California officials acknowledged last Thursday that the state faces $20 billion deficits every year from now to 2016. At the same time, California’s state Treasurer entered bond markets to sell some $14 billion in “revenue anticipation notes” over the next two weeks. Worst of all, economic sanity lost out in what may have been the most important election on Nov. 2—and, no, I’m not talking about the gubernatorial or senate races.
This was the California referendum to repeal Assembly Bill 32, the so-called Global Warming Solutions Act, which ratchets the state’s economy back to 1990 levels of greenhouse gases by 2020. That’s a 30% drop followed by a mandated 80% overall drop by 2050. Together with a $500 billion public-pension overhang, the new energy cap dooms the state to bankruptcy.
Conservative pundits have lavished mock pity on the state. But as America’s chief fount of technology, California cannot go down the drain without dragging the rest of the country with it.
The irony is that a century-long trend of advance in conventional “non-renewable” energy—from wood to oil to natural gas and nuclear—has already wrought a roughly 60% drop in carbon emissions per watt. Thus the long-term California targets might well be achieved globally in the normal course of technological advance. The obvious next step is aggressive exploitation of the trillions of cubic feet of low-carbon natural gas discovered over the last two years, essentially ending the U.S. energy crisis.
The massive vote against repeal of the California law—62% to 38%—supports an economy-crushing drive to suppress CO2 emissions from natural gas and everything else. In a parody of supply-side economics, advocates of AB 32 envisage the substitution of alternative energy sources that create new revenue sources, new jobs and industries. Their economic model sees new wealth emerge from jobs dismantling the existing energy economy and replacing it with a medieval system of windmills and solar collectors. By this logic we could all get rich by razing the existing housing plant and replacing it with new-fangled tents.
All the so-called “renewables” programs waste and desecrate the precious resource of arable land that feeds the world. Every dollar of new wages for green workers will result in several dollars of reduced pay and employment for the state’s and the nation’s other workers—and reduced revenues for the government.
Most destructive of all is the bill’s stultifying effect on America’s and California’s most important asset: the venture capital industry, which accounts for the nation’s technological leadership, military power, and roughly a fifth of GDP.
Led by Al Gore’s investment affiliate, Kleiner Perkins Caulfield and Byers, the campaign to save AB 32 raised $31 million—more than three times the $10 million that the oil companies raised for repeal. Pouring in millions were such promethean venturers as John Doerr and Vinod Khosla of Kleiner Perkins, Eric Schmidt and Sergei Brin of Google, and the legendary Gordon Moore and Andrew Grove of Intel. The campaign even managed to shake down a contribution from the state’s public utility, Pacific Gas and Electric, and gained the backing of the GOP’s eBay billionaire gubernatorial candidate, Meg Whitman.
What is wrong with California’s plutocratic geniuses? They are simply out of their depth in a field they do not understand. Solar panels are not digital. They may be made of silicon but they benefit from no magic of miniaturization like the Moore’s Law multiplication of transistors on microchips. There is no reasonable way to change the wavelengths of sunlight to fit in drastically smaller photo receptors. Biofuels are even less promising. Even if all Americans stopped eating (saving about 100 thermal watts per capita on average) and devoted all of our current farmland to biofuels, the output could not fill much more than 2% of our energy needs.
In the past, Kleiner Perkins funded scores of vital ventures, from Apple and Applied Materials to Amazon and Google. But now Kleiner is moving on to such government- dependent firms as Miasole, Amyris Biofuels, Segway and Upwind Solutions. Many have ingenious technology and employ thousands of brilliant engineers, but they are mostly wasted on pork catchers.
Other venturers plunged into solar panel manufacturer Solyndra, which received some $500 million in federal subsidies and a campaign visit from Barack Obama before laying off 17% of its work force and giving up on a new factory that was supposed to create 1,000 green jobs.
Many of these green companies, behaving like the public-service unions they resemble, diverted some of their government subsidies into the AB 32 campaign for more subsidies. Virtually every new venture investment proposal harbors a “green” angle that turns it from a potential economic asset into a government dependent.
A partial solution is a suit by four attorneys general outside of California. They argue that the California law violates the Constitution’s interstate commerce clause because of the limits it places on electricity generated by out-of-state, coal-fired power plants. But ultimately the new Congress must act. The Center for American Progress has found that 50 out of 100 or so new Republican congressmen elected earlier this month are “climate-change skeptics.” But Republican leaders such as incoming Speaker John Boehner and Majority Leader Eric Cantor show dangerous gullibility in the face of environmentalist claims.
Co-sponsoring a disgraceful bill introduced in September to force utilities to expand their use of “renewable energy” to 15% by 2021 are Republican Sens. Sam Brownback and Susan Collins. Republican politicians are apparently lower in climate skepticism than readers of Scientific American, which recently discovered to its horror that some 80% of its subscribers, mostly American scientists, reject man-made global warming catastrophe fears.
Republicans may delude themselves that the U.S. can undertake a costly, inefficient and disruptive transformation of the energy economy, estimated by the International Energy Agency to cost some $45 trillion over 40 years, while meeting our global military challenges and huge debt overhang. But the green campaign wastes scarce and precious technological and entrepreneurial resources indispensable to the nation’s future. Now it is debauching America’s most precious venture assets. It must be defeated, not appeased.
Mr. Gilder is a founding fellow of the Discovery Institute.