potential fuel taxes -- as part of a climate change bill, and the Obama administration vowing to step in via new regulations if lawmakers do not act, it's worth asking which of the country's top carbon-generating companies are truly concerned that pollution caps would hurt their business.

Automakers, for the most part, foresee problems if the administration's recent move to raise U.S. fuel-efficiency standards is not extended beyond its current 2016 expiration date. Ford's year-end financial report openly fretted about the consequences of individual states, such as California, acting on their own to hike fuel standards in 2017 in the absence of another national agreement:

Compliance with [multiple fuel-efficiency] regimes would at best add enormous complexity to our planning processes, and at worst be virtually impossible.  If any of one these regulatory regimes, or a combination of them, impose and enforce extreme fuel economy or GHG standards, we likely would be forced to take various actions that could have substantial adverse effects on our sales volume and profits.

General Motors released its financial report today, declaring itself "committed to meeting or exceeding" the new fuel-efficiency minimums but warning that adverse consequences could result if consumers fail to embrace electric cars:

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Government subsidies for hybrid and electric cars, while
"politically seductive," will fail to achieve the Obama
administration’s national pollution-reduction goals if they are not
coupled with a significant increase in fuel prices, according to a new study by Harvard University researchers.

The
team at Harvard’s Belfer Center for Science and International Affairs
used U.S. Department of Energy economic models to evaluate six possible
outcomes for Washington’s newly reinvigorated push for a 17-percent cut in U.S. emissions by 2020, in keeping with President Obama’s pledge at the global Copenhagen climate talks.

Five
of the Harvard team’s six outcomes assumed a future carbon price of $30
per ton (higher than the price envisioned in the House-passed climate
bill) that rises over time, with other tweaks added to the system,
including continued government tax credits for hybrid and electric
vehicles, an immediate 50-cent hike in the gas tax, and more increases
in auto fuel-efficiency standards.

The researchers
concluded that taxpayer-funded clean-vehicle credits "are expensive and
not particularly effective at reducing CO2 emissions, at least in the
near term." In order to trim transportation’s 30-percent contribution
to total U.S. emissions, the Harvard team recommended an
all-of-the-above approach:

[O]ptions now being
discussed in Congress cannot by themselves achieve the significant
reductions in the transportation sector needed to meet the Obama
administration’s targets for total U.S. greenhouse gas emissions by
2020. The most effective policy for reducing CO2 emissions and oil
imports from transportation is to spur the development and sale of more
efficient vehicles with strict efficiency standards while increasing
the cost of driving with strong fuel taxes. Without addressing both,
CO2 emissions from the U.S. transportation sector will continue to grow.

Of course, higher gas taxes are as anathema to politicians as clean-car
subsidies are alluring — which is leaving green groups wary of a
bipartisan Senate proposal
to include a new motor-fuel fee in climate legislation. The oil
industry has said it prefers a new carbon tax on fuel because companies
can more easily pass on the costs to consumers, attributing the resulting gas-price hikes to congressional climate action.

From the Harvard researchers’ perspective, however, expensive fuel is merely a means to an end.

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Last week, the New York Times broke the news that Texas based oil companies were funding the ballot initiative that would "temporarily" place the Greenhouse Gas reforms required by A.B. 32 on hold until California's unemployment rate reached 5.5%.  When discussing the news with some of my friends, it was greeted with a yawn.  After all, this is hardly the first time an out-of-state interest has placed a lot of money behind a ballot proposition, and A.B. 32 spends a lot more time promoting clean fuel than it does human powered transportation or transit.

At first glance, their lack of concern has some validity.  The California Legislative Analyst's Office doesn't even mention impacts to Smart Growth, transit, bikeways, Fix-It-First, or pedestrian improvements when discussing the impacts "postponing" the legislation would have.  It does mention vehicle emission standards, "cap and trade," programs, and green jobs.  In fact, when the state set targets for Land Use reductions in the Greenhouse Gas plan mandated by A.B. 32; it only plans for 1% of those reductions to come from land use.

While it's true that A.B. 32 has a lot more to do with bringing more clean cars to California than bringing Livable Streets, the legislation has also been the backbone of other major pieces of transportation reform.  Among them, S.B. 375, is the much heralded "Anti-Sprawl" Bill passed last year.  In a lengthy interview last May, Los Angeles City Planning Commissioner and Member of the Air Resource Board Michael Woo explained how S.B. 375 was reliant on a strong commitment to removing Greenhouse Gasses from our air:

SB 375 tackles a separate problem.  Pavley’s landmark climate law AB 32 committed California to the goal of rolling back greenhouse gas emissions to 1990 levels by the year 2020, but it didn’t really spell out how California is going to achieve that goal.  SB 375 authored by Senator Steinberg is the next step in terms of addressing one of the major causes of Greenhouse Gas emissions related to transportation and land use.

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(editor's note: This is Part I of a two part series.  Next week we'll look specifically at how the repeal or delaying of this legislation would effect transportation and Livable Streets. - DN)

In 2006, the California Legislature passed, and Governor Arnold Schwarzenegger signed, A.B. 32, landmark legislation that would require the state to reduce its Greenhouse Gas emissions to 1990 levels by 2020. 

The legislation was the first of its kind in the United States, and while there has certainly been some eye rolling at the Governor’s jet-setting lifestyle; there’s almost no debate that reducing Greenhouse Gases is considered the central plank of the Governor's term in office. For transportation reformers and environmentalists, A.B. 32 is important legislation that could still be a “game changer” in the way California thinks about transportation.

However, thanks to a coalition of pro-business Republicans and the oil industry there is a strong push to place a measure on this fall’s ballot to “delay” the measure, citing the current economic client as a valid reason to delay trying to clean California’s air.  The measure would "delay" the implementation of A.B. 32 until the state unemployment level dips below 5.5%.

While the people officially pushing the ballot measure, former Gubernatorial candidate and current Congressman Tom McClintock and Assemblyman Dan Logue aren’t officially members of the oil lobby; a recent New York Times article revealed that oil giants Tesoro and Valero have funded the effort to get A.B. 32 on the ballot.  Neither firm will either confirm or deny their involvement.

Steven Maviglio, of Californians for Clean Energy and Jobs took exception to the idea that A.B. 32 is bad for the economy, "First of all, this initiative would destroy the clean energy economy.  There's more than $5 billion in venture capital, 3,000 businesses and 45,000 people employed in clean tech.  This would take a wrecking ball to the only flourishing part of the economy."

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Environmental Protection Agency (EPA) chief Lisa Jackson extended an olive branch
this week to lawmakers who are pushing to block her from regulating
carbon emissions in the absence of a congressional climate bill, but
Jackson’s promise to delay action until next year appears to have made no headway with Republicans and coal-state Democrats. 

If Congress succeeds in blocking the EPA from following through on a Supreme Court mandate
to regulate emissions, a legislative path to nationwide pollution
limits would effectively become the sole means for the Obama
administration to follow through on commitments it made at last year’s Copenhagen climate summit.

But White House climate adviser Carol Browner
noted today that a congressional block on the EPA’s authority would
have a second wave of consequences for transportation policy — it
would jettison the Obama administration’s much-heralded deal to raise auto fuel-efficiency standards to 35.5 mile per gallon by 2016.

"I
don’t know why members [of Congress] would want to go out and vote
against the science of climate change," Browner told attendees at a
climate conference sponsored by The New Republic.

Without EPA
authority to regulate emissions under the Clean Air Act, she explained,
"there is no car rule" — referring to the agreement to adopt
California’s landmark efficiency standards as a national model.

"If
the car rule were not to go forward, California would still have all
its authorities," Browner added, meaning that the auto industry’s fears
of compliance with a "patchwork" of regional fuel standards would become a reality.

Browner’s
comments came as climate legislation continues to lose momentum in the
Senate, giving more political ammunition to lawmakers and industry
representatives who seek to stall the process.

Yet Sen. John Kerry (D-MA), one of three negotiators working on a "tri-partisan" climate deal in the upper chamber, took a notably upbeat tone today on the prospects for action this year, and Browner concurred with Kerry’s sentiment.

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Pensacola, Florida. Springfield, Missouri. Fort Wayne, Indiana. All
three of those metropolitan areas have populations between 350,000 and
500,000, and all three would have been required to install nitrogen
dioxide monitoring stations near major roadways under a new
Environmental Protection Agency (EPA) rule cracking down on the pollutant.

But as the Center for Progressive Reform (CPR) noted
soon after the EPA unveiled its rule, an initial draft setting the
minimum population for local air-quality monitoring at 350,000 was
changed to 500,000, leaving out cities such as Fort Wayne and
effectively weakening the nitrogen dioxide rule’s accountability.

Another watchdog group traced the change to the White House
Office of Management and Budget, which evaluates new agency regulations
through a smaller arm called OIRA (short for the Office of Information
and Regulatory Affairs). The president’s nominee to lead OIRA, Cass
Sunstein, has taken heat from green groups for his past criticism of government’s role in the rule-making process.

What’s
the significance of the OMB’s change to the EPA rule? "The fewer the
monitors, the more likely it is that many metropolitan
areas will be able to exceed EPA’s limits without detection or
correction," CPR president and law professor Rena Steinzor wrote on the
group’s blog in late January.

Steinzor’s
post also addressed the significance of the new nitrogen dioxide rule,
noting that the pollutant tends to be especially common, and dangerous,
in lower-income neighborhoods located near busy roads:

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As Governor Schwarzenegger presses forward with his newest scheme to rob funds dedicated to transit, he’s receiving a frosty response from legislators and opinion makers that could spell doom for this plan to balance the budget. 

After the State Supreme Court agreed with every other court to rule on the merits of a lawsuit brought by transit advocates against the Governor’s recent transit raids; the Governor proposed doing away with the portion of the state gas tax that goes towards transit permanently and replacing it with a new tax for the general fund.  Knowing such a plan would face fierce opposition, the Governor tried a little "transportation user warfare" by having the new tax actually be five cents lower than the current one; forever burying any belief that the Governor cares at all about transit, transit riders or vehicle-created pollution.

The good news?  It’s more than just transit advocates that are calling b.s. on the Governor’s plan.

The NRDC Switchboard reports on a Senate Committee on Budget and Fiscal Review that was flooded with opponents to the Governor’s scheme and found their complaints echoed by the legislators who would have to approve it.  Long Beach Senator Alan Lowenthal is quoted as one of the leading voices against the plan:

It’s nice to go to a hearing in Sacramento every once in awhile and find
yourself in a cloud of nearly universal agreement.  I was able to
experience that rare feeling earlier today when the Senate Committee on
Budget and Fiscal Review held its hearing on Transportation and
Resources Issues…

…Senator Alan Lowenthal was “appalled” by the proposal’s impact on
transit; Senator Mark Leno told of San Francisco’s continued transit
funding problems and wondered how this proposal would help things; and
Senator Joe Simitian wisely pointed out the likely ridership impacts of
further cuts and fare hikes, particularly on those “discretionary”
riders who will once again choose their cars, leading to more air
pollution and road congestion. 

Meanwhile, an editorial is making the rounds of several Northern California newspapers pointing out that there’s more that would be loss in the Governor’s plan than just another round of transit riders v motorists.  From the Contra Costa Times:

The revenue shift would
take hundreds of millions of dollars away from transit systems at a
time when they are in dire financial straits.

Even worse, it
would result in a 1.6 percent reduction of Prop. 98-mandated school
funding, or about $800 million, according to the Legislative Analyst’s
Office. What about the governor’s pledge not to once again decrease
funding for K-12 schools?

The Governor’s plan is far from a "Done Deal" or a "Dead Deal" at this point, but based on the early returns; it appears that transit riders and advocates are starting ahead in the game and this time they’re not alone in the fight.

The 40-year-old National Environmental Protection Act (NEPA), which requires the federal government to evaluate the environmental consequences of future projects, is a valuable tool for local residents and green groups that work to defeat highway expansions -- but as Streetsblog L.A. noted earlier this year, NEPA can be an equally valuable tool for opponents of clean transportation projects.

But the biggest NEPA flashpoint these days is whether the White House Council on Environmental Quality (CEQ) will amend its rules to require that federally funded projects, including transportation efforts, be evaluated for their contributions to climate change.

The Sierra Club, the Natural Resources Defense Council, and the International Center for Technology Assessment last year filed a petition with CEQ seeking climate change's inclusion in future environmental rules, but CEQ chief Nancy Sutley has remained mum on its fate. "I won't tell you what the answer is because we don't know yet," she told GreenWire in March.

In the meantime, GOP senators are starting to push CEQ towards a denial of the petition. Sen. Jim Inhofe (OK), the environment committee's senior Republican, and Sen. John Barrasso (R-WY) wrote to Sutley on Thursday requesting all documents related to the CEQ's consideration of adding climate change to NEPA.

The two senators made their stance plain, lamenting that the median time required "to complete environmental impact statements for highway projects in recent years has been as high as 80 months" and contending that climate change should not be considered under a "bedrock environmental statute" such as NEPA.

As of last year, the median time for completion of NEPA review for highway projects had fallen from its high of 80 months in 2002 to 63.5 months. Moreover, the long-term transportation bill proposed in the House by Rep. Jim Oberstar (D-MN) would set up an office of expedited project delivery within the U.S. DOT to ensure that NEPA reviews and other assessments be completed without lengthy delays.

Still, any progress on resolving NEPA compliance issues is unlikely to deter Inhofe and Barrasso's push to deny the pending CEQ petition. As the battle over the Senate climate bill heats up, opponents of legislative action are sure to use any strategy they can to prevent the Obama administration from addressing the issue.

Check out Inhofe and Barrasso's full letter to the CEQ after the jump.

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PG&E workers installing an LED streetlight. Photo: PG&E

Streetlights
are an enormous part of any city’s energy consumption and cities that
wish to cut down on their emissions and their energy bills are getting
in line to convert their older street lamps to LED technology.
According to Clinton Climate Initiative (CCI) and Department of Energy
(DOE) data, street lighting costs
are one of the biggest components of a city’s utility bill, accounting
for 10 percent to 38 percent of the total. With nearly 35 million
street lights in the United States, about 1 percent of all electricity
is used by street lighting systems.

Like other cities in
the Bay Area experimenting with LED streetlights, including San
Francisco and Oakland, San Jose has embraced the nascent technology as
part of a sustainability platform called Green Vision, which sets ambitious targets for reducing energy
consumption and emissions, including an expected 50 percent or more energy and cost savings from the street lamp conversions.

"Our
goal has always been to move to a more energy efficient light," said
Laura Stuchinksy, Transportation Sustainability Officer at the San Jose Department of Transportation.

Stuchinsky
said San Jose intends to replace all 62,000 streetlights throughout the
city before the Green Vision target date of 2022. The city implemented
a pilot streetlighting project in Hillview North in 2008 that replaced
118 low-pressure sodium streetlights with LEDs and a recent American
Recovery and Reinvestment Act (ARRA) stimulus fund grant of $2.2 million
will offset implementation costs for the next wave of conversions
expected later this year.  Further, the city intends to backfill with
new renewable energy generated locally and possible purchases through
PG&E. San Jose currently spends $4 million annually on street
lights, which consumes over 35 million kilowatt hours of electricity,
according to Stuchinsky.

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Early this week, I noticed a number of my favorite bloggers linking to this Elisabeth Rosenthal essay
at Environment 360, on the mysterious greenness of European nations.
The average American, as it happens, produces about twice as much
carbon dioxide each year as your typical resident of Western Europe.

Rosenthal attributes much of this difference to behavioral
factors relating, it seems, to Europeans’ unique tolerance of
inconvenience. She writes:

But even as an American, if you go live in a nice apartment in Rome, as
I did a few years back, your carbon footprint effortlessly plummets.
It’s not that the Italians care more about the environment; I’d say
they don’t. But the normal Italian poshy apartment in Rome doesn’t have a clothes dryer
or an air conditioner or microwave or limitless hot water. The heat
doesn’t turn on each fall until you’ve spent a couple of chilly weeks
living in sweaters. The fridge is tiny. The average car is small. The
Fiat 500 gets twice as much gas mileage as any hybrid SUV. And it’s not
considered suffering. It’s living the dolce vita.

She later adds:

Also, in Europe, the construction of most cities preceded the invention
of cars. The centuries-old streets in London or Barcelona or Rome
simply can’t accommodate much traffic — it’s really a pain, but you
learn to live with it. In contrast, most American cities, think Atlanta
and Dallas, were designed for people with wheels.

What
makes this particularly remarkable is that she opens the essay by
discussing an experience she has in Stockholm, in which she insists on
taking a taxi from the airport, which ends up being much slower and
more expensive than the train.

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