Reports Show Cutting Greenhouse Gases Will Benefit California Economy

Studies Support Emissions Plans
Two independent analyses say an effort, opposed by business, to cut
greenhouse gases could be beneficial for California's economy.
By Usha Lee McFarling, Times Staff Writer
Los Angeles Times, January 23, 2006
http://www.latimes.com/business/careers/work/la-me-climate23jan23,1,5379952.story

The state's ambitious plan to cut greenhouse gas emissions could create tens
of thousands of new jobs and dramatically boost the economy in coming years,
according to two new independent analyses.

The reports, one led by economists at UC Berkeley, the other by a Washington
think tank that emphasizes market solutions to environmental problems, agree
with a draft version of a state plan released earlier this month and reject
concerns that curbing the gases that contribute to global warming would hurt
the economy.

"It's basically a very good news story," said Ned Helme, president of the
Center for Clean Air Policy, an environmental think tank based in
Washington, D.C. "We found you could do this very cheaply."

The Berkeley report found that the cost savings on fuel and gas generated by
curbing greenhouse gases would translate into more money for consumers and
more jobs. In addition, they predicted that investment in technology to
reduce greenhouse gases could pay off for the state in the way that
investment in computer technology has paid off for Silicon Valley.

The Center for Clean Air Policy's report found that the state could meet its
2010 emissions reduction goals at no cost to consumers and that they would
save money if the 2020 goals were met. The study described a number of
cost-effective ways to cut emissions, including capturing methane from
landfills and manure and using it to generate energy, and switching freight
transport from diesel trucks to rail.

Last June, Gov. Arnold Schwarzenegger declared the debate on climate change
over and directed a "Climate Action Team" made up of representatives from
various state agencies to devise a plan to cut the state's greenhouse gas
emissions to 2000 levels by 2010, to 1990 levels by 2020 and to 80% below
1990 levels by 2050.

California is one of the 10 largest economies in the world and the
12th-largest producer of greenhouse gases such as carbon dioxide, methane
and nitrous oxide, which are byproducts of industry, agriculture and motor
vehicle use. The state's draft report calls curbing these emissions "one of
the most daunting challenges of our time."

Its emission reduction goals put California in the forefront of efforts to
regulate greenhouse gases and years ahead of Bush administration plans,
which reject regulation in favor of voluntary curbs by businesses. The
state's 2050 targets are among the most stringent in the world.

A draft state plan to meet those goals has been of concern to some business
and industry leaders locally who fear that economic growth could be
compromised and that jobs may migrate to neighboring states with fewer
regulations.

But Helme of the Center for Clean Air policy said the concerns were not
warranted.

"People think anything we do is going to cost more," he said. "That's just
not the case."

The state's efforts have also attracted the attention of those fighting
climate change regulations on a national level.

"National lobbyists are starting to show up because as California goes, so
goes the country, so it's going to be a focal point," said Helme.

If greenhouse gas emissions are not cut, global warming is expected to raise
temperatures between 8 and 10.4 degrees in California and diminish the
Sierra snowpack ‹ a major source of drinking water ‹ by 90% in the next
century, according to recent studies that have been incorporated in the
state's draft plan. Warming could also raise the sea level between 4 and 33
inches, causing coastal erosion and sending salt water surging into
Sacramento Delta water supplies, the draft plan said.

Such effects could harm the state economically by threatening agricultural
production, increasing the risk of forest fires and increasing utility costs
for cooling. Climate warming could also cause large numbers of heat-related
deaths, increase the incidence of some diseases and lead to a higher number
of bad ozone days, the plan said.

The climate team is planning to submit a final report to the governor in
mid-February. Because of complaints from business leaders, state officials
extended the public comment period on the report until Jan. 31 and will hold
open hearings today in Sacramento and Tuesday in Los Angeles to gather more
information on economic aspects.

"We must ensure that California's ability to create and retain jobs is not
compromised through this process," Allan Zaremberg said in a statement. He
is president of the California Chamber of Commerce and a member of a new
coalition formed to ensure that climate regulations do not harm business.

Other members of the new group, called Sustainable Environment and Economy
in California, include the California Farm Bureau Federation, Western
Growers, the California Nevada Cement Promotional Council, the Western
States Petroleum Assn., the Rubber Manufacturers Assn. and the Alliance of
Automobile Manufacturers.

The two new analyses agree with the state draft report in suggesting that
many industry fears are unfounded.

"We can save money now by addressing climate change," said Alex Farrell, an
assistant professor in the energy resources group at UC Berkeley who co-led
one study with W. Michael Hanemann, an economist who directs the Climate
Change Center at UC Berkeley. "And by acting now, California can gain a
competitive advantage by becoming a leader in new technologies that will be
used worldwide."

The state draft analysis suggests that California would gain 83,000 jobs and
$4 billion in income if changes to curb greenhouse emissions were made. The
study assumes that savings to consumers would generate more demand for goods
that would create additional jobs.

The Berkeley analysis used a different economic model and analyzed eight
policies the state could undertake to reach half of the 2020 target. That
goal would result in an additional 20,000 jobs for the state and an increase
in the gross state product of $60 billion, Farrell said. The authors
concluded that the entire target could probably be met with a net gain as
well but did not provide specific numbers.

Farrell said people should not focus on the fact that different analyses
found different numbers ‹ because they used different models and data ‹ but
on the fact that all the studies came to the same general conclusions.

The Berkeley-led group did not analyze the costs and benefits of reaching
the 2050 goal because that is too far in the future to predict, Farrell
said.

The group concluded that voluntary measures to reduce greenhouse gases would
be insufficient and the changes would require new regulations and a "cap and
trade" program in which the government would set a cap on emissions and
businesses could trade emissions credits and payments to meet the cap.

Many of the options in the state plan are still under discussion, but
California Environmental Protection Agency secretary Alan C. Lloyd has said
the final plan would probably require a mix of government mandates and
business incentives.

The state's draft plan offers two alternatives to a cap-and-trade program.
One would affect 30% of the state's emissions by imposing restrictions on
five key industries: electric power, oil refining, oil and gas extraction,
landfills and cement production. The other would impose limits on fuel used
in a variety of industrial operations.

The draft states that the plan would have to be designed so it did not
encourage the movement of production and jobs to neighboring states without
caps.

Farrell said he and his coauthors felt strongly that California could reduce
emissions and could profit financially, thereby disproving the widely held
assumption that economic growth requires increased energy consumption and
high levels of greenhouse gas production.

"That assumption is incorrect," Farrell said. "In California, we can prove
that."