California’s economy is in the doldrums, its political leadership is in such paralysis that it has become a national laughing stock and its golden reputation is tarnished. But in one area, the attempt to curb climate-changing greenhouse gases, California is taking the premier leadership role.
But while the preponderance of scientific evidence acknowledges that global warming is a reality, there is great deal of uncertainty over the economic impacts of the fight against global warming. As the state targets carbon emissions, what happens in California will be scrutinized as a potential precedent for the rest of the country. Few disagree about the need to clean the air. The controversy is over the economic impact of doing the right thing.
Will jobs be gained, as the backers of AB 32 contend, or will they be lost, as some in business and industry believe? Will AB 32, the state’s landmark law to cut carbon emissions, serve as a model for the national greenhouse gas emissions law, which has been approved by the House and awaits action in the Senate? Thus far, the national proposal appears weaker than some environmentalists want. Will a national law pre-empt California’s law?
But the biggest question is the jobs.
The Air Resources Board, charged with developing and enforcing the regulations for AB 32, believes the new law will drive investment and new jobs, and that as the production and use of low-carbon fuels become more common, industry will meet the demand and reap economic benefits.
“California maintains its’ position at the front of the line in attracting venture capital, and positions us as a leader in the race to develop the clean technology products, patents, and projects the global market demands and needs,” ARB Chairwoman Mary Nichols said when the ARB approved the regulations last December.
Others agree. Two weeks ago, the Cleantech Group, a global marketing research group, and the accounting and advisory firm Deloitte, jointly issued a study that showed the some $1.2 billion in clean-technology funding was invested in 94 companies in North America, Europe, China and India during the second quarter of 2009. The investments, averaging about $12.9 million each, were led by electric vehicles and biofuels.
The report noted that the second quarter investments were up 12 percent over the previous quarter, but were off 44 percent from the same period the year before.
“Cleantech venture investment has rebounded moderately after free-falling for two consecutive quarters,” said Brian Fan, senior director of research at Cleantech Group. “We are seeing initial signs of recovery in other cleantech asset classes, including recent activity in solar tax equity…Additionally, new climate and energy legislation from governments worldwide and the upcoming Copenhagen climate negotiations continue to be strong drivers of investment and innovation.”
But the volatility of the early steps of the green economy is drawing concerns. What is in store for workers at facilities that ultimately face closure?
“Which jobs are going to be replaced as a result of that,” said Assemblyman Sandre Swanson, D-Oakland? “We all agree with the goals of AB 32, and that it is right for California to lead the campaign for a clean and healthy environment. But we also have a national recession, a recession that has hit California. We have an 11.5 percent unemployment rate and the forecast is that it is going to get worse. So how do we develop a win-win scenario?”
Swanson, who wants expanded training programs for workers displaced by the recession, has authored an Assembly concurrent resolution, ACR 77, that urges the ARB to further study the economic impact of AB 32. His measure is in the Assembly Appropriations Committee. “If there is a silver lining to the recession, it is that there are a lot of people available for retraining,” added Swanson, who heads the Labor and Employment Committee.
A study by Sacramento State professors released this week found that AB 32 will have a direct financial impact on businesses – an average of $49,691 per small business – and that the annualized cost of AB 32 is higher than the $28.9 billion projected by some estimates. “Various analysts believe there are considerably more costs associated with AB 32 that either were deliberately not taken into account in the ARB analysis or are ‘hidden costs’ that were not acknowledged by the ARB.”
According to the study, financed in part by business interests, such factors as changes in land use, compliance and monitoring costs, fuel availability, the cost of financing new facilities, volatility in the marketplace and research costs were not examined. The study suggested that the “implementation of AB 32 could easily exceed $100 billion upfront,” when the costs of new construction, fuel-efficient cars, and potentially higher food costs are factored in.
The study’s sources included numbers developed by the ARB in its planning documents for the AB 32 regulations, material from Legislative Analyst Mac Taylor, who studied the issue at the request of Assemblyman Roger Niello, R-Sacramento.
But other studies, such as one by PEW Research and another by the University of Massachusetts at Amherst, offer contradictory findings. The ARB believes the financial benefits of putting AB 32 into effect will become apparent.
“The clearest example of this is the Low Carbon Fuel Standard. It sends a signal that there will be a market for low-carbon fuels in California, no matter what the price of petroleum ends up at. This provides a great deal of certainty to investors,” said ARB spokesman Stan Young. The standard, proposed by the governor and adopted by the ARB in April, requires a 10 percent cut in the carbon intensity of fuels by 2020. “Carbon intensity” means the carbon that is related to the production, transmission, transportation, and combustion of the fuel.
The Amherst study examined employment conditions in 12 separate states: Florida, Indiana, Minnesota, Missouri, Nebraska, New York, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, and Wisconsin. The study looked at six “green strategies” – building retrofitting, mass transit, energy-efficient automobiles, wind power, solar power and cellulosic biomass fuels.
“What is clear from this report is that millions of U.S. workers…will all benefit from the project for defeating global warming and transforming the United States into a green economy,” the study noted.
The ARB is more cautious.
“We realize that we are in transition. We are focusing on our efforts to ensure working with labor to have job-transition programs and retraining, and also taking a look at instituting career technical courses,” Young said.