GREEN GROWTH: FROM RELIGION TO REALITY - Sustainia

Chapter 5ting regulatory infrastructure. This experience has madeit more willing and able to enact green policy that will loweremissions and build green markets. This enables thepassage of market-creating green policy such as AB32,discussed below.The second derives from California’s general economichistory of successful innovation and new businesscreation. This background and its commercial infrastructurelegacy prepares California to undertake a newwave of business creation in a highly technical field suchas clean tech, embarking on a new stage of growth whereemissions reductions drive growth. Below, we discussCalifornia’s business legacy – the venture capital communityand associated resources. We then review AB32 andthe green policy that this environment makes possible.We next discuss how the clean tech venture capital industryhas grown over the last few years in tandem withgreen policy. We conclude by discussing some challengesfacing California.2.3.1 Finding a new home for venture capitalCalifornia’s venture capital (VC) community is a prominentpart of its economic landscape. The state’s traditionof tech-based entrepreneurship, venture capital investment,and innovation means California has in place thefinancial expertise, related services, and intellectual infrastructureto support a thriving high-tech VC community,and constituencies in place who stand to profit fromVC activities (Randolph 2011; Lecar 2011). This VCcommunity has a strong backing in technical know-howlocal to the state: in the last half century production inthe state has increasingly shifted away from heavy manufacturingand increased emphasis on innovation andhigh-tech light manufacturing (Sudarshan and Sweeney2008). In addition, California’s strong network of researchand innovation centers, such as the national labsand the University of California system, support researchand discovery at a basic level and help nurture a communityof scientists and engineers.This existing VC community was a critical and fullyinvolved participant in the information technology industryboom in California. As that wave of new industrygrowth drew to a close, however, the VC machinerywas in a sense left idling. With the community and itseconomic infrastructure ready and waiting, VC participantsbegan searching for the next major investmentwave (Lecar 2011). This search has led business intereststo focus on green technology as a possible new engineof growth in the state. The potential to capture even asmall portion of the $5 trillion global energy market withthe rising demand for clean tech has proved seductive tomany venture capital firms. Firms hope to earn high returnsby being able to provide the most advanced cleantech technologies to a rapidly growing, policy driven,market (Huberty et al. 2011). California’s existing VCcommunity thus provides a driving force for California’sinvolvement in clean tech, as well as a fertile environmentin which to begin new high-tech businesses (withsome caveats, discussed below).AB32 and associated green policyAssembly Bill 32 orders the reduction of California GHGemissions to 1990 levels by 2020, a 30 percent reductionfrom projected business-as-usual levels. The bill furtherrequires an 80 percent reduction in GHG emissionsby 2050. It intends to meet these goals through the oversightand implementation of a suite of new and existingstate laws and policy (CARB 2008).Key policy initiatives under or further supportive to AB 32:• Development of California cap-and-trade program tointeract with regional market system the Western ClimateInitiative• Increase of Renewable Portfolio Standard to 33 percent• California Energy Efficiency Strategic Plan• High Global Warming potential gas reductions• Implementation of Light-Duty Vehicle GHG Standards• Implementation of Low Carbon Fuel StandardRegional efforts:The Western Climate InitiativeFormed in 2007 Western Climate Initiative (WCI) soughtto set regional green house gas emission targets andimplement a multi-state cap-and-trade program. Theinitiative would regulate the electricity sector, most largeindustrial plants, and transportation in the region (WesternClimateInitiative2010). Political opposition to theprogram, however, has halted ratification of the initiativein many of the key U.S. states. Of the original sevenstates: California, New Mexico, Oregon, Washington,Utah, Montana, and Arizona, only California and NewMexico have passed legislation to move forward with theinitiative. Elected officials in the states that have pulledaway indicate concerns over budget costs and politicalopposition. New Mexico may yet reverse its support ofthe initiative, as “anti-business” (Roosevelt 2010; LATimes 2011).Regional initiatives such as the WCI can aid in the transitionto a low-carbon economy in the U.S. by providing thescale, coordination, resources, and knowledge, absentin individual state initiatives, while bypassing the politicalgridlock on the national level. They can help overcomecross-jurisdictional issues, eliminate duplicationof work, and provide greater levels of policy expertise(Lutsey and Sperling 2008). As the WCI demonstrates,however, in the current polarized political climate of theU.S. even regional initiatives may prove challenging.2.3.2 Creating a clean tech market: green policy andAB 32As noted above, California’s history has created a dynamicin which its business community has come to seeeconomic opportunity in green policy and has thus chosento back such policy. The narrative of successful pollutionand energy efficiency policy discussed in section2.1 above means there is a broader array of players thatfeel comfortable with, in favor of, and equipped with theinnovative skills necessary to handle future green policyGreen Growth: From religion to reality 55