July 11, 2022
A few years ago, author and demographer Joel Kotkin declared that “California is a great state in which to be rich.”
Of course, it’s good to be rich anywhere. But California—the province that for decades has led the United States in cultural issues like fashion, gay rights, and entertainment—has devolved into a state where the American dream is being strangled by a phalanx of energy and climate regulations that are imposing huge regressive taxes on the poor and middle class. And worse yet, the state’s vast bureaucracy is imposing yet more regulations that will further tighten the financial noose on Californians.
Before going further, it’s essential to put California into context. While the state is known for posh spots like Beverly Hills, Marin County, and Silicon Valley, the Golden State has the highest poverty rate in America. Indeed, the poverty figures in the state can only be described as shocking. A 2021 report by the Public Policy Institute of California found that “More than a third of Californians are living in or near poverty. Nearly one in six (16.4 percent) Californians were not in poverty but lived fairly close to the poverty line … All told, more than a third (34.0 percent) of state residents were poor or near-poor in 2019.” Los Angeles, the state’s biggest city, and a magnet for generations of immigrants has one of the highest poverty rates among America’s biggest cities.
California also has the largest Latino population in America. About 15 million Latinos live in the Golden State and they account for about 40 percent of its population. But the PPIC report also found that more than Latinos account for nearly 52 percent “of poor Californians but only 39.7 percent of the state population.”
Despite these numbers, California policymakers continue to implement policies on energy, housing, and transportation that are driving up the cost of living and deepening the state’s poverty problem.
In April, the state’s Air Resources Board released a plan that will ban the sale of automobiles with internal combustion engines by 2035. The plan was cheered by a lawyer at the Center for Biological Diversity who said it was essential to “free our streets from tailpipe pollution as fast as possible.”
In May, the Los Angeles City Council banned the use of natural gas appliances and heaters in new homes and businesses. By doing so, according to the Sierra Club, the city became the 57th municipality in the state to ban the fuel. The vote, said council member Nithya Raman, puts the city “in line with climate leaders across the country.” That climate leadership comes at a high cost to consumers. Why? On an energy-equivalent basis, electricity costs four times as much as natural gas.
On July 1st, motorists in the state began paying an additional three-cent-per-gallon tax on gasoline, a move that will make California’s motor fuel even more expensive. In late June, motorists in the state were paying an average of $6.30 per gallon for gasoline, which is roughly 29 percent more than motorists in the rest of the US.
Perhaps the most obvious casualty of California’s climate policies is the state’s tattered electric grid. Blackouts in the state have become so common, particularly in the Bay Area, that media outlets have largely quit reporting on them. Nearly every day, maps of Pacific Gas & Electric’s service territory show outages across wide swaths of central California. The state’s increased blackouts are coinciding with skyrocketing electricity prices. And those skyrocketing electricity prices are coinciding with the implementation of some of America’s most-aggressive renewable-energy mandates.
In 2008, Governor Arnold Schwarzenegger signed an excutive order that required the state’s utilities to obtain a third of the electricity they sell from renewables by 2020. In 2015, Governor Jerry Brown signed a law that boosted the mandate to 5o percent by 2030. In 2018, California lawmakers imposed yet another mandate that requires the state’s electric utilities to procure at least 60 percent of their electricity from renewables by 2030 and to be producing 100 percent “zero-carbon” electricity by 2045.
What has happened since The Terminator signed that executive order? Between 2008 and 2021, the all-sector price of electricity in California increased five times faster than rates in the rest of the continental United States. Last year alone, the all-sector price of electricity in California jumped by 9.8 percent to 19.8 cents per kilowatt-hour. Residential prices increased even more, jumping by 11.7 percent to an average of 22.8 cents per kilowatt-hour. California residential users are now paying about 66 percent more for electricity than homeowners in the rest of the US.
The state also faces a chronic shortage of affordable housing. Despite the shortage, home prices are being driven up by a myriad of mandates including the requirement that new homes have solar panels on their roofs. Since 2020, single-family homes and multi-family buildings up to three stories high in California must be topped with solar panels. In January 2023, that mandate will expand to include commercial buildings, including hotels, offices, retail and grocery stores, restaurants, and schools. It will also require panels to be put atop civic buildings, including theaters, auditoriums, and convention facilities.
All of these mandates amount to what land-use and civil-rights lawyer Jennifer Hernandez calls “Green Jim Crow.” In an essay published last year by the Breakthrough Institute, Hernandez wrote that her home state:
leads the world in renewable energy and electric vehicle ownership. But its industrial and manufacturing sectors have been decimated … Its climate accomplishments are illusory, a product of deindustrialization, high energy costs, and, more recently and improbably, depopulation. Inequality has hit record levels, and housing segregation has returned to a degree not seen since the early 1960s.
Hernandez is the lead lawyer for The Two Hundred, a group of Latino leaders who have sued the state of California over its climate, housing, and transportation policies. In 2019, she and The Two Hundred filed a 250-page civil rights lawsuit that claims “Entrenched special interest groups, including environmentalists, block meaningful housing policy reforms” and that the state’s housing crisis is “deepening an already severe civil rights crisis.” Hernandez also points out that many of the regulations The Two Hundred is fighting were never directly authorized by the state legislature.
There is no shortage of irony here. California is one of the most liberal states in America. In the 2020 presidential race, Joe Biden thrashed Donald Trump in California by a margin of nearly two to one, taking 63 percent of the vote. Although Trump lost California to Biden, the state is key for presidential hopefuls. That helps explain why Governor Gavin Newsom, a Democrat, has already begun positioning himself for a White House bid in 2024.
The California Senate has been controlled by the Democratic party since 1970. The lower house, the Assembly, has also been controlled by Democrats since the 1970s, except for two years in the mid-1990s. The Democratic Party has long considered itself the party of the working class and minorities. Nearly half of Latinos consider themselves Democrats while only about 23 percent identify as Republicans. But Latinos in California are not prospering under Democratic control. Quite the opposite. According to the report issued by the PPIC last year:
More than one in five (21.4%) Latinos lived in poverty, compared to 17.4% of African Americans, 14.5% of Asian Americans/Pacific Islanders, and 12.1% of whites. Though the Latino poverty rate has fallen from 30.9% in 2011, Latinos remain disproportionately poor—comprising 51.6% of poor Californians but only 39.7% of the state population.
There are also big disparities in homeownership. In 2018, the homeownership rate among California Latinos was about 44 percent. Among whites, that rate is about 63 percent.
Robert Apodaca, the executive director for The Two Hundred, and a long-time activist, told me that a myriad of pending regulations will exacerbate the state’s affordability crisis. He pointed to the state’s decarbonization efforts, which include a ban on the sale of cars powered by internal combustion engines that begins in 2035. The push for the electrification of transportation will require the installation of about 1.2 million new EV charging stations by 2030, according to the California Energy Commission. The cost of those stations will, of course, be borne by ratepayers. Furthermore, running all cars and trucks in the state on electricity will increase electricity demand by 25 percent, in a state that is already experiencing regular blackouts.
Apodaca said the 100 percent zero-carbon electricity mandate and an economy-wide goal of carbon neutrality by 2045, will also increase costs. In February, the California Public Utilities Commission unanimously approved a scheme that aims to add more than 25 gigawatts of renewables and 15 gigawatts of batteries to the state’s electric grid by 2032 at an estimated cost of $49.3 billion. Also in February, the California Independent System Operator released a draft plan to upgrade the state’s transmission grid at a cost of some $30.5 billion.
The combined cost of those two schemes is about $80 billion. Dividing that sum among 39 million residents works out to about $2,050 for every Californian. But the final price will almost certainly be far higher than $80 billion. Big public works projects routinely exceed initial estimates; California’s beleaguered high-speed rail project was expected to cost $42 billion when it was launched in 2008. The latest cost estimate is $105 billion. Any effort to overhaul the state’s electric grid will require huge amounts of complex machinery, including generators, solar panels, transformers, and switch gear. It will also require vast amounts of land, steel, concrete, and tanker loads of industrial commodities at the same time that prices for everything from zinc and lithium to nickel and aluminum are soaring.
The renewable-electricity push will force prices upward at a time when California is in the midst of an energy-affordability crisis. In January, electricity rates for customers of Pacific Gas & Electric, the biggest utility in the state, went up by eight percent. In March, PG&E customers were hit by another nine percent rate hike. Consumers served by San Diego Gas & Electric are also seeing big increases, with electricity price increases of nearly eight percent this year. Furthermore, PG&E is seeking rate big rate increases from 2023 to 2026 to pay for a variety of programs including burying thousands of miles of power lines.
Electricity prices are soaring at a time when many consumers simply can’t afford to pay. In March, more than a quarter of residential customers in San Diego County were behind on their utility payments.
These soaring costs shouldn’t be surprising. Like what has occurred in Australia and Germany, the imposition of renewable-energy mandates in California has corresponded with dramatic increases in electricity prices. Of course, that’s not what we are told by climate activists like Bill McKibben who never tire of claiming that wind and solar are cheaper than traditional forms of electricity production. But a 2019 study done by academics at the University of Chicago found that renewable-energy mandates cause prices to go up, not down.
The report, by Michael Greenstone and Ishan Nath, said renewables “raise electricity prices more than previously thought” due to “hidden costs that have typically been ignored.” They also found that the mandates “come at a high cost to consumers and are inefficient in reducing carbon emissions.” Greenstone and Nath said “the intermittent nature of renewables means that back-up capacity must be added” and that “by mandating an increase in renewable power, baseload generation is prematurely displaced, and some of the cost is passed to consumers.” It continued, saying that renewable-energy mandates lead to lead to “substantial increases in electricity prices that mirror the program’s increasing stringency over time.”
Of course, none of this fits the convenient narrative that California is leading the way on climate change. Nevertheless, the hard reality is that California’s climate policies and renewable-energy mandates are immiserating vast segments of the state’s population.
In a July 1st telephone interview, Apodaca said the state’s climate policies are hard to fight because California is “being governed by the administrative state, the regulators.” He continued, saying “The legislature hasn’t mandated most of these climate rules. There is no legislative mandate for the majority of the regulations that the Air Resources Board and other agencies are creating. The agencies have gone too far. But they aren’t held accountable.”
What has happened in California is a warning for the rest of the United States and the rest of the world. Kotkin, who I quoted at the top of this piece, has become one of the loudest and most-frequent critics of California’s decline. In April, citing a report he co-wrote (with Marshall Toplansky and three others) for Chapman University, Kotkin declared that California is in the midst of an “existential crisis, losing both its middle-aged and middle class, while its poor population faces dimming prospects. Despite the state’s myriad advantages, research shows it [is] plagued by economic immobility and inequality, crushing housing and energy costs, and a failing education system. Worse than just a case of progressive policies creating regressive outcomes, it appears California is descending into something resembling modern-day feudalism, with the poor and weak trapped by policies subsidized by taxes paid by the rich and powerful.”
Given the state’s many problems, residents are reacting with what has been dubbed the “California Exodus.” Last year, for the first time in its 171-year history, California lost a seat in the US House of Representatives. Meanwhile, Texas gained two seats and Florida gained one. A few months ago, U-Haul, the company that rents moving trucks, issued a press release that said its California locations experienced the biggest loss of one-way truck rentals in 2021. The top destination for those soon-to-be-ex Californians? Texas. (I can verify this, as it seems everyone from California is moving to Austin.) Furthermore, since 2018, about 300 companies have moved their headquarters out of California. Among the more notable corporate departures: Tesla and Oracle, both of which moved their headquarters to Austin.
The punchline here is obvious: For decades, regulators and politicians in California—a state that is a pillar of the Democratic Party as well as the home of US vice president Kamala Harris and the home of America’s biggest climate-activist group, the Sierra Club—have been implementing a skein of policies, nearly all of them tied to energy and climate, that are blatantly anti-poor and anti-working class. Yes, California is a fine place to be rich. But Californians who aren’t rich have seen enough. And now they are voting with their feet and with whatever U-Haul truck they can find.
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