Wednesday, February 04, 2009

California’s Green Plan

The cost of California’s "leadership" in global-warming reduction is examined—and commented on by a local legislator—in this article.

It is significant that many of the scientists asked to critique the study claim the costs have been underestimated and the benefits overestimated and if that is true, this could very possibly be extremely bad news for our already struggling economy.

An excerpt.

“Gov. Arnold Schwarzenegger was all smiles in 2006 when he signed into law the toughest anti-global-warming regulations of any state. Mr. Schwarzenegger and his green supporters boasted that the regulations would steer California into a prosperous era of green jobs, renewable energy, and technological leadership. Instead, since 2007 -- in anticipation of the new mandates -- California has led the nation in job losses.

“The regulations created a cap-and-trade system, similar to proposed federal global-warming measures, by limiting the CO2 that utilities, trucking companies and other businesses can emit, and imposed steep new taxes on companies that exceed the caps. Since energy is an input in everything that's produced, this will raise the cost of production inside California's borders.

“Now, as the Golden State prepares to implement this regulatory scheme, employers are howling. It's become clear to nearly everyone that the plan's backers have underestimated its negative impact and exaggerated the benefits. "We've been sold a false bill of goods," is how Republican Assemblyman Roger Niello, who has been the GOP's point man on environmental issues in the legislature, put it to me.

“The environmental plan was built on the notion that imposing some $23 billion of new taxes and fees on households (through higher electricity bills) and employers will cost the economy nothing, while also reducing greenhouse gases. Almost no one believes that anymore except for the five members of the California Air Resources Board (CARB). This is the state's air-quality regulator, which voted unanimously in December to stick with the cap-and-trade system despite the recession. CARB justified its go-ahead by issuing what almost all experts agree is a rigged study on the economic impact of the cap-and-trade system. The study concludes that the plan "will not only significantly reduce California's greenhouse gas emissions, but will also have a net positive effect on California's economic growth through 2020."

“This finding elicited a chorus of hallelujahs from environmental groups. The state finally discovered a do-good policy that pays for itself. Californians can still scurry around in their cars, heat up their Jacuzzis, and help save the planet. But there was a problem. The CARB had commissioned five economists from around the country to critique this study. They panned it.

“Harvard's Robert Stavins, chairman of the federal Environmental Protection Agency's economic advisory committee under Bill Clinton, told me that "None of us knew who the other reviewers were, but we all came up with almost the same conclusion. The report was severely flawed and systematically underestimated costs." Another reviewer, UCLA Prof. Matthew E. Kahn, a supporter of the new regulations, criticized the "free lunch" aspect of the report. "The net dollar costs of each of these regulations is likely to be much larger than is reported," he concluded. Mr. Stavins points out that if these regulations are a net boon for businesses and the economy, "why would you need to impose regulations like cap and trade?"