Global warming law will boost California economy, study finds

But business groups are still concerned about the costs of the landmark emission caps.

When California made global headlines two years ago for a landmark law requiring a 25 percent cut in industrial greenhouse gases by 2020, some critics said the environmental advantages would be symbolic and net job losses significant.

Now, two studies released this week by the California Air Resources Board, the state body charged with overseeing the project, claim to show that implementing the emission-cutting measures under the pioneering law would actually benefit California’s economy and public health.

The economic analysis says implementing the regulations will increase economic production by $27 billion, overall gross state product by $4 billion, overall personal income by $14 billion, and per capita income by $200.

And the public health analysis concludes that programs under AB32 – also known as the California Global Warming Solutions Act of 2006 – will help eliminate 300 premature deaths statewide, avoid almost 9,000 incidents of asthma and lower respiratory symptoms, and avoid 53,000 workdays lost to illness.

“The facts are in. These reports support the conclusion that guiding California toward a clean energy future with reduced dependence on fossil fuels will grow our economy, improve public health, protect the environment, and create a more secure future built on clean and sustainable technologies,” said ARB chairman Mary Nichols on Wednesday.

The so-called Scoping Plan, which combines market-based regulatory approaches, other regulations, voluntary measures, and fees, will go to the board for adoption in November. Meanwhile, the agency is seeking public comment.

Key environmental groups such as the Sierra Club, Environmental Defense, and Natural Resources Defense Council generally agree with the findings, as do scientific bodies such as the Union of Concerned Scientists.

But business groups are skeptical. The California Manufacturers and Technology Association fears the economic models used in the studies could be faulty. The fiscal analysis ignores near-term costs and doesn’t account for the price of gas if it continues to go up, they say.

“This analysis is long on wishful thinking but short on economic reality,” says Dorothy Rothrock, spokeswoman for the California Manufacturers and Technology Association and co-chair of the AB32 Implementation Group, a 160-plus-member coalition dedicated to cost-effective execution of the climate-change law.

“There is no evaluation of the real-time costs that California businesses and consumers will pay up front,” she says. The analysis looked at costs and benefits over the plan’s 10-year time frame, she notes, without providing a year-by-year cash flow projection.

“Government can get away with deficit spending, but in the real world, families and businesses have to pay their bills every month or there are severe consequences,” says Shelly Sullivan, executive director of the AB32 Implementation Group. “We are looking at billions in increased electricity, natural gas, gasoline and fuel prices; billions in new carbon fees and water fees; higher building costs, rents and mortgages.... CARB assumes we can afford to pay for all this and wait for savings 12 years from now.”

Even those who broadly agree with the reports’ conclusions have caveats. The Union of Concerned Scientists’ Chris Bush says “the economic models they used did not proceed as smoothly as CARB hoped.” Sierra Club’s Bill Magavern worries that estimates of the price of gas – at $3.67 per gallon – could change and dramatically modify the report’s conclusions.

But neither go as far as Ms. Sullivan and Ms. Rothrock who worry that increased regulation and costs will result in business flight to other states or countries where less stringent laws would ensure an overall increase in pollution.

“Ironically, a California business could relocate to India or China where the mix of energy consumption includes coal which would pollute the atmosphere worse than if they stayed in California,” says Rothrock. The state’s industries are among the cleanest in the world because of strict regulations, she says.

Higher taxes, fuel and labor costs already means that doing business in California costs more than elsewhere in the US.