Investors.com STEVEN MALANGA - Senior editor of City Journal, from which this essay was adapted.
"I just can't imagine any corporation in their right mind would decide to set up in California today."
Californians have long had the reputation of being more concerned about environmental issues than Americans in general. But for years that interest expressed itself in modest ideas about conservation and in efforts to mitigate problems like the smog that hovered over the state's cities. In the last 15 years or so, however, the green movement in California has lurched increasingly to the left — touting no-growth initiatives that make it more expensive to create jobs, housing and infrastructure in California — even as environmentalists have gained political power in the state.
Key to the rise has been vast sums of money poured into the cause by a relatively small circle of extremely rich Californians, whose fortunes were made in so-called "clean" industries like technology and finance, and who largely constitute what the press often simply refers to as the state's "environmental movement."
With billions of dollars at their disposal, these rich greens fund hundreds of local environmental groups, lure environmentalists from elsewhere to pursue the cause in the Golden State, and spend heavily to pass green ballot initiatives and elect politicians whose agendas revolve around environmentalism. These California true believers are also intent on using their vast resources to promote their vision of environmentalism to the rest of the country. Call it the Californication of the green movement.
Intel co-founder Gordon Moore and his wife set up the Palo Alto-based Moore Foundation in 2000, staking it with $5 billion. Moore initially targeted some of his green philanthropy at conservation, an interest that he had developed as a recreational fisherman. But he has veered toward anti-growth environmentalism, channeling huge amounts of money to nonprofits and trusts so that they can buy up land in Northern California and freeze future development. Moore has also spent money on green politics, including $1 million on the 2010 campaign to thwart Proposition 23, a pro-growth initiative supported by a coalition of blue-collar unions, small businesses, manufacturers and big energy companies.
Just minutes from Moore's foundation in Palo Alto is the charity that Google executive Eric Schmidt and his wife, Wendy, founded: the $300 million Schmidt Foundation. The Schmidts have been large funders of major California environmentalist players like the Energy Foundation, but through their 11th Hour project, they also back smaller local environmental efforts, including anti-fracking research and campaigns to ban or restrict oil and gas exploration.
The most visible of California's rich environmentalists is Tom Steyer, who led the anti-Prop. 23 effort and seeded it with $5 million of his own money. Steyer made headlines in 2014 by pledging to invest $100 million in congressional campaigns in seven states, seeking to influence federal climate policy. Operating out of his 1,800-acre ranch in Pescadero, he and his wife have also pumped money into the TomKat Charitable Trust, based in San Francisco, which focuses on giving to "organizations that envision a world with climate stability, a healthy and just food system, and broad prosperity."
The heirs of William Hewlett and David Packard have pushed the two foundations they established ever leftward, and activist environmentalism is a prime beneficiary. In a signature moment in green giving, the Packard and Hewlett foundations decided in 2007 to boost their spending on climate-change issues, funneling the money into a new, San Francisco-based nonprofit, ClimateWorks, led initially by the former head of environmental programs at Hewlett. The Hewlett Foundation agreed to put $500 million into ClimateWorks, with the Packard Foundation adding approximately $390 million since 2008.
Two other major California funders have joined Packard and Hewlett in the climate-change cause: the Energy Foundation, a San Francisco nonprofit that bundles smaller contributions into large environmental grants; and the San Francisco-based Sea Change Foundation, created by Nathaniel Simons, son of the enormously successful New York hedge-fund manager Jim Simons of Renaissance Technologies. The younger Simons operates his own fund, Meritage, based in San Francisco, and has been described by Inside Philanthropy as the "quiet hedge fund manager engaged in massive climate giving."
Green causes increasingly dominate California's individual political races, too. Their takeover advanced decisively in 1996, when a green-activist group, Vote the Coast, targeted a handful of state assembly seats in wealthier coastal areas and helped get seven environmentally oriented Democratic candidates elected. That effort tipped the assembly to the Democrats and created an environmental caucus in the lower house. The new assembly majority proceeded to fill the state's environmental bureaucracies with left-environmentalists, making those bodies much more likely to side with greens against businesses and landowners in any disputes.
The Coastal Commission — originally created to oversee coastal development in California — has relentlessly extended its reach over the property of individuals and businesses, often refusing to let owners build or rebuild structures, and even objecting to the type of beach furniture that homeowners use. The commission's radical character was captured in the title of a 2014 speech by one of its retiring Democratic-appointed commissioners: "In Defense of Unreasonableness — Saving the California Coast."
California politics is likely to grow greener still. After spending millions across the country in the 2014 election cycle, Steyer plans to bring his environmentalist giving back to the Golden State. He also may be considering a run for office — probably the governorship — in 2018. If so, environmentalism will be the No. 1 theme of his self-funded campaign. "The fight for justice starts with climate," he recently observed. If the past is any guide, a Steyer governorship would be exceedingly costly to California businesses. In 2012, he spent $30 million of his own money on a successful initiative to hike taxes by $1 billion on out-of-state firms operating in California, with half of the revenues from the tax going to projects that promote conservation and renewable energy.
California consistently ranks dead last as a place to do business in Chief Executive's annual survey of company executives. Environmental policy plays a huge role in the difficulties of operating in the state. A 2014 study by Pepperdine University's Michael Shires found that, thanks in part to the costs of California's global-warming law and other regulations, manufacturers in the state must pay 40% above the national average for electricity.
Even green firms are looking elsewhere. Be Green Packaging, a Santa Barbara recycling company, recently built a manufacturing plant in South Carolina; Biocentric Energy Holdings, a Santa Ana energy company, moved to Salt Lake City in 2011; and Bing Energy, a fuel-cell maker, relocated to Florida in 2011. "I just can't imagine any corporation in their right mind would decide to set up in California today," the company's CFO said.
California's greens are increasingly pushing their radical environmental agenda in other states. In 2012, for instance, a group of green funders, powered by California money, helped push on to Michigan's ballot the Michigan Renewable Energy Amendment, known as Proposal 3, the aim of which was to require that at least 25% of the state's energy come from renewable sources by 2025. The face of Prop. 3 was a local group — Michigan Energy, Michigan Jobs — with a $4 million campaign purse, according to state campaign records. But most of that money ($3.3 million) came from a San Francisco entity, the Green Tech Action Fund. Notwithstanding the huge influx of outside money, Prop. 3 went down to defeat, earning just 38% of the Michigan vote.
Most Americans have yet to embrace the anti-growth environmentalism preached by the green activists. But California is different, thanks to the power of its green movement, fueled by billions of dollars earned in America's pro-growth free markets.
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