Just as the Governor was tuning up for his Climate Summit last week, the LAO released a report questioning the economics of California’s Global Warming Solutions Act, aka AB-32. The report assails the assumptions and projections made by the Air Resources Board, in estimating the effect of AB-32’s implementation on the state’s economy. The board’s “scoping plan” projects net annual savings of $16 billion.
Among the LAO’s conclusions:
- The [ARB] plan’s evaluation of the costs and savings of some recommended measures is inconsistent and incomplete. The plan does not reflect the costs and savings of all of the emissions reduction measures that it recommends.
- Macroeconomic modeling results show a slight net economic benefit to the plan, but ARB failed to demonstrate the analytical rigor of its findings. Despite its findings—slight, eventual overall benefit to the economy—the macroeconomic analysis conducted by ARB provides little insight.
- The findings are highly dependent upon key assumptions, and ARB has not performed an analysis to determine how sensitive the macroeconomic findings are to changes in the key assumptions.
- The plan fails to lay out an “investment pathway.” Despite its prediction of eventual net economic benefit, the scoping plan fails to lay out an investment pathway to reach its goals for GHG emissions levels in 2020.
The LAO found that the lion’s share of the economic benefit from AB-32 is presumed to spring from one emissions control measure, that’s actually part of a separate law (AB 1493, passed in 2002). According to the analysis, implementation of the “Pavley regulations” would account for 18% of the greenhouse gas reductions and 70% of savings and benefits attributed to AB-32 in the air board’s scoping plan. That plan is likely scheduled for formal sign-off by the board in the next few weeks.
The report was not widely distributed but was contained in a letter to Assemblyman Roger Niello (R-Sacramento), who requested the analysis.
All the angst over economic impact of AB-32 may be moot, given the findings of another recent LAO study, which warned that we may not be able to put the darn thing into effect, anyway. The state is presently keeping the program alive by borrowing tens of millions of dollars from the California Beverage Container Recycling Fund. The LAO says the Schwarzenegger administration “has failed to produce a sustainable, long-term funding plan for AB-32 implementation.”