Industry funded studies, including the Charles River Associates study, do not include the benefits of energy savings but do include the costs of becoming more energy efficient. For instance, they charge California consumers for the cost of buying a more fuel-efficient car without giving them the fuel savings that car would generate.
Throughout the process of completing the upcoming CARB economic analysis, the Economic and Allocation Advisory Committee (EAAC), an independent group of economic, financial, and policy experts appointed by the Governor, has guided and offered independent critiques of CARB's work product. More information on the EAAC and its members can be found here: http://www.climatechange.ca.gov/eaac/
Meanwhile, the findings of a single, discredited industry-funded report (by Prof. Sanjay Varshney), which falls outside of the range of all other economic analyses of AB 32, is facing yet another round of criticism. The latest critique of the Varshney study comes from the bipartisan Legislative Analysts Office (LAO). The LAO found that Varshney's analysis contains "major problems involving ... data, methodology and analysis." The LAO further found that the study findings were "unreliable" because the study failed to account for the measurable savings associated with energy efficiency. Read more about the LAO critique here: http://www.lao.ca.gov/laoapp/PubDetails.aspx?id=2240
Additional critique of the Varshney report from top economists and academics can be found here: http://www.ca-greenbizalliance.com/wp-content/uploads/2010/03/CA-BAGE_Experts-Discredit-Small-Business-Studies.pdf
ECONOMIC ANALYSES OF AB 32 IMPLEMENTATION
Climate Policy and Economic Growth in California:
A Comparative Analysis of Different Economic Impact Projections
By Dr. Chris Busch, Center for Resource Solutions
December 2009
Summary: A comprehensive review of the peer-reviewed economic analyses of AB 32.
Key Findings:
- The results of CARB's macroeconomic modeling efforts to date fall within the mainstream of results of macroeconomic analyses, which yield a broad consensus that climate solutions are affordable and economic growth will be robust at the same time that pollution reductions of the magnitude called for by AB 32 are achieved.
- It is notable that all macroeconomic modeling shows continued strong economic growth even as most of the benefits of climate solutions are typically left out of the models.
- The Varshney study results are so exaggerated in part because the author ignores the value of energy saved.
Energy Efficiency, Innovation, and Job Creation in California
By David Roland-Holst, UC Berkeley, produced for Next 10
October 2008
Summary: This study examines the economic effects of the state's landmark efficiency policies since the 1970s, and forecasts the economic effects of significantly more ambitious policies proposed to reduce emissions to 1990 levels by 2020.
Key Facts:
- Since the 1970s, California's building and appliance standards saved California consumers over $56 billion in energy costs, while creating 1.5 million jobs with a total payroll of over $45 billion.
- Accounting for the potential for innovation, the proposed package of AB 32 policies could increase the Gross State Product (GSP) by about $76 billion, increasing real household incomes by up to $48 billion and creating as many as 403,000 new efficiency and climate action driven jobs.
Program on Technology Innovation:
Economic Analysis of California Climate Initiatives: An Integrated Approach
By Charles River Associates
December 2007
Summary: California's climate policy goals would create minimal overall costs to the state's economy and a cap-and-trade program would lessen those costs.
The Economic Impact of AB 32 on California Small Businesses
By The Brattle Group, produced for the Union of Concerned Scientists
December 2009
Summary: AB 32's economic impact on small businesses will be small and manageable.
Key Facts:
- The average small business in California spends only 1.4 percent of its revenues on energy-related costs, like electricity, natural gas, and transportation fuel. Since most small businesses will not be directly regulated by California's global warming policies, these policies will only impact them indirectly to the extent that they cause energy prices to change.
- California's global warming policies will only increase the percent of revenue that small businesses spend on energy by 0.3 percentage points—increasing the share of revenues dedicated to energy costs from 1.4 percent to 1.7 percent in 2020.
- To put these costs into perspective, a typical dinner at The Border Grill (the restaurant used as a case study in this analysis) would see a less than 3-cent increase on a $20 dinner tab in the year 2020.
ECONOMIC ANALYSES OF DELAYING AB 32 IMPLEMENTATION
Energy Prices & California's Economic Security
By Professor David Roland-Holst, UC Berkeley, produced for Next 10
October 2009
Summary: University of California researchers examine the economic impacts of putting the state's climate program on hold. If California remains primarily dependent upon fossil fuels, electricity costs could escalate by as much as 33 percent.
Key Facts:
- The state risks losing over $80 billion in Gross State Product (GSP) and more than a half million jobs by 2020 if it fails to implement AB 32.
- Implementing a 33 percent renewable energy standard, combined with 1 percent annual improvement in energy efficiency increases GSP by $20 billion and generates 112,000 jobs.
LAO's analysis of proposed initiative to suspend AB 32
By the Legislative Analyst's Office
January 2010
Summary: Suspending AB 32 would have various economic impacts. Generally speaking, the suspension of regulatory activity under the measure means that business might avoid some costs. However, suspending AB 32 could also have some negative impacts. For example, it would delay investments in energy technologies and green jobs, thereby resulting in less economic activity than otherwise would be the case.
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