September 19, 2008
This measure asks taxpayers to fund $5 billion in bonds -- at a time when the state is in desperate financial straits and may be approaching a dangerous level of indebtedness -- for a scheme disguised as an effort to benefit the environment. Yet its true aim is to subsidize vehicles powered by natural gas, which would build a customer base for its sponsor: Clean Energy Fuels Corp., a company Pickens co-founded that operates natural gas filling stations throughout the U.S. and Canada.
The measure generously doles out taxpayer money for a variety of green-sounding initiatives: $200 million for alternative energy demonstration projects at eight California cities, none of which are clamoring to perform them; $1.5 billion in grants and incentives for research and development of clean energy technologies and alternative fuel vehicles, a field that venture capitalists are already shoveling cash into; $250 million for renewable energy generation equipment. But the lion's share of the bond money, $2.875 billion worth, goes for rebates on purchases of alternative fuel vehicles.
The rebates are structured so that only a small amount of money goes to truly environmentally beneficial vehicles, while most would subsidize those that run on natural gas. For example, buyers of hybrid cars like the Toyota Prius that get combined highway-city fuel economy of 45 miles per gallon or better would be eligible for a $2,000 rebate, handed out on a first-come, first-served basis to 55,000 buyers. But if you buy a "clean alternative fuel vehicle," you get a $10,000 rebate. These are defined under Proposition 10 as cars, vans or light trucks powered by natural gas, electricity or hydrogen. Last we checked, there were no hydrogen or electric vehicles on the new-car market.
But wait, it gets worse. A total of $1 billion would be allocated for rebates on purchases of natural gas-powered trucks -- an initial $50,000 rebate per truck. Nothing in the initiative says these trucks have to remain in California. So the day Proposition 10 is enacted, buyers will line up to purchase natural gas trucks, drive them to Nevada or some more sensible state, resell them and collect the $50,000-per-truck rebate as pure profit, courtesy of California taxpayers. The environmental gains for the state? Zero. Moreover, even though natural gas engines tend to pollute less than gasoline engines, vehicles don't have to be clean in order to qualify for a rebate. The initiative says they must merely be "as clean" as gas-powered vehicles.
Spending bond money on something as intangible as privately owned vehicles is a terrible idea unless there is a clear public benefit. Thirty years on, when the cars and trucks bought under Proposition 10 would be scrap metal, taxpayers would still be paying off the bonds. That's why this funding mechanism is normally (and rightly) used only for brick-and-mortar infrastructure such as schools and bridges.
There's a much better way to encourage clean cars. Rather than dictating which specific alternative fuel technology the market should adopt, as Proposition 10 tries to do, the state should impose vehicle pollution limits and let the market work out the solution. Actually, that's precisely what California is trying to do. A 2002 law orders steady improvements in greenhouse gas emissions from vehicles sold in the state, but it can only go into effect if the U.S. Environmental Protection Agency issues a waiver of the federal Clean Air Act. The Bush administration has rejected the waiver, but both presidential candidates have listed the fight against global warming among their priorities. The next administration should do the right thing in short order and grant California's waiver.
Meanwhile, voters should send Pickens packing and reject Proposition 10.
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