Air regulators' latest AB32 study predicts little overall impact on state's economy

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The downtown skyline is enveloped in smog shortly before sunset on in Los Angeles, California. File photo.

Conservative lawmakers and petroleum companies are campaigning to suspend California laws that aim to cut the state’s impact on global warming. Opponents of the new mandates argue that they'll harm Californians and their economy. KPCC’s Molly Peterson reports on a new report air quality officials hope will quiet critics of the law known as AB-32.

By law, within the next decade California must cut carbon and other gases that trap heat and warm the earth by 15 percent. AB-32 gave birth to that rule - and with it, to piles of studies about the law's effects on the state's economy. Earlier research from the Air Resources Board projected small harm and big upsides.

But critics called that work thin and deficient. So the board’s chair, Mary Nichols, says the agency consulted more economists, fixed some faulty assumptions, and ran the numbers again. "We made all the changes & found that the results are pretty much the same as they had been the first time," she says. "Which is very modest almost undetectable overall effect on gross state product by 2020, but modest improvements in various areas of job growth and personal income."

Air Resource Board staffers admit that the updated analysis offers less cause for optimism. Stanford macroeconomist Larry Goulden heads an independent committee the agency set up in the last year to scrutinize its work. He agrees with the state's newer conclusions that AB-32's impact will be small.

"Indeed, the range that’s projected is somewhere between about no effect on state income and a cost of 1.5 percent of state income," he says. "So this implies AB 32 will neither come as a huge boost to the California economy. nor will it have a major negative impact."

Not that it looks particularly good for petroleum related industries, cement plants, and some other manufacturing. AB-32 could kill one in seven mining jobs, along with some utility-sector work, the state has concluded.

Losses in these sectors could represent tens of thousands of jobs - still a small fraction of the state's 16 million non-military positions. The Air Resources Board's Nichols says that shows California is ready to weather this transition. "This is the direction that our economy is moving in anyway in the direction of more cleantech and more clean energy related jobs," she says.

The state's latest study still leaves plenty out. It doesn't consider what happens outside California if the state cracks down on greenhouse gases but other jurisdictions do not. It has little to say about whether the costs of consumer goods could rise.

Economists and others argue that these unknowns could help with navigating the new economy. One small example: smart meters — electrical meters that provide more data to customers. Hank Ryan of the pro-AB-32 group Small Business California says the air board study doesn't dig down to details that small. But he thinks small pieces of data can greatly affect day to day choices.

"That’s information we’ve never had before and we’re moving very quickly into the realm where we’re going to understand these costs as a controllable," Ryan says.

Ryan's hope is rooted in enlightened self-interest: his small business is an energy efficiency firm, an area AB-32 could help to grow.

Jim Bushnell, research director at the University of California Energy Institute, finds a silver lining in the rough economy — he says it lowers the bar over which businesses must jump.

"Many of these regulations particularly an emissions cap would be in effect countercyclical," Bushnell says. "In the sense that when the economy is down it’s much easier and less costly to meet emissions targets."

Bushnell says he understands why people worry about the state's future in a struggling economic climate. But he and other economists point out that the downturn could make some climate rules easier to handle.

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