The distance between California's growing budget problems and California's ambitious environmental protection agenda continues to increase.

The consequences of the state's chronic budget deficit – currently $20 billion per year or more with no end in sight – continue to chew up everything and everybody in its path: local governments, transit agencies, the prison system, welfare recipients, school districts.

Everything, that is, except an aggressive new generation of laws and regulations aimed at taking California's environmental protection efforts to a new level. Even as government services and payments are being cut left and right, the state and its agencies are moving forward with implementing AB 32, the greenhouse gas emissions reduction law, and all of its offspring (including SB 375, the regional planning bill). These measures will affect not only land use patterns, as these pages often describe, but they will also force a big ramping up of efforts to cut electricity usage.

Meanwhile, regional water quality control boards around the state are moving forward with a new generation of much tougher permits focused on "nonpoint source pollution" – meaning, in simpler terms, stormwater runoff. For all the hullabaloo about AB 32 and SB 375, the new stormwater permits – recently adopted in both Orange County and the Los Angeles-Ventura region – may have a more immediate on-the-ground impact on how planning and development functions in the state.

And the weird thing is, hardly anybody is talking about the budget and the environment together. Yes, some land use nerds have pointed out that it's going to be tougher to hit the greenhouse gas emissions reduction targets if the state cuts funding for public transit. And some conservative activists are pushing for a suspension of AB 32 while the economy is lousy. But that's it. The state's budget crisis continues to decimate our government structure. Meanwhile, on another planet, the state's environmental regulators push forward aggressively.

There are understandable political reasons for this disconnect. Whereas the state's financial problems seem intractable, movement on environmental regulation does not. The Democrats who control the legislature are perfectly willing to move forward with new environmental regulation even in bad times. And the moderate Republican in the governor's chair understands that environmentalism is good politics in California, even in bad times.

Yet it's amazing how real and persistent this disconnect is. I was struck by it during the recent UCLA Extension Land Use Law and Planning Conference, the premiere land use event in Southern California each year. The legislative review – pulled off with great energy and competence by Peter Detwiler of the Senate Local Government Committee and Bill Abbott of Abbott & Kindermann – was littered with discussions of the state budget crisis and how it is affecting land use. The subsequent panel on stormwater regulations – which featured an acrimonious back-and-forth between developers and environmentalists – appeared to be taking place on a completely different planet.

Maybe the thing to do is to separate out the environmental protection efforts that can actually help the economy from those that might hurt it, at least in the short run, and see what lessons may be learned for applying the carrots and sticks at the state's disposal.

Although environmental protection is often airily advertised as a matter of making different personal choices or forcing corporations to be more responsible, the down-and-dirty fact is that it's mostly a matter of capital investment. Removing pollutants from smokestacks means you have to install scrubbers. Capturing wind or solar energy means you to have to build and install turbines or solar panels. Reducing overall energy consumption means a whole variety of capital investments, ranging from weatherization to replacing old HVAC systems. Reducing water use means installing drip irrigation – not too hard for the average homeowner, but an enormous cost for the average farmer. Reducing polluted stormwater runoff means building greener stormwater facilities, such as bioswales instead of culverts.

Inevitably, a lot of these capital investments will be made over the course of time. Smokestacks will be replaced, as will irrigation systems, stormwater systems and HVAC systems.

The trick to both environmental protection and economic prosperity is to use both the sticks and the carrots government has available to drive those capital investments in a certain direction on a certain timeline. An aggressive regulation may force technological innovation by requiring that new capital investments, in fact, be greener than old ones. Oftentimes, however, that's not enough, because the payback period on green capital investments may be so long. So low-cost financing programs – from the government or water purveyors or electrical utilities – might also be necessary to bridge the gap.

California is actually pretty good at lining up the incentives and penalties to get this kind of capital investment in certain areas, especially energy efficiency. Take, for example, the energy efficiency financing programs being created under AB 811. Under the provisions of AB 811, local governments can create Mello-Roos-style districts that will help provide low-cost, long-term financing for homeowners who wish to green their homes through solar panels or HVAC upgrades. The AB 811 method has succeeded in places as diverse as Berkeley and Palm Desert and is moving to new locations fast. It wouldn't work without the government carrot of low-cost financing (assuming anybody will buy the AB 811 bonds, but that's another story), but it also wouldn't be moving as fast if it were not for California's climate change bill, which essentially forces reductions in energy consumption. 

Now, contrast this experience with the implementation of the new stormwater permits in Orange, Los Angeles, and Ventura counties. The regional water quality control boards are tightening the screws, and the local governments and developers are scrambling to figure out how to pay for the increased regulation. A familiar scenario is emerging: Regulators push the problem onto developers, who try to push the problem onto the local governments, who try to push the problem onto the taxpayers, who are wondering why the developers aren't footing the bill.

The problem here is that water quality, unlike energy efficiency, is a completely stick-based system without a single carrot in sight. On the energy efficiency front, there is also a tough regulator – the California Air Resources Board. But there are also other government agencies, principally the California Public Utilities Commission and the California Energy Commission, that are accustomed to dealing with the problem of the long payback period for capital investments that improve the environment. Maybe it's time the state began to line up carrots and sticks on water quality, as well as on other land use-related environmental issues. The savings in lawyer costs alone ought to be enough to pay off the bonds.