Global warming law won't hurt California economy -- Really?

Russ Steele

The Sac Bee has the story here:

Responding to forecasts of devastating job losses, top state officials said Wednesday that California's historic global-warming law will do minimal harm to the state's economy and will result in modest job growth.

The California Air Resources Board released a long-awaited analysis that says AB 32, which requires substantial reductions in greenhouse-gas emissions, won't inhibit economic growth and will even add 10,000 jobs when the law fully takes effect in 2020.

The Bee Article Continues

The ARB's own study is itself a rewrite of an analysis that had been deemed by some as half-baked.

The agency's first analysis, released a year and a half ago, said the law would boost economic output 0.3 percent in 2020, when most of its provisions fully kick in and greenhouse-gas emissions are supposed to fall 15 percent. That study was criticized in some quarters for being too rosy; the Legislative Analyst's Office called it "inconsistent and incomplete."

The new study is somewhat less optimistic, but not by much. It says economic output will fall 0.2 percent in 2020, yet the state will actually create 10,000 more jobs than it would have without AB 32.

Here is what the study group had to say about the study in an Appendix. My comments are in brackets [ ]

• First, considerable uncertainties surround any projection of future economic costs (or benefits). [ Admission by CARB and the Study Group they really do not know what they are doing. ]

•  Second, while the analysis considered a range of scenarios, a general result emerging from the ARB's analysis is that the impact of AB 32 on the California economy will be modest relative to the overall California economy. [ The results depend on the input assumptions and there assumptions produced a positive result, other assumptions could different results.]

•  Third, as the report indicates, the impacts on individual sectors can differ significantly. Some sectors likely will experience increases in economic activity levels, while others might experience declines in economic activity relative to the reference case. [ Some business will be hurt, especially those that rely on automobile travel.]

• Fourth, we appreciate the report's serious attempt to make use of available data and the detail with which it considers various energy technologies.  [ All the data need to do a robust analysis was not available. ]

•  Fifth, we would point out some general limitations in the ARB's analysis.

1. The ARB's analysis does not capture some important elements related to the overall impact of AB 32. [ They did a lot of guessing. ]
2.  The ARB report (as well as some similar analyses) focuses on the economic impacts of AB 32 within California. It does not address the important question of the environmental and economic impacts outside of California.  ....as indicated in Section 3 below, some specific impacts of AB 32 are highly sensitive to input and modeling assumptions. [Garbage in -- Garbage out]
3. The ARB study of economic impacts focuses on the year 2020. This is therefore not necessarily reflective of the impacts for 2015, let alone 2012. [ They really have no idea what the real impacts are.]
4. The ARB's modeling does not consider alternative ways of allocating emissions allowances or the potential implications of alternative ways to return allowance value. [ Yea, as they point out these alternative "can have very significant impacts on the overall cost of AB 32 as well as the distribution of this cost across various households and businesses."  In other words if they did not use CARB's rosy numbers the cost could be much greater.]

Plus this admission:

Each of the models employed by the ARB was only partly suited to addressing the economic impacts of AB 32. [ As the Legislative Analysis Office pointed out these model are not suited for forecasting job loss or growth.]

Suggested changes to the models:

•  Updating the forecast to reflect recent economic trends and forecasts. [ California economy is in a hole and the go go growth rates in the CARB numbers distorted the analysis.]

•  Re-examining the transportation demand forecasts. [ The transportation demand forecast was based on a real increase in personal income of 2.9% per year to 2030. Highly unrealistic given the economic hole California is currently in.]

• Integrating expected age structure changes into the forecast methodologies.  [Boomer's will be retiring and older folks drive less. This should be taken into account.]

An out of this stone soup all they could only come up with was "modest job growth." Give me a break!  The whole mess is based on assumptions that were shown to be flawed by the very folks who did the study!   This fact did not appear in the Bee headlines.  Go figure!

Call me at 273-8085 if you would like to sign the AB32 California Jobs Initiative Petition. Here is link to the Appendix: Download 2010-03-23_EAAC_REPORT_Appendix.