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Guys like Elon Musk and Larry Ellison like to talk a lot of smack about California.
And while criticisms of overzealous regulation and high taxation are credible, I still love the Golden State.
In fact, I was in the Bay Area last weekend and loved every second of it…
The food, the people, the tremendous views of golden-hour sunsets over the ocean.
California is a magical place. It’s also an incredibly powerful state.
Boasting a GDP of $3.35 trillion, it’s the fifth-largest economy in the world. That means it's bigger than India, France, and even the U.K. This is not trivial.
Now, one of the reasons California’s economy is so large is because it’s so well-diversified, encompassing everything from media, entertainment, and tourism to technology, agriculture, and education.
And while there have been some high-profile entrepreneurs recently leaving California for what they call more “business-friendly” environments in Texas and Florida, the influence of California’s massive economy remains strong.
This is particularly true in the case of clean energy adoption and climate change mitigation strategies, where California has long been a leader.
Under the umbrella of the state’s California Air Resources Board (CARB), which is a sort of “clean air agency” that was established under Ronald Reagan while he was governor, California has been instituting a variety of programs and legislation that puts the state in the pole position of trillion-dollar economies transitioning to a cleaner energy economy.
Here are a few examples:
- The Greenhouse Gas Emission Reduction bill, which required California to reduce its overall greenhouse gas emissions to 1990 levels by 2020 and 40% below 1990 levels by 2030, appointing CARB to develop policies (ultimately including the state’s cap-and-trade program) to achieve this goal
- Renewable Energy Procurement bill, which requires the state to procure 60% of all electricity from renewable sources by 2030 and 100% from carbon-free sources by 2045, double the energy efficiency of existing buildings, and allow greater electric utility investment in electric vehicle charging infrastructure
- Sustainable Transportation Planning bill, which set regional greenhouse gas emission reduction targets for passenger vehicles and requires agencies to assess and mitigate the vehicle miles traveled (VMT) impacts of new developments
- Energy Storage bill, which requires electric utilities to install minimum levels of grid-scale energy storage infrastructure
- Electric Vehicle Charging bill, which requires local governments to develop streamlined ordinances for electric vehicle charging infrastructure.
- Advanced Clean Cars Program, which was designed to reduce greenhouse gas and smog-causing emissions from California cars, including vehicle performance standards and manufacturer requirements
- Green Building Standard program, which was designed to reduce the energy use of California buildings, including energy efficiency standards for new construction and retrofits for existing buildings
- Low Carbon Fuel Standard program, which requires transportation fuel producers to reduce the greenhouse gas emissions intensity of their products, from extraction to refining and end use
- Renewables Portfolio Standard, which is a statewide requirement that electricity providers procure 33% of energy from renewable sources by 2020 and 60% of total electricity by 2030. It's worth noting that the state exceeded its 2020 goal after data showed that 59% of the state’s electricity came from renewable and zero-carbon sources in 2020.
Now, I understand that some folks don’t think much of these types of programs and laws that seek to address climate change.
And that’s fine.
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To be honest, I really don’t care what your thoughts are on climate change-related laws and mandates because I’m not here to convince you to hug trees or recycle. I’m here to convince you that if you play it right, you can make a lot of money by investing in the companies that are going to benefit from California’s very aggressive clean energy and climate change laws — especially now that some of those laws are about to get even more aggressive.
You see, in an effort to counter the Supreme Court's recent decision to restrict the EPA’s ability to regulate greenhouse gas emissions, California is now making moves to become carbon neutral by 2035 — which is 10 years ahead of the state’s current target. And some have suggested that the state may also try to reach its 100% clean energy portfolio by 2030, which would be five years ahead of schedule.
A lofty goal, to be sure, but not impossible to reach.
In fact, earlier this year, on May 8, California produced enough renewable electricity to meet 103% of consumer demand.
So much renewable electricity was generated that day that the California Independent System Operator even exported some of it to other western states.
Still, in order to speed up the state's renewable energy goals, it will need to build solar and wind projects three times faster than they’re being built now, and battery storage projects need to be built eight times faster.
I’m not fully convinced that the state will be able to pull this off, but I do know enough about California’s aggressive climate change mitigation strategies to understand that those leading the charge here are going to make a very serious effort. This, of course, will result in certain renewable energy projects and technologies getting a very serious shot of steroids.
Translation: Savvy investors are about to make a ton of cash.
Might as well be you, right?
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