The Sneaky Threat That Could Cripple California's Climate Law

California voters batted down an oil-industry-backed evisceration of their state's climate program on Tuesday, giving environmental groups one of their biggest victories this year. But in the midst of all the celebration of the defeat of Proposition 23, few are talking about the fact that Californians also passed a proposition that could quietly undo the very law they voted to protect.

Proposition 26 has been called Prop. 23's "sneaky, environmentally unfriendly stepsister." It is complicated and vague, much more difficult to explain than Prop. 23's direct assault on California's cap-and-trade law. Yet the sneaky stepsister has the potential to strip this law of its funding mechanisms, rendering it relatively useless.
Prop. 26 will reclassify "fees" the state assesses on various industries as "taxes," requiring the state legislature to pass them by a two-thirds majority. As proved every year when the legislature attempts to pass a budget, a two-thirds majority is next to impossible to achieve. The industries that will be most affected by this reclassification are those on which the state imposes fees to compensate for negative societal costs--the beverage industry, for one. Beverage distributors in California have to pay fees to cover recycling costs and alcohol enforcement programs. Not surprisingly, the industry was one of the biggest contributors to the Yes on Prop. 26 campaign.

Oil companies--particularly Chevron--were the other major force behind it. The state charges big polluters myriad fines to cover clean-up efforts. How Prop. 26 will affect the all-important climate law, however, is unclear. In 2006, Gov. Schwarzenegger pushed the California Global Warming Solutions Act, known as AB32, through the state's legislature. Among other emissions reduction efforts, the law establishes a cap-and-trade system for big polluters beginning next year. Prop. 26 may or may not retroactively attack the fees charged to implement this program.

"That's the million dollar question," says Cara Horowitz, executive director of UCLA Law School's Emmett Center on Climate Change and the Environment. "And the proposition is unclear in many respects. Anybody who says they know for sure whether it will block [AB32 fees] or allow them to go forward is being optimistic about their confidence in their views. One thing I'm sure of is it will wind up in court."

In addition to retroactively gutting implementation fees, Prop. 26 could potentially classify the carbon credits polluters purchase under the new cap-and-trade system as taxes, thereby sending the law back to the state legislature for a two-thirds vote, which it barely received four years ago.

These contingencies, however, are just that--contingent. Nobody is sure how Prop. 26 will affect the beloved climate law Californians just saved from the axe of Prop. 23. This made the proposition both difficult to explain to voters and less urgent for environmental groups than the blunt force of Prop. 23.

"There's no doubt Prop. 23 sucked up all the air in the room," says Horowitz. "It rightly got a ton of attention from the green coalition out in California. It sucked up all the air in the room, probably at expense of Prop. 26 efforts."

The mobilization against Prop. 23, and the amount of money poured into defeating it, was stunning. Despite painting the campaigns for and against the proposition as a "David versus Goliath battle," opponents of Prop. 23 raised $31 million, more than three times the money spent by the coalition backing the initiative. They flooded the state's airwaves with a simple message: Oil companies are trying to trick voters into doing away with a law that is in their best interest.

"Everyone in California loves air control laws, but who loves a fee?" Horowitz asks. "The messaging was a lot more difficult on Prop. 26."

The expensive hype around Prop. 23 has proven that Californians are proud of their state's role as a green leader and innovator. In an enormously anticlimactic year for the environmental movement--with the fizzling of the climate bill in Congress, the rise of climate change denial among candidates for office, and the flat-lining of global climate summits--AB32 became a symbol for environmental progress on a global level. The fight to save the law from Prop. 23 became a battle to show that in the midst of a recession, people still cared about combating climate change.

Now the question is whether the energy generated by this battle will survive the technical, legally ambiguous threats of Prop. 26. Because as Horowitz points out, a state's environmental programs are only as good as the money that funds them.