For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “California Dream is in Real Peril”
CAPITAL ACTIONS
- Legislature Reconvenes for Final 2019 Actions
- “Address the Housing Crisis,” Newsom Tells Legislature
- Big Hydro Would Be Renewable Energy – New Ballot Initiative
- CalRecycle “Grossly Mismanaged,” Consumer Group Asserts
- Political Watering Hole Frank Fat’s Celebrates 80th Anniversary
ECONOMY
RESOURCES
- Kern County…Capital of Crude Oil Production Enters “Managed Decline”
- Carbon Credits Now A Best-Performing Asset Worldwide
- Farmers Live Climate Change Management, Every Day
- Legal Cannabis A Growth Industry – Black Market Even More So
CALIFORNIA CULTURE
- Six Great Road Trips
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
Stay current daily! For our focused updates via Twitter: @jrgualco / @robertjgore / @gualcogroup
READ ALL ABOUT IT!!
FOR THE WEEK ENDING AUG. 16, 2019
Rested & Ready: Legislature Reconvenes for Final 2019 Actions
CalMatters commentary
The California Legislature’s 2019 session began last winter amidst great hopes and fears.
The hopes were strongest among advocates for social, medical and environmental causes and labor unions.
The state’s new governor, Gavin Newsom, was outwardly more supportive of those causes than predecessor Jerry Brown had been, Democrats had won even bigger majorities in both legislative houses, and the state’s political atmosphere was drifting leftward in reaction to President Donald Trump.
The fears were most evident among business groups because advocates for more vigorous economic regulation had been energized after years of frustration.
Presumably tanned, rested and ready — a phrase erroneously attributed to Richard Nixon — the Legislature reconvened this week for its month-long session finale to decree how many of those hopes and fears were justified.
There are nearly 1,200 bills still awaiting final action and while most are fairly mundane, there’s no shortage of high-profile, high-dollar issues, and the 1,000-plus lobbyists who work the Capitol on behalf of specific interest groups will be hustling.
This is a synopsis of issues with the most impact in the real world outside the cloistered confines of the Capitol:
HOUSING — chronic shortage, particularly low- and moderate-income rentals, has driven consumer costs sky-high and while Capitol politicians — Newsom especially — place it atop their agenda, nothing substantial has happened to kick-start construction.
Several attempts to overcome local not-in-my-backyard opposition to high-density housing have failed, but one measure, Senate Bill 330, has survived so far. It would declare a housing crisis and exempt some projects from local red tape but still faces stiff opposition.
Newsom, meanwhile, is embracing calls for statewide rent controls, although the details of what he wants are still fuzzy. However, rent controls could also discourage housing developers from investing, which is what SB 330 supposedly encourages, so there’s an obvious conflict between the two approaches.
EMPLOYMENT — The state Supreme Court tightened up the legal definition of employment, which may force contract workers, such as drivers for Uber and Lyft, to either become payroll employees or be fired.
Assembly Bill 5, now pending in the Senate, would carve out a few exemptions, but not nearly enough to satisfy employer groups. Unions see the Supreme Court ruling as a major boon because payroll workers can become union members, and they have a strong ally in AB 5’s author, Assemblywoman Lorena Gonzalez, a San Diego Democrat.
Gonzalez is also carrying Assembly Bill 51 to ban arbitration agreements as a condition of employment, reviving a measure that Brown vetoed, saying it “plainly violates federal law.”
REGULATION — While the Trump administration has been rolling back business regulations, Senate Bill 1 would give state regulatory agencies blanket authority to adopt pre-Trump standards, bypassing the usual processes for rulemaking. Environmental groups back the legislation, now pending in the Assembly, but business opposes it as an overreach.
RECYCLING — California’s long-standing program to reduce “solid waste” in landfills is gasping for air and two essentially identical bills, Assembly Bill 1080 and Senate Bill 54, would require manufacturers to reduce waste from packaging and certain plastic products, reaching a recycling rate of 75 percent by 2030. Business groups say it would impose a high-cost burden that would be passed on to consumers and is unrealistic.
EDUCATION — School unions are pushing legislation to make it more difficult to create charter schools, claiming that charters divert too much money, but the fates of Assembly Bill 1505 and other anti-charter measures are very uncertain.
It will be a busy month.
“Address the Housing Crisis,” Newsom Tells Legislature
Sacramento Bee & PoliticoPro
Gov. Gavin Newsom on Thursday called for California lawmakers to send him bills to limit rent spikes and cut building regulations before their 2019 legislative session ends next month.
He said capping rent increases is a “top priority” for him over the next month. He made the remarks during a Thursday discussion on housing affordability in San Francisco, where housing prices are famously high, but said he could have had the same discussion anywhere in the state.
“The California dream is in real peril if we don’t address the housing crisis,” he said. “We need to see more permitting, we need to see more housing being constructed.”
He acknowledged there’s a patchwork of regulations on rent control and tenant protections throughout the state, and said there needs to be more statewide regulation protecting Californians from rent spikes.
“We’re working with the Legislature to get a rent gouging ordinance to my desk,” he said. “This is one of my top priorities for the next few weeks before the legislative session ends.”
The rent-gouging bill moving through the Legislature, Assembly Bill 1482 by Assemblyman David Chiu, D-San Francisco, would cap annual rent increases to 7 percent plus inflation.
He also said he hopes lawmakers pass Senate Bill 330 by Sen. Nancy Skinner, D-Berkeley, which would suspend some local development rules to speed up housing permitting. Newsom said the measure aims to streamline local regulations and crack down on “abuses” by local governments that are trying to avoid building new housing.
Newsom called for the Legislature to pass his plan to steer $331 million the state received in 2012 from a lawsuit against financial institutions over unfair mortgage practices. Courts determined the state initially misspent the money and ordered Newsom and the Legislature to fix it.
During his campaign, Newsom set an ambitious goal to build 3.5 million units by 2025.
He faces significant headwinds to hitting that target.
The rate at which cities and counties are approving housing permits is down more than 15 percent during the first half of the year compared with the first half of last year, according to the data from the state’s Department of Finance.
If approval rates continue as they have during the first half of the year, the state is on track to approve just 107,000 housing units this year, far less than the state would need to build to reach Newsom’s goal.
Newsom called local development fees “usurious,” referring to charges that in some cities are beyond $100,000 per unit.
“The impact fees are usurious, I’ll say it — and we’ve got to call that out,” Newsom said at a San Francisco event aimed at addressing the issue of housing affordability. He blamed “the way our property tax allocations work — and Prop. 13 is the principal source [of the problem],” he said. “You got Prop. 13, connect the dots.”
A recent paper by the Terner Center for Housing Innovation at UC Berkeley found that “California jurisdictions have increasingly relied on development fees” because of state policies that restrict local tax options, including Prop. 13.
Newsom said part of his goal is to “connect the impact fee conversation to the larger negotiations.”
“That’s a bank shot of sorts, because it makes it particularly more complex. But it’s fundamental, in terms of addressing the affordability issue in the state,” he said. “Because you can’t build an $800,000 affordable housing unit — that’s laughable … not in a big urban center like this.”
He said to keep down building costs, he wants to continue encouraging creative new housing approaches, including “prioritizing new modular prefab strategies.” He added that he also intends to aggressively pursue the development of state surplus property.
Currently, “we have 45,000 parcels of the state property that we’ve reviewed, 1,300 that we think we can set aside for development,” he said. “We’re prioritizing those methods for those parcels — and we already have six cities that are partnering with us in order to fast track the developments of those units in order to get those costs down.”
The state’s severe housing shortage is driving up housing prices and “skyrocketing” homeless populations in California, Newsom said. In Sacramento alone, researchers estimate the homeless population has increased nearly 20 percent over the last two years.
The shortage has been decades in the making, Newsom said, pointing to building regulations and opposition from cities and counties as barriers to building more housing in the state.
Meanwhile, home prices in California continue to rise. In June, for the third straight month, median home prices hit a record high of $611,420.
https://www.sacbee.com/news/politics-government/capitol-alert/article234038822.html#storylink=cpy
Big Hydro Would Be Renewable Energy – New Ballot Initiative
Politico Pro, no link
A state assemblyman has submitted a ballot initiative that would allow large hydropower projects to qualify for state renewable electricity targets, continuing a push by Central Valley lawmakers to boost the resource.
Assemblyman Adam Gray (D-Merced) filed an initiative Friday with the Secretary of State that would count large-scale hydropower toward California’s renewables portfolio standard for utilities. The target is currently set at 60 percent by 2030 by CA SB1000 (17R), but does not include hydropower projects above 30 megawatts because policymakers are trying to encourage development of wind and solar power.
“For years, the people of the Northern San Joaquin Valley have been trying to get hydropower recognized for what it is: the original source of clean electricity,” he wrote in a recent op-ed in CalMatters. “Our efforts have been stymied by people who feel entitled to decide what is, or isn’t, green enough.”
Gray also introduced a constitutional amendment in the Legislature last month, CA ACA17 (19R), that would do the same thing. And Sen. Anna Caballero (D-Salinas) introduced CA SB386 (19R) earlier this session specifically to allow municipal utilities in her region, the Modesto and Turlock irrigation districts, to count electricity from Don Pedro Dam towards their renewables requirements.
Gray also cited the financial burden on Merced, Modesto and Turlock in his op-ed, estimating that allowing Turlock to count hydropower would save its 100,000 customers $300 million.
“Several environmental organizations and SB 100’s author, former Senate President Pro Tem Kevin de León, went nuts” over Caballero’s bill, Gray wrote. “The bill was halted even though the federal government and virtually every other state considers hydropower renewable.”
An environmentalist pointed out that large hydro would count towards the 2045 “zero-carbon” goal, also contained in SB 100. “It totally counts as a zero-carbon power source once we hit 2030,” said Dan Jacobson of Environment California. “I just think we don’t need to incentivize hydropower, and we need to continue to incentivize and encourage solar and wind development.”
CalRecycle “Grossly Mismanaged,” Consumer Group Asserts
Sacramento Bee
The leadership of CalRecycle must drastically change or else be sacked and replaced by Gov. Gavin Newsom, according to a letter written to the governor from the head of a consumer advocacy group, just days after the largest recycling chain in California shuttered all remaining locations.
“This is gross mismanagement that should not be tolerated,” wrote Jamie Court, president of Consumer Watchdog, to Newsom. “We suggest an immediate job review for the director of CalRecycle and possible replacement depending upon on its findings.”
Court’s letter argued that CalRecycle has done nothing to stem the wave of recycling center closures in the Golden State.
“CalRecycle has been highlighting these issues and doing everything allowable under current law to address these challenges for years,” a CalRecycle spokesman said in a statement. “CalRecycle consistently does everything required by law and everything allowed by law to further the stated goals of the Beverage Container Recycling Program.”
In 2013, there were more than 2,600 can and bottle redemption centers around the state; now, there are just 1,226 left, according to Consumer Watchdog researcher Liza Tucker.
Even before rePlanet shuttered all remaining 284 locations last Monday, there was just one redemption center for every 27,000 people in the state, leading to massive wait times for people trying to recover their can and bottle deposits.
“Who is going to recycle when you have to stand in line for two or three or four hours? Nobody,” Tucker said.
Though California still leads the nation in recycling, Tucker pointed out that that lead has decreased significantly over the last seven years.
While half of Californians were recycling their solid waste in 2012, that number has fallen to 42 percent in 2017, according to CalRecycle numbers provided by Tucker.
On top of that, “Californians are generating more and more trash. Since 2012, trash disposal has increased per resident from 5.3 pounds to 6 pounds every day. That amounts to the weight of a subcompact car per person per year,” Tucker said.
She said consumers need to have convenient, easy access to can and bottle recycling, but instead the state “has aided and abetted the collapse of the system it was supposed to ensure flourished.”
In his letter to Newsom, Court alleged that CalRecycle has failed to produce timely financial reports and failed to hold beverage companies and retail and convenience stores accountable.
“Instead, the entirety of CalRecycle’s response has been to quibble with our numbers in the media and ignore the crisis,” Court argued.
CalRecycle published its latest quarterly report, for the first quarter of the 2018-19 fiscal year, on Friday. A spokesman for the agency conceded that there have been delays in the past, writing, “Historically, CalRecycle acknowledges there have been delays in publishing these reports. The department has since made a commitment to better streamline the process, which has produced positive results.”
Court called on CalRecycle to “crack down on grocers and retailers that are obligated to take back bottles and cans,” to immediately release a report on how much consumer deposit money is being held in state accounts, and to “embark on a high profile public education and enforcement campaign to let consumers know they have an easy way to redeem their bottles and cans.”
A CalRecycle spokesman said the agency has actively enforcing the law; in the last five years, CalRecycle has issued 1,314 violations to retailers who failed to either put up required signage indicating in-store redemption or for not redeeming cans and bottles when they had agreed to. This has generated nearly $100,000 in fines.
Court also called for the modernization of the state’s 33-year-old can and bottle program, either in a special session of the Legislature or by a special “gubernatorial strike force.”
“You inherited a crisis, but CalRecycle has long known about it. It’s now time to solve the problem and help both consumers and the environment,” Court wrote.
In response, a CalRecycle spokesman wrote that, “CalRecycle is always open to working with the Legislature on short- and long-term solutions to support recycling centers.”
A representative from Newsom’s office did not respond to an inquiry about the letter by deadline.
https://www.sacbee.com/news/politics-government/capitol-alert/article233714092.html?#storylink=cpy
Political Watering Hole Frank Fat’s Celebrates 80th Anniversary
Sacramento Bee
For one night, at least, it was just like old times inside Frank Fat’s.
There was ex-Gov. Jerry Brown digging into gyoza with his wife, Anne Gust Brown. “Where’s my drink?” called out longtime Assembly speaker and onetime San Francisco mayor Willie Brown. John Burton, the legendarily explicit former California Democratic Party chair, told stories of a now-dead legislator who brought a date to the Chinese restaurant, knowing he could charge the meal to a “pigeon” — a lobbyist.
Though Frank Fat’s still hosts scores of state employees and Capitol visitors each day, its status as the go-to place for legislators’ backroom deals and napkin-scribbled agreements is mostly a memory. Lobbying reform, an improved dining scene and stricter laws around alcohol changed Capitol culture over the years.
But the landmark downtown Sacramento restaurant’s 80th anniversary party Wednesday evening flashed glimpses of the 1980s and before, when lobbyists, journalists and political leaders on both sides of the aisle all ate and drank.
“It was an important element in all of what we did,” Willie Brown said. “It was the one place where there was no such thing as a Democrat or a Republican, there was no such thing as a Senator or an Assembleyman. We were all literally equal in this establishment in every way.”
Born outside of Canton in 1904, Dong Sai-Fat used falsified immigration papers to circumvent the Chinese Exclusion Act and sail to San Francisco in 1919, where he adopted the name “Frank.” He worked service jobs for 20 years and was waiting tables at a Sacramento restaurant called Hong King Lum when a state official came in to play keno one day.
As the story goes, the man’s 50-cent keno ticket won $900, but he left before collecting his prize. When the official came back to find Frank Fat had safeguarded the winning ticket instead of pocketing it, he offered Fat a business loan to open his own restaurant, which served its first customer in a derelict old speakeasy on Aug. 14, 1939.
Frank Fat’s slowly emerged as a Capitol favorite not only for its food but for the wait staff’s deferential service and the sense of privacy that existed through the restaurant’s back lounge. Every sitting California governor has eaten in “the third house of the Legislature” since it opened, with future Supreme Court Chief Justice Earl Warren a particularly loyal customer throughout the 1940s and early 50s.
Jerry Brown would frequently come eat traditional Chinese dishes with the cooks in Frank Fat’s kitchen during his first term as governor, he said. Now pseudo-retired to his Colusa County ranch, Brown still visits Frank Fat’s whenever he’s in Sacramento, he said.
The best-known story about Frank Fat’s, though, centers around Willie Brown and former state treasurer Bill Lockyer. After Brown got lobbyists for trial lawyers, insurers, doctors and the tobacco industry to reach a deal on a liability bill, they headed to a private room upstairs for a toast or three.
Lockyer, then the Senate judiciary committee chair, joined in and suggested everyone sign a document saying they wouldn’t fight the agreement for at least five years. The autographs were scribbled not on paper but on a Frank Fat’s linen napkin, a copy of which still hangs in the restaurant today.
The Fats’ influence grew outside of 806 L St. as well: the family owned or ran restaurants at Sacramento State, Thunder Valley Casino Resort, Cache Creek Casino Resort, Downtown Plaza and even San Diego. Fat Family Restaurant Group’s other properties now include Fat City Bar & Cafe in Old Sacramento and Fat’s Asia Bistro & Dim Sum Bar in Roseville and Folsom, as well as a catering hub.
But the first restaurant remains the flagship, with the recent accolades to remind customers of its place in Sacramento’s evolving dining scene. Frank Fat’s was one of three local restaurants to earn Michelin’s Bib Gourmand designation in May, joining Mother and Canon, and received a James Beard Foundation America’s Classics Award in 2013.
“It’s here, it’s been here and it’s going to stay here because it’s an institution,” Burton said. “The food’s good, the food’s consistent and if you (found) a good lobbyist, the price (was) right.”
The oldest restaurant in Sacramento still owned by its founding family owes much of its longevity to Lina Fat, Frank’s Hong Kong-born daughter-in-law who transitioned the menu from chop suey to American classics to semi-traditional Chinese dishes as the executive chef.
https://www.sacbee.com/article233958517.html#storylink=cpy
State’s Cash Flow Continues Ahead of Projections
Dept. of Finance
After finishing fiscal year 2018-19 above the 2019-20 Budget Act forecast by $1.041 billion, preliminary General Fund agency cash for July, the first month of the 2019-20 fiscal year, was $533 million above the 2019-20 Budget Act forecast of $7.794 billion.
n Personal income tax revenues for July were $364 million above the month’s forecast of $5.403 billion. Withholding receipts were $353 million above the forecast of $5.06 billion. Other receipts were $11 million higher than the forecast of $762 million. Refunds issued in July were $7 million lower than the expected $322 million. Proposition 63 requires that 1.76 percent of total monthly personal income tax collections be transferred to the Mental Health Services Fund (MHSF). The amount transferred to the MHSF in July was $7 million higher than the forecast of $97 million.
n Sales and use tax receipts for July were $25 million above the month’s forecast of $1.732 billion. July is the first month of the 2019-20 fiscal year and includes the final payment for second quarter taxable sales, which was due July 31.
n Corporation tax revenues for July were $119 million above the month’s forecast of $357 million. Estimated payments were $146 million above the forecast of $290 million, and other payments were $63 million lower than the $162 million forecast. Total refunds for the month were $36 million lower than the forecast of $95 million.
Cisco Lays Off Nearly 500 Silicon Valley Employees
San Jose Mercury
San Jose computer-networking giant Cisco has laid off 488 workers, according to a filing with the State of California.
In San Jose, 397 employees were turfed, and another 91 workers lost their jobs at the company’s offices in Milpitas, according to the California WARN Act filing.
Effective date for the layoffs, described in the notice as permanent, was July 31. Cisco said in letters to state and local officials that anyone not laid off on that date would be out by Aug. 13.
Cisco’s filings show the job cuts hit a variety of positions, including large numbers of engineers and managers, along with technical leaders.
A Cisco spokesperson said the firm in the past few years has been “transforming” the company. “It’s important that we make decisions to continually ensure that our investments and resources are aligned with strategic growth areas of the business and customer demands,” the spokesperson said.
“As we realign some of our teams, we are working closely with impacted employees to match them where possible with the wide variety of roles currently open across Cisco.”
https://www.mercurynews.com/2019/08/14/cisco-lays-off-nearly-500-workers-in-san-jose-and-milpitas/
Kern County…Capital of Crude Oil Production & “Managed Decline”
Bakersfield Californian commentary
Our days as a capital of crude oil production are numbered — California is seeing to that. Kern County hasn’t reached the end of the road but the signpost is visible on the horizon. T-intersection ahead: Prepare to make a choice.
In no uncertain terms, Gov. Gavin Newsom has made clear that this nation-state will continue working toward a carbon-neutral future, and next up is the elimination of the practices and institutions that inhibit that quest.
“That’s California’s identity,” Newsom said during a visit last month to the site of a west Kern oil seepage incident. “It’s who we are. It’s what we do better than anyone else.”
Indeed it is. California has been working toward a green economy on several fronts for years. Then, last month, a bold stroke: Newsom put his signature on a state budget that includes $1.5 million to study a managed decline of the state’s oil production.
That is to say, a managed decline of Kern County’s most important industry, apart from farming.
Many will cheer Newsom’s larger objective, and some will sneer, but the fact is, without a suitable replacement, shutting down the California oil industry will devastate the economy of a region that is already among the state’s poorest.
It’s not enough for anyone to declare that Kern County leaders must dedicate their efforts to the diversification of this economy. That is a given. Kern County must identify a champion newcomer of depth and potential, and pursue it.
Some will point to logistics — warehousing, to translate — but those jobs are not high-paying, certainly not in the six-figure orbit of oil industry jobs. And since logistics relies on heavy truck traffic, it is not environmentally friendly and therefore runs counter to the whole purpose of this grand undertaking by California.
If the state taketh away, so must it give.
Newsom’s green government must help local leaders lure a dynamic replacement to Bakersfield. Computer manufacturing. Biotechnology research. Semiconductor development. Something.
Or, most appropriately, renewable energy research, development and manufacturing, which already have important footholds here.
All of those industries will require investments in education — new or enhanced programs at Bakersfield College, Cal State Bakersfield and other regional institutions that can train workers for these new employers.
Would state-level tax breaks be enough to attract a player, or players, of such scale that the pain of a diminished oil industry might be sufficiently eased? That’s hard to imagine. We’ll need more than that.
Public-private partnerships, already common in infrastructure development, are worthy of discussion. Could such a model translate to rooted, brick-and-mortar workplaces built to a new industry’s specifications? I don’t know if the framework for an undertaking like that exists yet. Creating one would have to be a task for our legislators, state and federal.
This “managed decline” study, underway now under the auspices of the University of California, will “evaluate pathways to achieve a carbon neutral economy by 2045, manage the decline of in-state production as the state’s fossil fuel demand decreases, and assess potential impacts to disadvantaged and low-income communities and strategies to address those impacts.”
That study must assess potential impacts to every tier of this broader community because, no matter how one might otherwise feel about it, the fabric of the Kern County oil industry envelops everything from education and social services to commercial and leisure.
The Kern County oil industry employs about 10,000 people directly, and an additional 30,000 work in associated jobs. But Sacramento’s “managed decline” of the industry wouldn’t just affect employment levels and its trickle-down effect on the community’s overall quality of life. It would affect our very safety.
Oil company holdings are one of county government’s top sources of property tax revenue. As we have seen in Kern County in recent years, even a marginal dip in the value of those lands, due primarily to low oil prices, can result in drastic decreases in public services, including law enforcement.
Environmentalists want to see the state’s oil extraction business shut down sooner rather than later, but Newsom needs to reiterate that the state’s economy still runs on fossil fuels and will for years to come. Try finding a charging station for your Tesla off the I-5 exit at Avenal: The infrastructure is not here, and it’s not close. Meanwhile, the oil pumped out of Kern County wells is subject to some of the most stringent environmental regulations in the world. Turning off the pumps in the southern San Joaquin just so California can turn to foreign exporters with dirtier extraction practices makes no sense.
Newsom is aware of all this, of course.
“Before we do anything precipitously, before we do anything audaciously, (vulnerable people need to know) that we have their back and that we have something better that’s more (economically) significant than what we have today,” he said during that Kern County stop on July 24.
“I want to be very honest with people that we’re not going to leave anyone behind,” he said.
Should we take him at his word? In his first State of the State address in February, Newsom gave the Central Valley an encouraging shout-out.
“Merced, Fresno, Bakersfield and communities in between are more dynamic than many realize,” Newsom said. “The valley may be known around the world for agriculture, but there is another story ready to be told.”
We’re all ears, Governor. This would be a good time to tell it.
Carbon Credits Now A Best-Performing Asset Worldwide
Wall Street Journal, 8/12, no link
Carbon-emission credits, long shunned by traders, are now one of the world’s best-performing investments.
The price of the credits, doled out by governments in Europe to polluting power plants and steel mills to curtail the production of greenhouse gases, has soared more than fivefold over the past two years.
Prices are up strongly again this year and near a record of about €30 ($33.60) a ton of carbon dioxide emitted. Driving prices higher is a combination of a shrinking supply of credits and a hot summer in Europe, which has put big demands on power plants that are legally required to hold the credits to operate.
The recovery has drawn back investors who largely abandoned the market when prices collapsed last decade.
“It’s attracting hedge-fund speculators,” said Norbert Rücker, head of economics at Swiss private bank Julius Baer. “With this move, carbon has really come back to life this year and it’s attracted a lot of interest—we have clients reaching out to us asking about it.”
The resurgence in carbon-credit prices began in mid-2017 when EU policy makers agreed to sharply reduce the number of available credits. That has pushed up prices and allowed the carbon market to help fulfill its purpose of punishing excess polluters. With the market set up to constrict credit supply, prices should rise further still, analysts say.
The idea of a trading program was first enshrined in the 1997 Kyoto Protocols. The EU launched its program in 2005, granting credits to individual countries, who in turn pass out credits or auction them to carbon-producing companies, like steelmakers and power plants, which can either use or trade them. For every ton of carbon the polluters generate, regulators require them to possess a credit.
An excess in credits in recent years caused prices to plunge as industry suffered across the continent during the financial crisis, leaving unused credits in the system for years afterward.
For the five years to January 2018, ICE European emissions futures languished below €10 a ton of carbon dioxide produced. Surplus annual allowances peaked at around 2.5 gigatons of carbon dioxide in 2013, while the footprint for powering Europe’s industry and homes was around 1.7 gigatons, according to Energy Aspects.
That prompted the EU to reduce the number of credits in the system by 24% each year for the five years starting in 2019.
Prices have shot up since the reforms were agreed on. Fresh interest from speculators has also boosted prices, creating a “positive feedback loop,” according to Tom Lord, a trader at London-based carbon risk management company Redshaw Advisors, which advises and trades carbon on behalf of polluting companies.
“The market as a whole and our customer base for sure is more interested. That’s industrial installations but also speculators,” Mr. Lord said.
Other factors are holding back the supply of credits. Germany’s environment minister said last month she would back canceling the credits held by power plants that have shut down, instead of allowing them to flow back into the market.
The minister’s comments preceded a European Court of Justice ruling that part of an Exxon Mobil Corp. natural-gas processing plant should be classified as an electricity generator—a decision that could cut the number of free carbon credits it receives.
The higher prices mean that it now costs industrial polluters almost as much to use coal as it does to use cleaner natural gas. Putting the two markets on an equal footing means carbon prices are driven by factors similar to the ones that affect gas prices, such as high summer temperatures.
That has been evident in this summer’s heat waves across Europe.
demand for power,” said Jeff Berman, director of emissions and clean energy analytics at S&P Global Platts.
Brexit could also affect emissions pricing. The U.K. has been suspended from the EU Emissions Trading Scheme amid uncertainty about the manner and date of its departure from the EU, meaning the country hasn’t officially been able to disperse any credits in 2019.
A departure with a negotiated settlement with the EU would give U.K. companies plenty of time to dump their remaining credits. A “no-deal” Brexit would allow U.K. companies to sell credits back into the market provided they have registered in a different country before the date of departure. Both scenarios could temporarily weigh on the price of carbon credits.
Farmers Live Climate Change Management…Every Day
NY Times commentary
FIREBAUGH, Calif. — Many farmers probably haven’t read the new report from the United Nations warning of threats to the global food supply from climate change and land misuse. But we don’t need to read the science — we’re living it.
Here in the San Joaquin Valley, one of the world’s most productive agricultural regions, there’s not much debate anymore that the climate is changing. The drought of recent years made it hard to ignore; we had limited surface water for irrigation, and the groundwater was so depleted that land sank right under our feet.
Temperatures in nearby Fresno rose to 100 degrees or above on 15 days last month, which was the hottest month worldwide on record, following the hottest June ever. (The previous July, temperatures reached at least 100 degrees on 26 consecutive days, surpassing the record of 22 days in 2005.) The heat is hard to ignore when you and your crew are trying to fix a broken tractor or harvest tomatoes under a blazing sun. As the world heats up, so do our soils, making it harder to get thirsty plants the water they need.
The valley’s characteristic winter tule fog is also disappearing, and winters are getting warmer. Yields of many stone fruits and nuts that feed the country are declining because the trees require cool winters and those fogs trap cool air in the valley. Warm winters also threaten the Sierra Nevada snowpack, which provides 30 percent of California’s water. We had a good wet winter this year, but a few years ago the snowpack was at its lowest level in 500 years. We also worry that last year’s record California wildfires, which blanketed the valley with smoke for weeks, might become the new normal. I don’t get sick much, but that summer I had a hard time breathing because of the congestion in my lungs.
More:
Legal Cannabis A Growth Industry…But Black Market Even More So
Associated Press
California’s struggling legal cannabis industry is expected to grow this year to $3.1 billion, but it remains outmatched by a thriving illegal market ripe with bargains, a report concluded Thursday.
Consumers are spending roughly $3 in the state’s underground pot economy for every $1 in the legal one, said the report from industry advisers Arcview Market Research and BDS Analytics .
California kicked off broad legal sales in 2018. But hefty tax rates and illicit sales have been blamed for slower than expected activity in the new licensed market.
The report projected sales in California — the world’s largest legal pot market — would grow 23 percent this year.
Companies that survived a rough 2018 “are battle hardened and kicked off a merger and acquisition flurry in the first half of 2019 that will allow them to leverage their positions in California to compete across the country,” Troy Dayton, CEO of the Arcview Group, said in a statement.
But those figures projecting robust growth don’t square easily with reports from many businesses that say they are struggling to keep their doors open.
There appears to be a growing divide between well-financed companies and big-dollar investors that are gaining ground and smaller operators just trying to get into the black.
Consumers can reap big discounts by buying under the table, with many underground shops operating in plain sight. Thus far, law enforcement and regulators have been unable to significantly slow the vast illicit market.
Indeed, “consumers have no shortage of cheap, illicit sources,” the report noted.
Meanwhile, licensed companies complain about high tax rates and face steep costs for everything from lab testing to state-required packaging.
But businesses that have been able to hang on in the bumpy market “have emerged stronger and well-positioned to grow their market share going forward,” Dayton said.
The report projects the legal market will gradually find its footing.
By 2024, legal spending is expected to climb to $7.2 billion, with the illegal market dropping to $6.4 billion.
https://apnews.com/ca7e90e59cab4d2e850d1ad22219ee47
Six “Great California Road Trips”
| California is made for road trips — a quilt of coastline, Sierra, desert and valley stitched together with asphalt. Instead of fighting the crowds on Highway 1, The San Francisco Chronicle’s travel team has built six itineraries for great California road trips on paths less traveled. |
| Gas — or charge — up the car, download your tunes or podcasts, pack a few snacks and follow these itineraries for great California road trips. See them here. |