20 August 2010

Clean Energy Investors Flash Cash for Ads in California Climate Law Battle


California’s clean energy investors are raising millions of dollars for an advertising battle with oil refiners who want to delay the state’s new law on reducing greenhouse gas emissions.

The campaign, supported by investors such as Tom Steyer, founder of San Francisco-based hedge fund Farallon Capital Management LLC, aims to convince residents to vote against the so-called Proposition 23 when it comes up for approval in November. The proposal, backed by the oil industry, would delay laws to begin regulating the state’s carbon emissions in 2012.

California’s Global Warming Solutions Act, signed into law by Republican Governor Arnold Schwarzenegger in 2006, requires the state cut output of greenhouse gases linked to climate change to their 1990 levels by 2020. The state will introduce a cap-and-trade program to put a price on carbon emissions and trade pollution rights.

“It would be a big setback for clean energy in the U.S. if California’s climate-change law is overturned,” Kevin Parker, the global head of asset management for Deutsche Bank AG, said in a telephone interview.

If the most populous state backs away, it would give other states and the federal government “a free pass to do nothing” on curbing greenhouse gases, said Parker, who oversees about $7 billion to $7.5 billion in climate change related investments as part of about $700 billion in funds.

Tesoro Corp. and Valero Energy Corp., which operate refineries in the state that would face extra costs under a cap- and-trade system, have contributed most of the $6.16 million raised to lobby for Proposition 23, according to the California secretary of state’s office.

‘Common Sense’

Valero, based in San Antonio, Texas, has 1,600 employees in the state and supports the measure as a “common sense approach to making sure higher costs don’t further hamper California’s economy,” said Bill Day, a Valero spokesman. Lynn Westfall, a spokesman for Tesoro, also based in San Antonio, declined to comment on the proposition.

Supporters of the carbon law, which include companies involved in the hunt for energy from non-traditional sources such as fuel cells, the sun, algae and the wind, have raised $5.56 million from mostly environmental groups and investors, according to state records.

Most of the more than $11.5 million raised so far by the two sides will be spent on television and radio advertising, said Robert Stern, President for the Center for Governmental Studies, a Los Angeles-based non-profit public policy group.

Farallon Capital

The marketing blitz has yet to hit the airwaves, Stern said in a telephone interview. “The best bang for your buck comes after Labor Day when people start paying attention,” he said. Labor Day is Sept. 6.

Steyer, at Farallon Capital, has contributed $2.5 million and pledged another $2.5 million, according to state records and a campaign statement.

“Proposition 23 is designed to derail a green technology revolution that we are in the early innings of and that is the engine for California’s growth,” Steyer said in an interview.

Steyer, who is co-chair of a campaign opposing Proposition 23 along with former U.S. Secretary of State George Shultz, said he did not have a “meaningful percentage” of his investments in clean tech companies.

Steyer and his wife donated about $40 million for a renewable energy center announced in 2009 at Stanford University in Palo Alto, California, he said.

John Doerr, a partner at Menlo Park, California-based Kleiner Perkins Caufield & Byers and an investor in fuel cell maker Bloom Energy Corp., has given $500,000 to the campaign, state records show.

Investor’s View

Companies involved in renewable energy are ready to pour more cash into the campaign if needed, said Steve Westly, an alternative energy venture capitalist and former State Controller who opposes the ballot initiative.

Vinod Khosla, founder and partner of Menlo Park, California-based Khosla Ventures, said he would reevaluate his investments in the state if Proposition 23 passes. Khosla Ventures said it raised more than $1 billion last year for investment funds focused on the clean energy industry.

“If there is not a clean-tech market in California, you will see people look in India and China, where there are markets,” Khosla said during an event on Aug. 10 at Google Inc. headquarters where speakers voiced support for California’s greenhouse gas laws.

Jobs Requirement

Proposition 23 would halt the program for cutting greenhouse gases until California’s 12.3 percent unemployment rate falls to 5.5 percent for four consecutive quarters.

Since 1970, there have been three periods when the state’s jobless rate has fallen that low for that long, according to an analysis of the ballot measure by the state’s Legislative Analyst’s Office, a non-partisan agency that works for legislature.

It’s likely that the state’s greenhouse gas laws would be suspended for many years given economic forecasts that project unemployment staying above 8 percent for the next five years, according to the analysis.

“No one has a crystal ball about when the unemployment rate will come down, but it’s almost certain that without Proposition 23, rates will remain higher for longer,” said Anita Mangels, communications director for the California Jobs Initiative, which formed to support Proposition 23.

Unless the carbon law is linked to the unemployment rate, it will needlessly funnel money to non-traditional energy companies and boost gasoline prices, hurting the economy and causing job losses, opponents of the carbon law said.

Taxpayers and energy consumers are “guaranteeing the investments of venture capitalists in businesses that will be subsidized heavily by the state, with a market guaranteed by the state and their competition dampened by the state,” Mangels said in a telephone interview.

Delaying the enforcement of the climate-change law will give California’s economy time to recover so it can handle the greenhouse-gas limits, Mangels said.

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