In 2006 the Legislature and Gov. Arnold Schwarzenegger enacted the California Global Warming Solutions Act. The objective of the act was to reduce greenhouse gas emissions in California to 1990 levels by 2020 and further reduce emissions by 80 percent of 1990 levels by 2050. The California Air Resources Board is charged with implementing the regulations.
The board intends to achieve these dramatic reductions with a cap-and-trade carbon market system that includes an overall limit on greenhouse gases from capped sources. When the board began writing its regulations in 2008, most in the business community assumed Assembly Bill 32 was a done deal, and the focus was on how the law would be implemented and whether it would actually create green jobs in California or cost jobs.
But much has happened in the past two years, and now the economic impact of AB 32 is front and center. A ballot measure, Proposition 23, would suspend the global warming law until California’s unemployment is 5.5 percent or less for four consecutive quarters. The last time this occurred was May 2004 through December 2007. In June this year, unemployment was 12.3 percent.
So this November voters will make a historic choice: Is global warming such a threat that California needs this law despite our weak economy, or is the economic threat to the state so great that AB 32 ought to be set aside for a while. The issue will turn on jobs and the economy.
Since 2006 California’s unemployment has soared. The nation and the world are in a major economic recession, and that has caused the huge state budget crisis. Suddenly, fighting global warming has taken a back seat to employment.
At the same time, the consensus that global warming is a brewing international crisis has taken a beating. Proposition 23 sponsors argue that the global warming consensus is much less settled than it seemed four years ago. In fact, the term global warming has fallen from favor; now it’s called global “climate change.”
In 2009 researchers studying climate change at a major British university were accused of trying to cover up dissent from the global warming consensus. A United Nations report on climate change was riddled with errors. The 2009 Copenhagen global warming conference that was supposed to bring nations together to fight greenhouse gases all but collapsed. Critics claim the European cap-and-trade system is rampant with corruption, and the U.S. Congress refused to pass an American cap-and-trade law.
Most ominous for the global warming consensus: The globe doesn’t seem that warm. In 2009 Europe experienced its coldest winter in 50 years. This coincided with the Copenhagen global warming conference where delegates nearly froze waiting to enter the convention hall. The arctic winter was the coldest since 1957, freezing many rivers and channels, and severe cold was noted from Asia to North America.
Is the problem so great that California needs its own global warming policy? According to Schwarzenegger’s own Climate Change Portal, California produces 1.4 percent of the world’s greenhouse gases and 6.2 percent of the country’s. And those percentages may be falling. According to the National Greenhouse Gas Inventory, U.S. greenhouse gas emission fell by 2.9 percent in 2008. This is because of a decrease in carbon dioxide emissions in transportation fuels, suggesting that more efficient fuels may actually be the solution to greenhouse gases, not cap-and-trade carbon markets.
Opponents of the law will also focus on the economic impacts of AB 32. Perhaps the best argument for suspending the law comes from the California Air Resources Board’s economic impact analysis. In March 2010 the board issued its “Updated Economic Analysis of California’s Climate Change Scoping Plan” showing that AB 32 would add some 10,000 jobs over the next decade. That came as a shock to AB 32 backers as the initial scoping plan predicted AB 32 would add 120,000 jobs by 2020. Ten thousand jobs would amount to a .000542 percentage increase in the state’s work force, not much to boast about.
More bad news came in the form of an independent study by Charles River Associates using Air Resources Board data showing AB 32 could increase California electricity prices by as much as one-third and gasoline prices by as much as 50 percent. The Charles River analysis also found AB 32 would reduce incomes annually by $200 to $500 a person by 2020. And the California Legislative Analyst’s Office noted in its analysis that “the aggregate net jobs impact in the near term is likely to be negative.”
None of these analyses were done by interests hostile to AB 32, but they suggest the promise of “green jobs” because of AB 32 is greatly overstated. One study touted by AB 32 proponents finds that green jobs increased from 117,000 in 1995 to 159,000 in 2008. But that’s only about 1 percent of California’s total employment. AB 32’s positive jobs impact and green jobs themselves seem rather miniscule in a state labor force of more than 18 million people.
What about the negative jobs impact? Studies hostile to AB 32 have predicted big job losses. But one of the best findings comes from Dr. Bill Watkins, Joel Kotkin and Zina Klapper, titled “The Truth about Green Jobs and California.” They write: “It’s time for California to get real about the impact on jobs and the economy of green job policies. Let’s acknowledge that there will be winners and losers, and that the net effect of green jobs may be negative for the economy.”
We may actually be seeing the negative effect of AB 32 already. Its passage in 2006 and the probability of billions in new costs to achieve the cuts seem to be having a negative impact right now. Census data from Site Selection magazine shows that California is dead last among industrial states in new or expanded facilities per million residents, with just 3.7 new facilities from 2007 to 2009. Compare that with 24.5 new and expanded facilities in Texas per million residents, and 106 in Missouri, 91 in Kentucky and 89 in Tennessee.
There is no question that AB 32 is frightening off the investments needed to pull California out of its economic doldrums — and that’s before the board puts its regulations into place. Clearly, California’s 12-percent-plus unemployment rate did not happen by chance.
So when the voters confront the impacts of AB 32 this fall, they may want to ask: Why are we doing this to ourselves?
AB 32 could increase California electricity prices by as much as one-third and gasoline prices by as much as 50 percent.
For years, the debate over climate change centered almost exclusively on science: Is global warming occurring, and if so, are humans causing it? But with the economy still struggling, the argument has shifted to one of dollars and cents.
If there is one thing a business owner hates, it is uncertainty. Planning for the future — or even managing the present — cannot effectively happen unless the person signing the checks knows the rules of the game. But when it comes to California’s efforts to reduce greenhouse gas emissions, uncertainty is about the only thing employers can count on right now.