Those budget deficits have eased, but as bad as they were, California's government has long had a bigger, longer-term problem, one that has its own impact on the state's economy: its polluted air and accompanying health effects. The state's efforts to transition to an economy based on low-carbon energy could provide valuable lessons for other regions dealing with these interlocking issues.
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California certainly has had plenty to deal with on the environmental side. Despite decades-long efforts, as of 2012 the state still was home to five of the country's 10 worst air-quality regions, all of them exceeding federal standards related to ozone, nitrous oxides, sulfur dioxides, particulate matter and carbon monoxide. Energy to power the state's transportation system was coming almost exclusively from high-intensity carbon fuels -- gasoline and diesel-- that were the major sources of its air pollution.
In 2006, recognizing the environmental impacts of greenhouse-gas emissions, state leaders enacted Assembly Bill 32, the Global Warming Solutions Act, which included a transportation-focused low-carbon fuel standard. The intention was to place California on a carbon diet that would drive down air pollution while mitigating climate change.
An early challenge to this strategy came in 2010, when, faced with the country's most stringent low-carbon energy standards, business interests placed Proposition 23 on the ballot. Entitled the "California Jobs Initiative," it would have suspended AB 32 until the state's unemployment rate dropped to 5.5 percent for four consecutive quarters. Despite proposition proponents' claims that AB 32 would kill job recovery, the ballot measure went down to defeat by a remarkable margin of 23 percent. In effect, California voters decided that by backing clean energy they could support the economy and the environment at the same time.
Today AB 32 is one of the state's best-known environmental laws, but it is just one part of a wide range of regulation designed to transition California to a low-carbon economy. A remarkable policy and regulatory framework is now in place across a variety of spheres, from building codes, energy-efficient appliance standards and bioenergy production to low-carbon transportation fuels and incentives for electric-vehicle purchases and rooftop solar installations.
There are many signs of success, not the least of which is the state's 7.5 percent job-growth rate over the past three years, ranking California sixth out of the 50 states. Nevertheless, the jury is still out as to whether California, as a proving ground for a new-energy economy, will experience success or failure over the long term.
A look back into the state's history may provide encouragement to stay the course. California, as a state, was created on the heels of the Gold Rush and its 49ers. Yet today there is no significant commercial gold mining in California. Why? Well, gold mining didn't end because California ran out of gold.
Between 1860 and 1880, large companies using hydraulic mining extracted millions upon millions of dollars worth of gold. They also devastated the landscape and clogged rivers with sediment that washed downstream, flooding farmlands and ruining crops. After a court ruling ended hydraulic mining in 1884, agriculture took over as the main driver of the California economy -- an early example of supporting the environment on which the broader economy depends.
Today, one thing is certainly clear: In working to build an economy built on a sustainable environment, California is engaged in a wide-ranging, long-term experiment that could serve as a blueprint for other states. After all, as the novelist and historian Wallace Stegner put it, California "is like the rest of America … only more so. " Perhaps America's fossil-fuel economy will end before we run out of fossil fuel. Stay tuned.
