Economic Impact of California Greenhouse Gas Emissions Reduction Plan

Charles Edward Doering, Brandlin and Associates

Abstract

ABSTRACT The California Global Warming Solutions Act of 2006 requires greenhouse gas emissions to be reduced to 1990 levels by 2020, and designates the Air Resources Board as lead agency of the program. The agency developed a Scoping Plan outlining 40 measures mandating: (a) increased energy efficiency in vehicles, buildings and appliances, (b) greater reliance on renewable electric generation, (c) enhanced industry operational efficiencies, (d) methane capture, and (e) an emissions cap-and-trade program. The agency projects the measures to generate these benefits: (a) a positive net cost/benefit of $16.1 billion, (b) increased economic output of $33 billion, (c) gross state product growth of $7 billion, (d) greater personal income of $16 billion, and (e) creation of an additional 112,000 jobs. These impacts are inaccurate because they: • Don’t quantify environmental or public health benefits; • Incorrectly characterize the investment process and discount rate; • Exclude the full impact of cap-and-trade; • Improperly account for pre-existing California emissions reduction laws; • Potentially underestimate energy price forecasts; • Overstate consumer spending responses to energy cost savings; • Exclude future administration costs; and • Are unclear about the effects of pre-existing federal laws. A more accurate analysis of the Scoping Plan impacts is clearly needed.