Market Overview

Decade of Data Charts California's Emissions Reductions During One of Longest Economic Expansions in State History

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On eve of climate summit, 10th edition of
California Green Innovation Index compares state, national and
international progress on key economic and environmental indicators

As leaders from around the world prepare to gather in San Francisco for
the Global Climate Action Summit, the tenth edition of the California
Green Innovation Index
presents robust findings of emissions
reductions and economic growth, while highlighting critical challenges
ahead.

The Index compares state and environmental indicators with the
U.S. and the rest of the world, and finds that in the ten years since
California passed its first climate law, emissions fell by 11 percent,
even as its economy grew by almost 16 percent during one of the longest
economic expansions in the state's history. In comparison, the U.S.
economy grew by 11.6 percent during this period, while emissions
decreased by 10.2 percent. The European Union (EU-28) was the only major
economy to cut emissions more than California, but its real economic
output grew by only 8.8 percent.

"This year's Index tells a comprehensive but complex story of the
transition to a decarbonized economy," said F. Noel Perry, businessman
and founder of Next 10. "On the one hand, California is a world leader
in innovation and climate policy, which has resulted in strong economic
growth and emissions reductions. On the other hand, population growth,
oil prices and increased commutes are driving transportation emissions
up at a time when the federal government is attempting to curtail our
ability to control those emissions. As subnational, national and
international leaders gather in San Francisco, this Index
provides important data and impetus for increased collaboration across
state and national lines in the transition to a clean energy economy."

"Over the course of a decade, comprehensive, consistent policy in
California created market certainty. That drove investment and advanced
technology. California is third only to China and the U.S. as a whole in
attracting clean technology investment," said Adam Fowler, director of
research at Beacon
Economics
, the independent research and consulting firm that
compiled the Index for Next 10. "But progress doesn't always
follow a straight line. Both California and the U.S. have experienced
dips in VC investment and a decline in patent generation in the past
year, while some of our major economic competitors have seen increases.
Command of clean technology markets may well determine economic success
in the 21st century, so it's not a time to slow down."

Top global findings from the 2018 Index include:

  • Total global emissions rose by 15 percent between 2005 and 2015, led
    by China, India and Iran.
  • Globally, renewable energy generation increased 339 percent between
    2005 and 2015, led primarily by a massive boom in solar electricity as
    technologies improved while costs fell.
    • Solar generation increased globally by 6,327 percent, while wind
      power increased 701 percent.
    • China's solar generation increased by a whopping 61,049 percent,
      followed by India (29,584 percent), EU-28 (7,235 percent), and the
      U.S. (4,424 percent).
    • Solar generation increased by 2,571 percent in California, and
      wind energy generation increased 442 percent.
      • But for the first time in Index history, California
        experienced a decline in solar generation growth, with the new
        net energy metering solar installations down 10.5 percent from
        2016, signals that the industry may be maturing.
      • However, any slowdown is expected to be resolved in 2020 when
        a new mandate from the California Energy Commission requiring
        all new homes in California to have rooftop solar takes effect.

Clean technology innovation

  • Globally, clean tech investment increased 121.2 percent between 2007
    and 2017, with an annual investment of $7.78 billion in 2017.
    • California's global share has ranged from 46 percent to 18 percent
      depending on the year.
  • California is third only to China and the U.S. as a whole in clean
    technology investment rankings, generating more than $22 billion in
    clean technology venture capital investment from 2007 to 2017.
  • In 2017, $2.5 billion was invested in clean energy technology in the
    United States, with 57.2 percent ($1.4 billion) going to California
    companies.
    • Transportation technologies received the largest share [$610
      million in US; $459m in CA].
  • The U.S. (including California) was a global leader in clean tech
    patents in 2017, producing 29 percent of global patents.
    • The EU-28 produced 20 percent of global patents, followed by Japan
      (13 percent), South Korea (6 percent), California (5.4 percent)
      and China (4 percent).
  • Globally, the number of clean technology patents increased 243.8
    percent between 2007 and 2017.
    • The number of patents produced in California increased 342 percent
      in this period.
  • From 2016-2017, the world saw an 11.2 percent gain in clean tech
    patents, while both the U.S. and CA saw a decline.
    • EU-28, which ranks second globally for most clean tech patents,
      saw a surge of over 40 percent from 2016-2017, while Japan and
      South Korea (spots 3 and 4, respectively) declined.
    • California leads the nation in clean tech patents [18.6% ]
      followed by Texas [6.5%], New York [5.5%], Michigan [5.1%] and
      Massachusetts [4.2%].
  • China had the largest international improvement in energy productivity
    between 2005 and 2015, with a 48.7 percent gain, followed by the U.K.
    at 36 percent and India at 35.9 percent.
    • California improved its energy productivity by 23.4 percent during
      this time.

Highlights of California's clean economy

  • Between 2015 and 2016, California's total GHG emissions fell 2.7
    percent, primarily due to electricity generation GHG reductions.
    California ranks 18th among world's top 50 polluters
    [2015]. To meet the state's 2030 emission reduction goals, California
    will have to achieve just over 4 percent annual declines between
    2020-2030.
  • Per capita electricity consumption decreased 14.1% between 2005-2015
    in California, and 21.2 percent since 1990, despite the proliferation
    of electronic devices, a result of greater energy efficiency. National
    per capita consumption was down 9.5 percent since 1990.
  • From 2015 to 2016, total capacity for thermal energy storage systems
    and battery energy storage systems in California increased more than
    threefold, representing a major surge in storage growth.
  • Despite having one of the highest electricity rates per kilowatt hour,
    California's average monthly residential electricity bills were 15.4
    percent lower than the national average in 2016 due to decades of
    investment in energy efficiency and a temperate climate.

TRANSPORTATION: A CRITICAL CHALLENGE

"The data show a formidable challenge when it comes to reducing
emissions from the transportation sector. Cars are getting cleaner in
California, but transportation emissions still increased in 2016 because
there were more cars on the road, and more miles driven," commented
Perry. "California has been investing in solving that challenge for
years – building a strong industry around clean transportation that
could command the worldwide transportation market. The question is
whether the federal government gets in the way. Federal challenges to
California's authority to set vehicle emission standards pose not just
an emissions risk, but an economic risk as well."

Emissions Increase

  • In 2016, California's transportation sector accounted for 40.5 percent
    of the state's total greenhouse gas emissions — the highest percentage
    since 2006. On-road passenger vehicles accounted for 68.4 percent of
    the transportation sector's GHG emissions.
  • California's population grew 9.2 percent from 2006 to 2016, resulting
    in over three million more vehicles registered over the time period.
  • Vehicle miles traveled (VMT) reached a record high of 340 billion in
    2016. Lower oil prices and longer commutes due to rising housing costs
    are chiefly to blame.
  • Public transportation ridership fell for the second year in a row.
    Compared to 2016, total trips dropped 4.2 percent.
  • Emissions from light-duty vehicles shot up in 2016, as did emissions
    from heavy-duty trucks, while overall heavy-duty emissions were 13.1
    percent below 2008's level, due in part to cleaner buses.

California leads nation in cleaner vehicles; China leads the world

  • But it's not all bad news. For the first time in state history,
    conventional internal combustion engine vehicles fueled by gasoline
    and diesel accounted for less than 90 percent of all on-road vehicles
    registered in California in 2017.
  • California sold about 47 percent of all electric vehicles ever sold in
    the U.S. and the number of zero-emission vehicles (ZEVs) registered in
    California rose 38.6 percent between 2016-17.
    • China accounted for 49 percent of total ZEV sales [2017] – the
      most in the world, and double the number of ZEV sales in Europe,
      the next top adopter.

The annual California Green Innovation Index features a
wealth of data illuminating the intersection between climate change and
the economy. Other highlights include:

  • California's dependence on electricity from natural gas was down 18.3
    percent in 2016 compared to the previous year.
  • The carbon intensity (emissions relative to GDP) of the California
    economy continues to decline, with emissions of 0.165 MTCO2e
    per $1,000 of GDP generated in 2016, a 5.5 percent improvement
    compared to 2015 and a 23.6 percent improvement over 2006.
  • California is one of the least carbon-intensive states. California's
    emissions from fossil fuel consumption per dollar of GDP dropped by 42
    percent between 1990 and 2015.
  • In 2015, California generated $3.29 of GDP for every 10,000 British
    Thermal Units of energy consumed, while the rest of the U.S. generated
    $1.75 of economic output for the same amount of energy consumed.
  • Nationwide in 2017, electricity production from coal slipped by 3
    percent while renewable production (excluding conventional hydropower)
    increased 4.8 percent compared to 2016.
  • California's Renewable Portfolio Standard (RPS) began in 2002, and has
    served as an example for other states. In 2016, California had an RPS
    goal of 25 percent; it reached 25.5 percent of total electricity
    generation, up 3.6 percent compared to 2015. At this pace, California
    is poised to meet its 2020 RPS goal of 33 percent.
    • In 2017, all three investor-owned utilities were far ahead of the
      state's RPS goals. RPS generation was 33.7 percent, 33.9 percent,
      and 46.3 percent for PG&E, SCE, and SDG&E, respectively.
    • Twenty-nine states and Washington, D.C. now have RPS policies in
      place.
  • Wind generation remains the largest renewable energy source in
    California when including imports. Despite having one of the lowest
    average wind speeds compared to other states, California had the 18th
    highest share of electricity generated from wind in 2016.
    • In 2016, in-state electricity generation from wind totaled 13,499
      GWh, a 10.7 percent increase compared to 2015.
    • On the other hand, cumulative capacity decreased by 107 MW between
      2016 and 2017, bringing California's cumulative wind capacity down
      to 5,555 MW at the end of 2017.

About Next 10

Next
10
is an independent, nonpartisan organization that educates,
engages and empowers Californians to improve the state's future. With a
focus on the intersection of the economy, the environment, and quality
of life, Next 10 employs research from leading experts on complex state
issues and creates a portfolio of nonpartisan educational materials to
foster a deeper understanding of the critical issues affecting our state.

About Beacon Economics

Beacon
Economics
 is one of California's leading economic research
and consulting firms. Through its Sustainable Growth and Development
practice, Beacon partners with policymakers, communities, businesses,
and elected officials to data-drive discourse and decision-making
processes around sustainability, economic growth, and equity. Beacon
leverages its quantitative and qualitative competences as well as its
policy-related expertise to help clients translate their goals into
measurable metrics for success.

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