Patrick Bigger’s ‘notes from the field’: on carbon, capital, and the state
See the original post on the University of Kentucky Political Ecology Working Group blog here
July 20, 2012
Department of Geography, University of Kentucky
Last week, California finally approved the United States’ first high speed rail line. It will run from LA to San Francisco, will cost a substantial amount of money, and, if all goes well, may be completed before both those cities are washed away by rising seas. I mention this because the logical second line of this high-speed rail between the Bay Area and Sacramento would have aided my fieldwork thus far tremendously. I’ve been spending a lot of time on trains. My work hinges on the creation of California’s carbon market, the first economy-wide carbon abatement scheme in the US. This summer I’ve been shuttling back and forth between Sacramento, the state capital and home of the California Air Resources Board (ARB) which is developing the project, and the Bay Area, hub of global finance on the West Coast and the location of UC Berkeley, where economists are feverishly modeling different aspects of the market in anticipation of an influx of money. Most of my work so far has been sitting in on hearings at California EPA headquarters and attending sessions of the California State Legislature as they try to hammer out regulations for the market, which is scheduled to go into effect on January 1, 2013. Then I hop on the train and blow down to Berkeley to listen to economists from UC and Stanford explain how they’ll be modeling markets, what the potential pitfalls are, and try to surreptitiously guess SoCal-Edison’s trading strategy. Below I want to make two observations that are only tangentially related to my fieldwork- this probably isn’t the place to muse about the epistemological difficulties of melding cultural economy approaches with finance and robust critical political economy or the materiality of carbon dioxide.
First, CalEPA headquarters is massive and beautiful. The Joe Serna Jr. building is twenty-five stories tall, is ranked by USEPA as the most energy efficient high-rise in the nation, features copious bike parking, and it’s just a really damn good looking building. I mention this because, tragically, it’s unlikely that the state will be able to undertake any buildings of this magnitude and quality anytime soon. The state is poised to embark on one of the biggest state-level austerity programs in US history. While everyone has their own theory about how California’s fiscal situation became so dire (I’ll toss my hat in with Ruthie Gilmore) and how to fix it (auctioning pollution rights is projected to bring in between $600 million and $1.8 billion…), it’s hard to see new state buildings of that quality in California’s near future. California can’t even afford to keep their own state parks open, including anhistoric former state capitol building in Benicia which I tried to visit while dropping in on the massive Chevron refinery located there. This sort of mirrors a broader trend across the US, in which less and less money, creativity and quality materials are being put into public buildings. Think only of crumbling schools, closing post offices, and the clapboard, cookie-cutter federal buildings that have popped up in many small cities across the US in the last 30 years. This follows arguments made by Giovanni Arrighi and Corrigan and Sayer, and an idea I’ve kicked around with Aaron Kappeler in the past-–namely that shoddy public architecture and degradation of the built environment are manifestations of failures of government and imperial decline. In many ways, it’s emblematic of the state’s decline that the last great building erected by the state of California (as far as I can tell) was built for CalEPA- it’s arguably the most important governance function the state has control over, and most people I’ve spoken with are proud that California is leading the way (although through questionable means) in reducing GHG emissions. Perhaps if California could control derivatives markets beyond its own environmental financial commodities it would have built a similarly great building for its own financial regulatory apparatus. However, in the current atmosphere of austerity, it’s more likely that California’s public buildings will suffer a decline similar decline to that of public infrastructure in other parts of the country.
My second and related observation is based on what is being said by my informants, rather than where is it being said. To put it bluntly, people are simultaneously drawn to, and repulsed by the power of finance. One of the more interesting hearings attended dealt with how to spend the aforementioned auction revenues from selling the rights to emit GHGs. It was organized with two panels of 8 people, each allocated 5 minutes to talk about how to spend auction revenue. The first thing that kept coming up was the insistence of Mary Nichols, the chairwoman of ARB, that the auction’s main purpose was not to raise money for the state, but to provide regulated entities with a price signal for what GHGs should cost. The money is just a happy byproduct! That stance is sort of tough to swallow because of the fiscal crisis the state is staring down right now.
Basically, the panelists could be broken down into four camps: naysayers who don’t think that ARB has the authority to conduct an auction because that amounts to a sort of complex argument around the commerce clause and the seizure of private property; those who were only concerned that revenue spending be narrowly tailored to the intent of AB32 per Prop 13, which states that all revenue from fees must be plowed back into the issues from which they arise; people advocating for direct investment in marginalized communities; and the most interesting group (only two of 16 speakers) who advocated financializing revenue by way of either a green investment bank or a state-backed reinsurance scheme. This last group’s comments elicited by far the most interest from the Board members, to the tune of 90% of all questions. Board members wanted to know if they could get a much higher return on investment (both monetarily and socially) by creating low interest loans for technology startups, pilot projects and the like.
Interestingly, this hearing was the same week as the Facebook IPO, and more than one commenter wondered aloud about the wisdom of creating new financial products based on an already abstract commodity. Often the same board member would ask a question about the stunning array of projects a green bank could sponsor, then in their next question pontificate on their skepticism about the stability of financial markets. One thing that kept popping up was that any plan to spend the money will have to go through the California Department of Treasury, which apparently (though I’ve had little luck finding specific examples) has a long track record of securitizing income streams- in this way the state could borrow against expected revenues from future auctions to plug the deficit because the securitized revenue streams apparently don’t have the same Prop 13 requirements as direct spending. The issue was never close to satisfactorily resolved; and in fact, the state legislature ended up passing a bill that much more narrowly tailored how the revenue could be spent. It was still fascinating to see a group of very bright people struggle with the world of possibilities created by the financialization of carbon revenue versus its potential costs.
My next several months of fieldwork entail spending quite a bit more time on the train, shuttling between the finance ambivalent regulators and their financial interlocutors. The first auction for GHG emission rights comes on November 15 and market activity will start buzzing while money flows into state coffers all under the backdrop of dramatic environmental collapse mirrored in magnitude by ongoing economic crisis.