by Mary Zhu
by Mary Zhu AB 32, passed in 2006, designated the California Air Resource Board (CARB) to develop regulations and market mechanisms to reduce California green house gasses (GHG) to 1990 levels, a decrease of 12%. Reductions would begin in 2012 and gradually reach the goal of 12% reduction by 2020.
Interestingly, the proponents of Proposition 23 are not arguing the science that points to our need to reduce GHG. Instead, they claim AB 32 will lead to increased costs and taxes and job losses. Could this possibly be right or is this just the usual corporate greed manipulating the electorate and public policy?
The study that supporters of Proposition 23 cite is the only one that supports their claims. This is the June 2009 analysis of Varshney and Tootelian of the Sacramento State University, Business Department. Their report was funded by the California Small Business Roundtable. Using CARB data, they calculated a loss of more that 1 million jobs, nearly $77 billion in lost income and nearly $6 billion in business taxes if AB 32 is implemented.
Their analysis has been evaluated by the nonpartisan Legislative Analyst’s Office as “highly unreliable” and by James Sweeney (2/16/10), Director, Stanford Precourt Institute for Energy Efficiency, as “highly biased, based on false logic and unsound economic analysis.” Sweeney was not funded for this work. Here are only three of his several point by point critiques.
1. The Varshney/Tootelian report only included projected costs; they discounted the savings from fuel efficiency as too speculative to consider. Sweeney argues that savings will accrue because they are based on federal standards of fuel efficiency. Using the same CARB data, but including savings, Sweeney finds a gain of $15.5 billion to the state.
2. Varshney/Tootelian inflated the cost passed down to consumers by assuming that businesses will charge customers double the actual costs to businesses. 3. Varshney/Tootelian chose to ignore the economic stimulus of new green energy companies and construction and only focused on jobs lost.
CARB’s economic analysis of March 2010 concluded that AB 32 would not affect California’s modest economic growth rate of 2.4% in the period 2006 to 2020. It will produce a 4.9% decrease in fuel expenditures and a reduction of 15% in GHG emissions.
These conclusions are consistent with the analysis of a group of 118 Ph.D. economists with expertise in California climate and energy issues. In their open letter, “The Most Expensive Thing We Can Do is Nothing ” (UCS, 8/12/10), they strongly disagree that the current recession should delay implementing AB32. Delay will increase the cost of later mitigation of environmental degradation. Decreasing local pollutants now will yield immediate benefits in health and welfare.
In summary, the only analysis that supports Proposition 23 has been soundly discredited by several diverse sources. Without a factual basis for Proposition 23, we are left with the conclusion that the money behind this bill is, in fact, corporate greed acting in total disregard for our California economy, environment and health.
And what is the current record holder for the most expensive campaign? The $154 million winner is Proposition 87 in 2006. This bill would have imposed a fee/tax on producers of oil extracted from California. At 230 million barrels of oil from California in 2005, these taxes would generate $4 billion over 10 years.
These revenues would be applied to alternative energy programs, with moneys distributed to California institutions and businesses. The points made in 2006 were that, while California is the third largest oil producing state, pays the highest gas prices and has the second worst air quality, it is the only state that does not collect an oil extraction fee. The opposition cited Big Government and the lack of absolute certainty in the implementation of this proposal. (League of Women Voters, 11/06.) The donors against this proposition were Chevron, AERA Energy and Occidental Oil and Gas (Public Policy Institute of California, 4/06). Prop 87 was rejected, 55% to 45%.
So in 2006, we let Big Oil evade their fair share of taxes. Too bad. Those revenues would be welcome today, as we confront draconian cuts in public services and/or increased personal taxes. And we could have grown local, private enterprises in sustainable energy.
Don’t let Big Oil put one over us again; get involved. The Union of Concerned Scientists has produced a mini documentary to screen at several national meetings on “The Dirty Energy Proposition: How Texas oil companies are trying to block clean energy progress in California. Please join us Thursday, September 23 from 7 to 8:30 PM at the Davis Community Church, 412 C Street, Davis. For additional information, go to: http://ucsusa.org/houseparty.
“1. The Varshney/Tootelian report only included projected costs; they discounted the savings from fuel efficiency as too speculative to consider. Sweeney argues that savings will accrue because they are based on federal standards of fuel efficiency. Using the same CARB data, but including savings, Sweeney finds a gain of $15.5 billion to the state.
2. Varshney/Tootelian inflated the cost passed down to consumers by assuming that businesses will charge customers double the actual costs to businesses. 3. Varshney/Tootelian chose to ignore the economic stimulus of new green energy companies and construction and only focused on jobs lost.”
Exactly how is fuel efficiency going to save $15.5 billion to the state? To what extent will new green companies offset jobs lost? Can it be quantified? Looks like both sides are using a lot of voodoo economics…
E Roberts Musser,
It’s good you’re extremely skeptical. However, that’s just the easy part. The one that takes effort is to prove the other side wrong. Sweeney did just that; he went through the same CARB data that Varshney used and found that Varshney only cited expenses and ignored savings. This is not some mysterious voodoo; it is simply cheating. Now, if you want to prove Sweeney wrong, you need to do the same thing and not just dismiss it as voodoo. That’s just lazy.
As of now, no one has come out in cricicism of Sweeney; I’m sure Varshney had a personal interest in defending his paper, but he has been without comment throughout this controversy. I also cite 118 PhD economists who find no reason to hold up on AB 32 because of the recession and plenty of good economic and environmental reasons to proceed with AB 32 at this time.
After you assume both Varshney and Sweeney do voodoo economics, you distrust the CARB data set. That’s an entirely different matter. I was not defending the CARB data set. My point was that, given the same data set, Varshney was found cheating. If you want to criticize the CARB data, you have to do some work and analyze the CARB data.
Did you notice that I quoted this year’s CARB economic analysis? That showed a neglible, if any effect of AB 32 on the total California economy. So, it does seem that CARB has toned down the economic plus side of AB 32. Again, their current analysis is consistent with a panel of econonomists with expertise in California energy issues.
Now, this is just about the immediate costs and benefits of AB 32 or no AB 32. But life is not just one set of changes. You really need to look at the entire cost of fossil fuels vs renewable energy. There are certainly air quality/health costs, damage to the environment as fossil fuels get more difficult to extract (have you forgotten BP and Musser Coal already?) and our wars to control oil resources overseas, to name just a few obvious down the road costs. So,you can nitpick about how many green jobs vs how many oil jobs, but not enacting AB32 will be very costly in the long run.
What scares me is people who vote without taking in the whole picture. Add to that oil money to fool the unwary and that’s how we let Big Oil escape their fair share of taxes in 2006. That’s why I’m working so hard to bring out the facts to challenge Big Oil’s lies; I don’t want to sell out California again. But all my work will be for naught if people just say everything is voodoo. How do I get to someone like that?!!!
itsme: “It’s good you’re extremely skeptical. However, that’s just the easy part. The one that takes effort is to prove the other side wrong. Sweeney did just that; he went through the same CARB data that Varshney used and found that Varshney only cited expenses and ignored savings. This is not some mysterious voodoo; it is simply cheating. Now, if you want to prove Sweeney wrong, you need to do the same thing and not just dismiss it as voodoo. That’s just lazy.”
I get your point about Varshney not including savings – but you still haven’t answered my question. Where did Sweeney come up with the number $15.5 billion in savings. I have an uncomfortable feeling that number is also artificially inflated. How did he come up with this figure?
itsme: “After you assume both Varshney and Sweeney do voodoo economics, you distrust the CARB data set. That’s an entirely different matter. I was not defending the CARB data set. My point was that, given the same data set, Varshney was found cheating. If you want to criticize the CARB data, you have to do some work and analyze the CARB data.”
And I do distrust CARB data set – my guess is it was some data cherry-picked to support a preconceived agenda, which is the usual modus operandi of every political group these days. Call me a cynic – I don’t trust either side on an issue! I wish these political groups would try honesty for once…
itsme: “Now, this is just about the immediate costs and benefits of AB 32 or no AB 32. But life is not just one set of changes. You really need to look at the entire cost of fossil fuels vs renewable energy. There are certainly air quality/health costs, damage to the environment as fossil fuels get more difficult to extract (have you forgotten BP and Musser Coal already?) and our wars to control oil resources overseas, to name just a few obvious down the road costs. So,you can nitpick about how many green jobs vs how many oil jobs, but not enacting AB32 will be very costly in the long run.”
I’m all for alternative fuels and pushing to become oil independent. We have needed to do that as far back as 1976 (first gas lines). (But what the heck is “Musser Coal”?) But it needs to be a comprehensive energy policy that gradually weans us off oil in a definite but measured way, bc so much of our economy, like it or not, depends on oil. If you were to end use of oil TODAY, the economic consequences would be catastrophic. But if we don’t start becoming oil independent soon, we are destined to fight more overseas wars protecting Middle East potentates who own vast oil reserves; fuel more terrorism; continue to unacceptably pollute our air.
itsme: “What scares me is people who vote without taking in the whole picture. Add to that oil money to fool the unwary and that’s how we let Big Oil escape their fair share of taxes in 2006. That’s why I’m working so hard to bring out the facts to challenge Big Oil’s lies; I don’t want to sell out California again. But all my work will be for naught if people just say everything is voodoo. How do I get to someone like that?!!!”
Now that is a very thoughtful question. How do you “sell” politicians/voters on the idea of developing a comprehensive energy policy that will make us oil independent eventually? One way is not to dismiss alternative fuels like nuclear energy out of hand. I like the idea of pushing oil companies to pay their fair share of taxes, until you realize the cost will just be transferred to the customer. But my guess is the only thing that is really going to push this country towards becoming oil independent is when the cost of oil becomes unacceptably high to the consumer. When it really hits consumer pocketbooks is when you will see dramatic change. That is just the uncomfortable reality. And unfortunately, a huge price hike will hit hardest the poorest among us. Also, developing fuel cell or electric cars that are acceptable (pricewise, practical use and asthetically) to consumers (so they will purchase them) will be a big boost to becoming oil independent. There are no easy answers here. But demanding radical changes all at once is a recipe for disaster, won’t get the politicians on board, and could stall the recovery of the economy. A measured by truly committed approach to wean us from oil dependence, IMHO, is the way to go…
From my point of view, the vitriole on both sides is not very convincing, and I tend to tune it out. I feel I know what needs to happen, but I sense our politicians are so beholden to special interests on both sides, we will never get a comprehensive energy policy in place to wean us from oil dependence. Let’s face it, politicians on both sides of the aisle are benefitting from all the tax revenue/political campaign contributions coming from big oil at the same time they are acceping campaign contributions from the environmentalists…