Warming Bill Jeopardizes Calif. Economy

Warming Bill Jeopardizes Calif. Economy
November 1, 2006

On September 27, California Gov. Arnold Schwarzenegger (R) signed A.B. 32, the "California Global Warming Solutions Act," after the bill was passed by the Democrat-controlled state legislature.

The bill aims to reduce California's greenhouse gas emissions, but analysts predict state residents will pay a high price for the gesture, which will have very little if any measurable effect on global temperatures.

A.B. 32 promises to reduce carbon emissions from sources within the state, and from certain sources outside. The act calls for limiting the state's emissions to 1990 levels by 2020, representing a 25 percent reduction from current levels.

Called Largely Symbolic

Critics of the bill, signed by the governor on September 9, note A.B. 32 is a costly, largely symbolic act that avoids more pressing environmental concerns.

"If California was sincere about improving public health and the environment, they would clean up their air instead of passing feel-good legislation to appease liberal special interest groups simply for political profit," observed Sen. James Inhofe (R-OK), chairman of the U.S. Senate Environment and Public Works Committee, Reuters reported on September 1.

Climatologists report the average global temperature is rising by less than 0.15 degrees Celsius per decade, which would amount to just 1.5 degrees of warming during the next century. Moreover, climatologists note that even if the entire world enacted and abided by the Kyoto Protocol, which applies more stringent carbon dioxide reductions than A.B. 32, temperatures would be mitigated by an almost unmeasurable 0.07 degrees over the next half-century.

Economy Likely to Suffer

The potentially major economic and social consequences of the new law explain why it became the most contentious issue of the legislative session's final week.

The guts of the bill--rolling back California's carbon dioxide emissions to 1990 levels by 2020--would require California industry to make immense investments in carbon dioxide control equipment. Many analysts wonder whether a sizable portion of California's industrial base will flee the state to neighboring Nevada or elsewhere rather than endure the anticipated financial punch of the new law.

"Farmers, dairies, and winemakers all warn that their narrow profit margins could disappear," observed the August 30 San Diego Union-Tribune. "Typical of many heavy industries around the state, owners of a cement plant in Mojave have already delayed plans for a $400 million expansion and are looking to move to Nevada."

Pseudo-Science at Work

Schwarzenegger and other advocates argued the bill will help the state's economy.

The state's Climate Action Team "determined that global warming reduction would increase income by more than $4 billion while providing 83,000 new jobs," John Doerr, founder of the Greentech Network, told Time magazine for a September 11 story.

Economic analysts and consumer advocates, however, call the new law a job killer.

"It doesn't take an economics professor to figure this one out," said Marlo Lewis, a senior fellow at the Washington, DC-based Competitive Enterprise Institute. "If businesses could make money in this industry, they wouldn't need the government to pass a law forcing them to do so."

"The pseudo-academic reports [claiming A.B. 32 will benefit a segment of the state's economy] don't assert that the export market for such emission-control technologies will be so lucrative they will lift the entire state's economy," noted the Union-Tribune. "They depend on the assumption that, voila, just like that, California will be able to come up with massive increases in energy efficiencies. Researchers here and everywhere have been hunting for such breakthroughs since the first oil price shock in 1973, and now they are supposed to come easy?"

Imported Power Targeted

A companion bill (S.B. 1368) will prevent utilities from entering into long-term contracts for electricity generation unless the plants comply with a greenhouse gas performance standard set by the state.

A tax would apply to power imports from other states not meeting the standard, further driving up costs and price volatility of electricity to Californians.

"This measure is fated to go the way of the California Air Resources Board vote in 1990," wrote columnist Debra Saunders in the September 3 San Francisco Chronicle. "Remember: By 1998, 2 percent of all cars sold in the state would have to produce zero-emissions--and the board looked even more serious by raising the bar to 10 percent by 2003. Newspapers lauded that bill as 'historic' and the 'toughest' in the nation, too, but you don't see a whole lot of electric cars on the road, do you?"

Thomas Tanton (ttanton@fastkat.com) is vice president and senior fellow at the Institute for Energy Research.

For more information ...

"Best 'fix' is a veto," San Diego Union-Tribune, August 30, 2006, http://www.signonsandiego.com/uniontrib/20060830/news_lz1ed30top.html

"Free lunch, free hot fudge sundaes," San Francisco Chronicle, September 3, 2006, http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2006/09/03/edg0sj79j41.dtl