At long last, this Thursday the California Air Resources Board is poised to approve the scoping plan to implement the Global Warming Solutions Act (AB 32). For the past two years, CARB collaborated with other agencies, conducted technical studies and reached out to the public to inform their plan. CARB developed a well-conceived plan and analyzed the health and economic impacts of the proposed measures. The economic evaluation has received considerable scrutiny, and some of the reviews go too far in their criticisms.
While the commentary offers some useful suggestions for improving CARB’s economic evaluation, they overstate the limitations of the analysis. The fact is that the models used by CARB are the current state-of-the-science in economy-wide modeling, and their limitations are shared by other models used widely by government agencies.
What CARB did achieve was a detailed study of the costs and benefits of all measures in the plan, which resulted in a finding that no major impacts will result to California’s economy from implementing AB 32. CARB estimated a net improvement to California’s Gross State Product of about seven billion dollars by 2020, a 0.3% increase over business-as-usual. This finding has led to an outpouring of criticism. In fairness, given modeling uncertainties, CARB should have done more to emphasize uncertainty in addition to presenting quantitative results about new jobs or economic growth that could be interpreted as implying more precision than is possible.
CARB has responded with a set of sensitivity analysis that supports the conclusions of their earlier work. Also, CARB has the opportunity and obligation to improve the analytical underpinnings since each measure will receive detailed analytical attention via rule-making processes in 2009 and beyond. For now, we have plenty of evidence to move forward.
The weight of evidence leads to a conclusion that inaction is the most expensive option. The economically sound course will redirect investment to clean energy and will provide the necessary global leadership that will reduce the economic damages that would accompany unabated climate change. The California Climate Change Center estimated that inaction may result in 4-6 times more heat-related deaths in urban areas, and 75-85% more days with weather conducive to high levels of ozone and particulate matter pollution that already impose a premature death sentence on tens of thousands of Californians and saddle our economy with a bill for $71 billion for health care costs annually. A recent study at the University of California at Berkeley estimated that $2.5 trillion worth of real estate assets are at risk of extreme weather events, rising sea level and wildfires, and that the annual bill to the insurance and real estate industries could be $4 billion. Inaction would burden our children with greater environmental risks and would require even steeper emissions cuts later, almost certainly resulting in huge costs to society.
CARB may have underestimated the possible benefits to California from new green jobs and clean energy technologies that will emerge due to the innovation that AB 32 will unleash. While the future is hard to predict, we can look to the past at related programs that used innovation and energy efficiency to cut pollution in ways that yielded economic benefits that would have gone unrealized in the absence of government policy. Looking forward, according to researchers at Stanford’s Precourt Institute for Energy Efficiency, California can avoid 50 million tons of greenhouse gas emissions at no net cost to consumers or businesses because the energy bill savings will pay back initial investments in, for example, better heating and cooling systems and more efficient appliances and lighting.
As climate scientists have been saying, it IS later than we think. The economists are analyzing whether AB 32 will be a small positive or a small negative for California’s economy. However, that debate ignores the most important piece: What will happen to California’s economy — and to the world as a whole — from unfettered climate change. To the Air Resources Board we say that now is the time for progress not delay. The rule making to follow will allow for fine tuning. The course of action inspired by AB 32 will create a healthier, more affordable future for all Californians. We simply cannot afford to get off track with AB 32 implementation.