15 Dec 2008

IER Comments on Scoping Plan for California’s AB 32

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Here (pdf) are the comments I submitted on behalf of IER to California’s Air Resources Board regarding the economic analysis contained in the Scoping Plan for AB 32, aka “The Global Warming Solutions Act of 2006.” It would force California greenhouse gas emissions back to 1990 levels by 2020, which would be about a 25% reduction under business-as-usual projections.

What was funny in this episode is that I didn’t have to deploy cynical Public Choice analysis; even the peer reviewers were stunned by CARB’s economic analysis. The CARB analysis was claiming that the cap-and-trade plan (as well as other mandates such as efficiency targets) would boost California’s economy.

Some excerpts:

IER appreciates the opportunity to provide comments on the California Air Resources Board’s (CARB) “Climate Change Proposed Scoping Plan: A Framework For Change.” We have serious reservations relating to the economic analysis underpinning the Scoping Plan. (The Economic Analysis Supplement was originally released in September 2008, and an updated version is included as Appendix G in the current Scoping Plan.1) We echo the concerns raised by such respected parties as the Legislative Analyst’s Office, which concluded that CARB “failed to demonstrate the analytical rigor of its findings” and that “economic analysis played a limited role in the development of [the] scoping plan.”

In the same vein, Director of the Harvard Environmental Economics Program Robert Stavins writes: “I have come to the inescapable conclusion that the economic analysis is terribly deficient in critical ways and should not be used by the state government or the public for the purpose of assessing the likely costs of CARB’s plans.”

With or without AB 32, businesses in California already have the option of reducing their greenhouse gas emissions, and households already have the option of installing energy-efficient windows, new installation, solar panels, etc. If it really were the case that the measures of AB 32 would, on net, make California businesses more profitable, it raises the question of why the legislature needs to use the force of law to implement the changes. CARB should simply fax its economic analysis to the owners of the major businesses, and they would make the changes voluntarily. By the same token, if households really do stand to save so much money from the efficiency measures contained in AB 32 that it is clearly worth their effort to implement the renovations, then the state should focus on educational efforts, rather than mandates.

What’s interesting in these things is that I think any Joe Schmoe is allowed to post comments for all the world to see. I will give a heads-up the next time something like this opens up, in case any of Free Advice’s eloquent readers wish to tell their employees (i.e. politicians) how to do their job.

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