California begins a controversial experiment to curb climate change on Wednesday: The state will start rationing the amount of greenhouse gases companies can emit.
It's the most ambitious effort to control climate change in the country, and some say the plan will cost dearly; supporters say it's the route to a cleaner economy.
Here's how the climate deal works. Big companies must limit the greenhouse gases they emit from smokestacks to tailpipes and they have to get permits for those emissions. The clock starts Jan. 1.
Most of these permits are free, but the state has held back some, to sell at an auction on Nov. 14. Lots of companies will have to buy some to cover their pollution, and no one knows exactly how much a permit will sell for.
That uncertainty has led to a lot of self-examination about energy use by people like Nathan Brostrom, vice president of business operations at the University of California. "We're trying to control our own destiny in terms of bringing down our carbon emissions," says Brostrom, "so we are not going to be subject to the fluctuations of the auction."
The university system has a big carbon footprint it runs power plants to make electricity for thousands of buildings, labs, hospitals and dormitories. So the university will have to buy some permits. But it's also decided to shrink its carbon footprint too.
A Market For Efficiency
I visited California's campus in Davis, where workers are putting up new dorms that the university touts as the most efficient money can buy.
Mary Hayakawa, from the university's design team, shows them off. Each has rooftop solar panels and the windows have their own eaves to shade the interior from the California sun.
"Every orientation of the building has a different response to the sun," she says. "And so if you look here on the side of the building, the shade structure is oriented to accommodate for that."
The toilets use less water. Rooms have ceiling fans, low-energy lighting and windows that open.
Camille Kirk, an environmental expert for the university, says the state's climate law is forcing change for everyone, and that's creating a market for efficiency.
"So if refineries are coming along," she says, "and if cement plants are coming along, and everyone else is coming along, that means you have to have technological change, there's a market that gets built for that."
In the meantime, though, businesses can choose to buy more permits to pollute instead. But those permits will probably get pricier to increase the pain for polluting.
And that means more uncertainty. That frustrates Stuart Woolf, who grows and processes tomatoes in tomato heaven California's San Joaquin valley. He walks me through a giant tomato processing plant and tells me to stick my head in a boiler.
"It's pretty cool," he says, in both senses of the word. "See the tubes in there? All they do is they blow this ginormous flame in there, and there's hot water in those tubes, and it's so hot it just turns to steam." That steam cooks tomatoes, which are then turned into tomato paste. But it takes natural gas to make that steam, and that produces carbon dioxide. Soon, food processors like Woolf will have to start reducing that CO2.
'A Huge Amount Of Uncertainty'
Woolf points out that he's already efficient he uses less machinery and water and fertilizer than ever, so much so that he can compete with anyone. He even exports tomato paste to Italy. But he's worried about the climate law, known as AB32 for short.
"I'm trying constantly to manage and eliminate risk," Woolf says, "and then I have something like AB32 come along that represents a huge amount of uncertainty and costs and compliance and how this is going to work. It's just causing me to put on the brakes."
Woolf recently installed a big solar array to provide electricity, but he now thinks he should have waited. "In all likelihood I'm not going to get any credit for our past practices. So it's about, 'What are you going to do for me tomorrow?' "
Woolf says his competitors who haven't squeezed the energy fat out of their operations will have an easier time cutting their emissions than he will. And some competitors don't have to comply.
Woolf just got back from the world tomato congress in China. He says the California climate law was a hot topic. "And I can't tell you how many of my friends in Italy and China and Brazil and what-have-you said, 'Hey, that is great news, you guys, you work that out, OK?" He finds that amusing, but not necessarily funny.
Woolf says his company, Los Gatos Tomato Products, will stay competitive. But Loren Kaye, with the California Chamber of Commerce, says pricey permits could push some business owners out of the state. "He'll take that manufacturing over the border and he will be producing emissions over the border and he's taking economic benefit over the border," Kaye says.
The chamber wants the state to give away all the permits. Kaye says companies would still have to live within their emissions cap just not pay extra for some of their permits. The Chamber calls the auction a hidden tax. State officials disagree, however; they call it a down-payment on a green economy.