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MEMO
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Subject: California’s Environmental Policies (helpful/harmful) in Business Climate
The impact of California’s Environmental Policies in business climate has aroused an unending debate on whether it will result in positive or negative effects. Despite the conflicting arguments, the state’s authority has continued to push forward unabated to effect the policies. The clamor for even more aggressive environmental regulations ison going. The regulations are affecting entirely all spheres of California’s livelihood. For this memo I will focus on the impact of the policies on the business climate.
Positive Impact
California has defied the national environmental trend with her sophisticated approach to environmental management. The policy aims at cutting greenhouse emissions. This will in turn encourage technological innovation and efficient consumption and generation of energy. The California Air Resources Board (CARB) has adopted an economy-wide cap-and-trade program. This program, drafted by professional environmentalists and other stakeholders aims at reducing the overall state’s greenhouse gas emissions. The implementation of the clean energy law; AB32 will boost green business industry.
The environmental policy is a positive signal to business in the state as it shows the authority’s commitment to promote energy efficiency and the use of clean energy. The leadership role taken by the state in adopting clean technology has had a positive economic impact. California State is today leading in venture capital financing to promote the use of clean energy. The state received over half a billion dollars in investments towards the end of last year. Positive prospects have been predicted for investments in California once the law is fully implemented. This can be attributed to the state’s resolve to embrace a clean energy economy (Davoudi, Crawford &Mehmood, pg 128).
Using Clean Energy
The business environment is set to reap benefits from the requirement by the law that all premises within the state invest in in clean energy. This will see use of wind and solar energy which not only increases efficiency but also reduces cost of production. The ultimate benefits will thus reach the business and the consumers. Use of clean fuels and upgraded efficiency standards will encourage business stability. This is because businesses that pollute the environment by emitting dirty fossil fuels will be penalized for the equivalent deleterious impact on the environment. Such a measure will see many businesses opt for the clean energy. In turn, this will encourage innovativeness as firms adopt energy efficient- environmentalfriendly systems that do not compromise on profitability.
The California’s environmental law has been designed elaborately to minimize any chances of market abuse. This is by adopting measures that discourage market gaming or any other form of manipulations. Borrowing from past experiences that saw an emergence of new tendencies of market exchanges such as the 2008 incidence that birthed a housing crisis across the nation, CARB has made the program transparent and highly liquid. With adoption of further recommendations from the Emmett Center on Climate Change, California is set to be not only America’s but world’s leader in clean technologies. Investing in such innovations will create a new platform for cutting edge business ventures in the state. The initial success registered so far only goes to indicate that sound environmental policies do not necessarily kill business. The success story of California may lead the way for other states in America and the world to follow with the overall impact being a clean world coupled with smart businesses (Davoudi, Crawford &Mehmood, pg. 129).
The Down Side
The California’s environmental policy could have a negative impact on the business climate. The restriction the law imposes on exploitation of oil reserves for instance discourages local drilling of oil. The stringent laws governing the drilling of oil have seen many investors relocate while those who continue drilling have to fulfill many requirements set by the authorities. The reduced rate of drilling has negatively affected business as America continues to rely on expensive foreign procured oil. The regulations on air pollution may have resulted in clean air in California. Unfortunately, this has been achieved by the leading emitters of air pollutants relocating to adjacent states of Nevada, Arizona and Mexico. This translates into clean air in California but not America and the world (Fulton, Para 7).
The demand to adopt clean energy systems by the local firms and homes means overhauling the systems currently in use. To reduce air pollution requires installing scrubbers, using wind and solar energy requires installation of turbines and solar panels and other related installations. Overall, this is a capital intensive venture. The resultant increased cost is forwarded to the final consumer negatively affecting their economic wellbeing (Fulton, Para 9).
Conclusion and Recommendations
It is agreeable that environmental management and sustainable development is necessary for the world to overcome the looming threat of global warming. Many events directly linked to the impact of environmental degradation have been witnessed. The plan by California to adopt an ambitious climate policy to reduce greenhouse gas emission is one such step. The state has crafted laws with far reaching impact on the environment and the economic status. The comprehensive policy aims to among others encourage use of clean energy such as solar and wind energy. It also aims at using ecofriendly strategies in running businesses. The benefits are numerous since apart from a clean environment, the law will encourage innovativeness.
The law is however not without pitfalls as experts warn that the speed with which it is being implemented could negatively affect business climate. The demand to invest in new energy systems and pollution reduction strategies is a capital intensive venture that could have far reaching economic impact. One of these effects would be the high cost of production and efficiency breakdown since energy sources that rely on nature do not guarantee efficiency. Overall, the plan is beneficial but would be more fruitful if the government adopts a policy that allows the private sector to gradually adopt the green technology. Rushing the process will only result in firms adopting technologies that may compromise on efficiency or which may not be really greener. The law may strictly set standards on what type of green technology to adopt but consideration should be put in that green capital investments have a long pay back period.
The state should in addition to formulating and implementing the strict environmental law, initiate low cost financing programs to encourage quick adoption of the new technologies especially by firmsexperiencing financial constraints. The enforcement of energy consumption reduction by relying on solar and wind energy may negatively affect efficiency. As such therefore, the state should encourage gradual adoption of alternative energy sources while discouraging the use of conventional energy sources such as hydro and fuel based. This will over time transform California’s economic status while protecting the environment.
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