08 September 2022 |

5th largest economy commits to climate


The talk of the summer in climate tech circles has been the Inflation Reduction Act, a $370B bazooka to stimulate construction, development, and adoption of climate technologies and clean energy infrastructure in the U.S. 

Now? California has quickly positioned itself as the state to most clearly take the baton from the feds, forging ahead with aggressive policy and spending of its own to advance climate causes. Here are some of California’s top hits from August: 

  1. A ban on new sales of most types of gas cars by 2035  
  2. A lifeline to keep open its last operational nuclear power plant, which provides almost 10% of the state’s electricity but was set to close in 2025
  3. A wave of legislation including up to $54B in spending of its own on climate technologies

Plenty to dig into! Let’s take a look at each piece.

Be gone, gas guzzlers

The first piece of major news out of California from a couple of weeks back was a prospective ban on new sales of gas cars, aimed to take effect by 2035. Mind you, that’s not much more than a decade from now, which feels weird to write. 

Specifically, The California Air Resources Board set targets for zero-emission vehicles to constitute: 

  • 35% of new cars by 2026
  • 68% by 2030
  • 100% by 2035

EVs in California make up only about 15% of new car sales today. This means their share will need to double in less than five years for California to be ‘on track’ with its targets. Of course, progress isn’t linear either – last year, EVs share of new sales was less than 10%.

Notably, California’s action on gas cars isn’t happening in a vacuum. State’s often look to each other to set policy; California’s first move may inspire other states to follow. Virginia specifically appears to be uniquely tethered to California’s approach. It may be the next state in line to ban new gas car sales as a result (that is unless their conservative governor has his way).

Of course, there’s a big difference between banning new gas car sales by a specific date and making a 100% EV future feasible. For one, many EVs command price points higher than baseline gas car options, which risks pricing out less affluent citizens. Many models are out of reach even with a $7,500 federal tax credit for new EVs. Nor is the used EV market necessarily a cheap option for folks. 

An (expensive) electric Porsche charges up in Palm Springs

Similarly, opportunities to charge aren’t always equitable or accessible, either: 

  • Where do you charge your EV if you don’t live in a single-family home and don’t work in an office building with chargers in its parking lot? 
  • Public charging is often expensive, limited, and frequently doesn’t work
  • Californians were asked not to charge their EVs during a recent flex alert. CA’s grid needs to mature significantly before it can support many more EVs charging
  • Alternatives to fast charging may help, but they aren’t scaling yet.

Further, EV availability will have to scale significantly to satisfy demand for new cars in 2035. This year exemplifies explicitly how serious supply chain constraints can get quickly – wait times for many EVs are through the roof right now, just like prices for many of the raw materials needed to make new cars are

One-two punch

And that’s not where California’s ambitious new policy stopped. Last week, the state unveiled a raft of policies and $54B in spending for climate technologies, covering: 

  • $14.8B for infrastructure (e.g., transit)
  • $8B to decarbonize and strengthen the electric grid
  • $6.1B for electric vehicles (including battery-powered school buses) 
  • $2.8B to combat drought
  • $2.7B to reduce wildfire risks

Combined with the Inflation Reduction Act and the CHIPS act, federally, newly greenlit spending on climate technologies this year approaches $600B. That’s a nice one-two punch! 

The spending accompanies a goal to cut greenhouse gas emissions by 85% or more by 2045. Considerably more spending beyond this $54B will be needed to hit those targets; California still gets more than a third of its electricity from natural gas, not to mention fossil fuel use for the energy required for industrial applications. 

It’s worth noting that some of this spending may be a boon for climate tech companies we’ve covered, too. Vibrant Planet – a startup focused on mapping things like wildfire risk – comes to mind; California should use their services in putting that $2.7B for wildfire risk mitigation to use. 

Going nuclear 

One other component of the legislation that will help curb emissions? It’s a status quo move, albeit a massively important one – keeping Diablo Canyon open. We wrote about the proposed rescue plan a few weeks back; now, California legislators got the deal over the finish line before the state’s legislative session ended on August 31st. With a forgivable $1.4B loan, the nuclear power plant is poised to continue operating beyond the original 2025 date set for its closure. 

Diablo Canyon provides more than 9% of the state’s electricity and is one of only three operating nuclear power plants on the west coast. Replacing its clean energy capacity would require significant investments in new renewable energy and swift deployment. In practice, California’s greenhouse gas emissions will increase rather than fall if the plant closes because natural gas plants will have to step up to make up for shortfalls. 

Still, the plant’s future is far from certain. For one, there’s a big open question about what happens to the plant beyond 2030. At present, it’s merely getting an extension. And even the extension is still contingent on California’s ability to secure federal funding in addition to the state-level loan. Jigar Shah of the DOE has previously noted that the plant should meet its criteria for funds.

Whether the tide is turning for nuclear is even less clear. California is a long way away from building or reopening other plants at present. It closed another plant in 2013. As per the graphic we shared in Sunday’s email from enersection, almost all of California’s planned capacity expansion is focused on solar and batteries. Granted, this graphic is pre-$54B in new spending. We’ll see if the picture changes!

The net-net

Any of these measures on their own would represent ambitious steps to electrify California and reduce emissions. Even keeping Diablo Canyon open is ambitious, considering how certain its future seemed a few months ago. While moves like banning new gas car sales by 2035 won’t eliminate their negative climate impact immediately (gas cars sold in 2034 will still be on the road producing emissions well into the 2050s), they’re necessary to move the needle. 

Taken together, California continues to lead the charge on all things climate and climate tech. Not just as a state within the U.S., but as the world’s 5th largest economy. That’s the real story here – an economy larger than India’s is committing fervently to decarbonization.