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Suspend or Not to Suspend? - Review of the Projected Economic Impacts of AB 32
Posted by Jacob Freitas on July 30, 2010 at 11:56am
Deemed landmark environmental legislation by some and a government power grab by others, AB 32 has been a point of contention since its adoption back in 2006. Most recently this contention has materialized into a proposition to suspend AB 32. Opponents argue that law will cause massive economic impacts while proponents believe that these impacts will be offset by growth in the Cleantech industry and energy security. Economic impact studies have been conducted by various interest groups and state agencies which do not come to any sort of mutual consensus. However, some of these studies have yielded extreme results that have since been debunked by 3rd party analysis.
One of the biggest opponents of AB 32 has been The CA Jobs Initiative which is a project of the Howard Jarvis Taxpayers Association primarily funded by Valero Energy Corp. and Tesoro Corp. of Texas. This Initiative has recently qualified Prop 23 for the November ballet which would suspend most actions relating to AB 32 until CA unemployment decreases to or below 5.5% for four consecutive quarters. Their primary arguments concern economic impacts of AB 32 that are illustrated through a report produced by Varshney & Associates (V&A). This report concluded that AB 32 will cost California 1.1 million jobs and burden small businesses with $49,691 a year with increased prices due to GHG regulations.
These are quite staggering cost projections that would seriously impact our all ready struggling economy. However, through analyzing reviews of the V&A report, it was found that the methodology used to calculate the results are greatly flawed. According to the CA Legislative Analyst Office (LAO), the report “contained a number of serious shortcomings that rendered its estimates of the annual economic cost of state regulations essentially useless.” Additional reviews were conducted by UCLA Economics Professor (sponsored by the CA Air Resource Board) which “demonstrates that these consultants’ cost estimates are fatally flawed and vastly over-state the expected costs of compliance with AB 32.”
Due to request from CA legislators the LAO was additionally tasked with conducting their own study on the economic impact of AB 32 on CA Jobs. The study’s findings show that gains would be seen in some job sectors with losses in others, producing a net loss in the near term and an unknown effect on jobs in the longer term. The study also states that (both in the near and long term) effects on jobs, rather positive or negative, “will probably be modest in comparison to the overall size of the state’s economy.”The LAO provides nonpartisan fiscal and policy analysis of legislation when requested by CA legislators.
Prop 23 will decide the fate (at least for the next couple of years) of AB 32 this November. The outcome will depend upon voters understanding the facts, weighing the options, and making an informed decision. What will yours be?
BallotPedia Review of Proposition 23
COST OF AB 32 ON CALIFORNIA SMALL BUSINESSES—SUMMARY REPORT OF FINDINGS by Varshney & Associates
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