Governor Rejects LAO Jobs Report on AB-32

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Governor Arnold Schwarzenegger said today that he’s “absolutely convinced” that California’s climate law “will create jobs more than kill jobs.”

“Unlike others that only have theoretical opinions,” he said, “I travel up and down the state and see first-hand.”  By “theoretical opinions,” the Governor appeared to be dismissing last week’s analysis by the non-partisan Legislative Analyst’s Office of the likely economic impact of the climate mitigation law, usually known by it’s legislative shorthand, AB-32.

But the report was hardly an unqualified downer. While the LAO concedes that “certain individual businesses and households…would be seriously affected,” the ten-page analysis presents a mixed bag of pluses and minuses, costing jobs in the near term but with potential long-term benefits. According to the report:

“The effects of the SP (Air Board Scoping Plan) on California jobs are difficult to accurately predict but would be mixed, with gains in some occupations and industries (including so-called” green” jobs) and losses in others (primarily involving fossil fuel-related energy production). On balance, however, we believe that the aggregate net jobs impact in the near term is likely to be negative, even after recognizing that many of the SP’s programs phase in over time.”

The report, issued in response to a request from state Senator Dave Cogdill (R-Fresno), is an assessment of California’s Global Warming Solutions Act, passed in 2006 to reduce greenhouse gas emissions, and set for full implementation in 2012. The law is under attack as a potent job killer, by a gubernatorial hopeful and a nascent ballot measure. Business groups are divided on AB-32′s overall effects.

The LAO report concludes that the law’s cap-and-trade program of carbon pricing “would almost certainly raise the near-term prices of electricity, gasoline, and certain other energy sources,” but at the same time, tighter energy efficiency standards for buildings would lower utility bills. Another measure, the low-carbon fuel standard, would raise the price of new cards but also reduce their operating costs.

Netting out the opposing effects of all these components is tricky business, involving a “complex model with hundreds of equations,” as described in the report. The LAO concludes that farther out on the time horizon, economic effects of AB-32 become fuzzier:

“In the longer term, its net effect on jobs-potentially either positive or negative-is unknown and will depend on a variety of factors. In a relative sense, however, its effect on jobs in both the near term and longer term will probably be modest in comparison to the overall size of the state’s economy.”

The Air Resources Board, California’s lead agency in implementing AB-32, initially projected the law would produce a net gain of 120,000 jobs in California by 2020. “They could be exactly correct,” LAO staff economist James Nachbauer told me, though his office isn’t putting its own number on the jobs effect. In it’s report, the LAO “questions the reliability” of the estimate in the scoping plan and concludes that the Air Board’s models “are not able to provide reliable estimates of the jobs impacts” in 2020. To meet it’s goals, AB-32 requires cutting emissions by about 15% from current levels, by 202o.

The Air Board has promised to provide a revised analysis, which LAO staffers say they expect to receive later this month. But as Nachbauer sums it up, “These weren’t created as jobs programs.”