The California Public Goods Charge- A Tantalising First Glimpse of Policy Success?

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The California Public Goods Charge- A Tantalising First Glimpse of Policy Success?

by Miles Ten Brinke

Miles, Peak Water columnist and avowed Hydrophilic energy-head, has found his way to Britain where he’s lost his California perma-tan and is studying an Energy Policy

Today, I’ll be writing about a fascinating Nexus case-study I’ve recently come across in my research. That is, of the California policy programme around a Public Goods Charge (PGC). Basically this is a charge added to consumer utility bills which both potentially serves as a price signal for conservation and provides funding for public interest projects related to that utility (there’s a more technical and perhaps more accurate definition but that’s the main gist of it).

Currently there is no PGC in California, but there was one previously and the potential for one specifically built around the Water-Energy Nexus. From about 1996-2011, California had a PGC on electricity but the state legislature failed to renew it and so the policy ended 1st January 2012. There are however efforts to reinstate the kWh PGC, and perhaps even more interestingly to implement a new water PGC.

In this entry I’m going to lay out the basics- how the CA PGC regime came about and what it entails. Later on I’ll cover who’s involved and what’s been done (some details on the policy mechanisms). After that, a longer-form entry making an initial policy analysis.

The original PGC was born out of an era in California policymaking history I’m not all that keen for but which has shaped the very face of its contemporary development- deregulation and market liberalisation during the mid 90s into the early 2000s. A PGC is indelibly a market mechanism, an approach which over the past 40 years has come to dominate policy thinking around the world (to my estimation, especially in the US and UK). Much has been written about the market liberalisation of western economies since the 70s, of the Thatcherite years in the UK and US Reagonomics among  many other examples. California, especially its energy sector, was heavily shaped over this period of largely neoliberal governance.

In my early, and yes I very well may not only revise but entirely reverse my position as I learn more, estimation however the 1996-2011 PGC is actually a successful mixed command-and-control/market mechanism instrument (and the same is probably true of those proposed PGCs). For better or worse, its been described as a green tax, with consumers bearing the cost. In a subsequent entry I’ll delve more into the political economics, but it seems thus far that it was not (and likely will not be) an undue burden with public benefit far outweighing costs. This is arguably so even for the consumers paying it. So far as I’ve read through the grey literature (fun catchall term for governmental, regulatory, policy analysis and media coverage of policies) I’m liking what I see.

An energy and/or water PGC increases the cost of consumption and can provide funding for nexus public interest programs. When the kWh one was still around it brought money to the state’s energy efficiency, renewables generation, renewables R&D and low-income assistance efforts with a prioritisation of energy efficiency and low-income assistance. It was relatively low-cost. A water PGC would most likely help to fund Integrated Regional Water Management Plans (IRWMPs) primarily for water conservation and efficiency. The great potential utility of linking this into IRWMPs is the principles of subsidiarity and localism- that you should govern at the most effective scale for the issue and that in the case of water resource management this is at the regional and local levels.

Really this all comes back to down to climate change, and California’s mitigation legislation AB 32 and the Air Resources Board’s Scoping Plan. That is, to achieve a reduction by 2050 of 80% 1990 level emissions and by 2020 of 30% 1990 level emissions. One of the state’s primary strategies towards achieving this is energy and water efficiency, of explicitly thinking about the Nexus.  From desalinisation to water treatment and simply pumping the resource from place to place water is very energy intensive.  At the same time, from petrol to power stations the energy system too consumes a lot of water. The destructive impacts not only can be minimised but must be, for the general socio-natural welfare and not just emissions targets. The PGC regime has the potential to play a very important and dynamic role in ensuring the coalition of actors engaged in this endeavour come through successfully.

More to come on this fascinating subject, stay tuned!

~ Miles on Water

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