Business & Economy

What President Trump’s emissions order means for SoCal

File: Some of the 24,000 mirrors called
File: Some of the 24,000 mirrors called "heliostats" at the eSolar Sierra SunTower power plant in Lancaster.

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President Trump signed an executive order Tuesday asking the federal Environmental Protection Agency to rewrite the rules on nationwide carbon emissions.

How will that affect California's energy industry? Here is what you need to know.

The status quo remains in place

Under President Obama, the EPA enacted the Clean Power Plan in 2015. It required all 50 states to set goals to reduce carbon pollution over time. Power plants are the nation’s largest source of carbon emissions, and the Clean Power Plan included national standards to reduce carbon pollution from those plants.

California has long been considered ahead of the curve. It had already enacted its own tough statewide regulations to make power plants cleaner. The federal plan would have required every state to follow that lead. It did not get that result. It was stalled – first by legal challenges, and then by Donald Trump's victory. Trump pledged to rollback the nationwide standards, and took a first step through his executive order.

California's power plants remain cleaner and more regulated than plants in other states.

California and other blue states will continue forging their own paths

Gov. Jerry Brown has pledged to continue moving California on the path to clean energy, despite Trump's moves to unravel Obama's climate change policies.

California's goal is to cut greenhouse gas emissions to 1990 levels by the end of 2020. By 2030, the state must cut its emissions to 40 percent of the 1990 levels. To continue toward those goals, the state will require natural gas power plants to emit less methane.  California continues to be the only state with a cap and trade program, to incentivize carbon pollution cuts. 

Other Democratic-leaning states have created their own emissions reductions programs. Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont banded together to cap and reduce CO2 emissions from the power sector.

"It's a blue state phenomenon," said David Victor, a professor of international relations and director of UC San Diego's Laboratory on International Law and Regulation. "The coasts have been moving into lower emissions, more renewable energy, more expensive energy for a long time."

Victor expects environmental policymaking to shift to the states throughout Trump's presidency.

"The states that are run by Democratic politicians, those are states that are going to double down in this area because the Democratic base is really fired up about what Trump's doing at the federal level," he said.

While blue states charge ahead, Victor expects red states to slow down on the push for renewable energy and cutting carbon emissions.

That, he said, will create chaos for businesses that try to operate in multiple states, as they navigate more variation in state policies and in competitiveness among states. 

But even in red states, don't expect a boom in coal-powered plants. Natural gas-powered plants have largely replaced coal because it's more affordable. It happens to also be more clean.

California energy will remain expensive

There is no denying that Californians pay more for their electricity, in part because of tighter regulations on power plants. 

According to the Bureau of Labor Statistics, Los Angeles households are paying an average of 18.4 cents per kilowatt hour. That's 36 percent more than the nationwide average.

Southern California economist John Husing says his own analysis shows that industrial electric costs are even steeper, with California companies paying 60 percent more for electricity than other states. He believes those added costs have driven many companies, primarily manufacturers, out of the state.

"With Trump undoing some national regulations, and California staying in place, then it's not an even playing field," said Husing. "So for California companies and potentially for the jobs of local workers, we are at a competitive disadvantage."

Shon Hiatt, a professor of management and organization at USC's Marshall School of Business, predicted that trend will continue, as California rachets up its carbon regulations while other states are given a federal reprieve.

"If you’re in a high energy usage [business] like manufacturing, yes, it is a downer, and it's going to probably lead to more of California’s manufacturing just leaving the state and going to lower cost states," he said.

Hiatt noted that other companies would probably get a boost from California's continued commitment to carbon reduction.

"As the prices get higher and higher to meet the [state] mandate, you're going to see people trying to invest in solar to try to reduce that cost, he said. "Plus you're going to see renewable energy companies, like on the production side – geothermal, hydro, solar and wind – who are going to invest in new operations so they can exploit the higher prices and make a greater profit."