Economic Flaws Cited In State Plan To Fight Global Warming

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Southern California Leadership Council (SCLC) Shares Concern with State Leaders on economic risks of AB 32

The Southern California Leadership Council (SCLC) today informed California Air Resources Board Chairman Mary Nichols and other state leaders that California Air Resources Board's conclusions that California's economy would grow or experience an "overall positive economic impact" from AB 32, the Global Warming Solutions Act of 2006, is based on a flawed study. In addition, SCLC called on CARB to consider a range of possible economic outcomes and remain highly sensitive to the very real economic risks associated with California's global warming initiative.

AB 32 sets a goal of reducing California's greenhouse gas emissions to 1990 levels by 2020, with an ultimate goal of an additional 80 percent reduction by 2050. Implementation involves a new and extensive set of regulatory overlays.

SCLC Co-Chair David Fleming said the Council remains committed to "supporting a sustainable, economically efficient, achievement of AB 32's global warming goals." Earlier this year, SCLC provided CARB with a Los Angeles County Economic Development Corporation report that evaluated various economic impact studies and approaches to the issue, and concluded that: "Policy makers should be wary of promises that greenhouse gas reduction programs can be implemented without substantial cost to the economy."

"Instead of heeding this advice, CARB embarked on a study using the very same flawed assumptions that the LAEDC cautioned against," said Lee Harrington, former CEO of the LAEDC and Executive Director of the SCLC. "This is not about academics. It goes to the very heart of CARB's credibility and a successful AB 32 outcome for the people of California."

Harrington said the CARB's adoption of this flawed analysis has a number of implications:

1. It creates the perception that CARB is not working closely with other key agencies, such as the California Energy Commission and California Public Utilities Commission, which have real world experience and expertise in such matters. The CEC cautioned against just such mistakes in analysis in its 2008 Integrated Energy Policy Report and the CPUC has had to significantly modify several of its energy demand studies for the same reason.

2. A "positive economic impact" finding lessens concerns and focus on the relative cost effectiveness of alternative regulatory measures and programs and the real risk that California's global warming efforts could negatively impact business and jobs. The downside risks are very real.

3. It assumes that California's negative business climate issues are unimportant. It falsely assumes that new green businesses will flock to California when the experience over the past 20 years, despite leadership in air quality and energy efficiency initiatives, has been that such businesses deliberately locate outside California to serve global markets, taking the jobs elsewhere.

4. It assumes that because AB 32 is the law in California that critical greenhouse gas economies like China and India will automatically follow California's lead, regardless of cost consequences. Unless they follow California's lead our impact on climate change will be far short of what is needed.

SCLC finds this a disappointing reflection on CARB as the agency which has been given the leadership role on such an important undertaking particularly since SCLC shared its concerns about such analysis months ago including the LAEDC Study.

"As a policy matter, it is advisable to prepare Californians for likely cost impacts while developing and implementing our AB 32 global warming program in as smart and cost effective manner as possible," Fleming said. "The people of California are better served and more likely to stay the course with a realistic understanding of the possible cost consequences. If we do our job well and achieve better results, the public will be pleasantly gratified."

SCLC plans to review the new Climate Change Proposed Scoping Plan and provide additional comments to CARB to help ensure a successful outcome.

About Southern California Leadership Council

The Southern California Leadership Council is a business-led-and-sponsored public policy partnership for the Southern California region. The Council provides proactive leadership for a strong economy, a vital business environment and a better quality of life for everyone who lives here. Founded in 2005 as a voice for the region's business community and like-minded individuals to focus and combine their efforts, the Leadership Council's objective is to help enable public sector officials, policy makers and other civic leaders to address and solve public policy issues critical to the region's economic vitality and quality of life. The Council is comprised of business and community leaders from throughout the seven counties of Southern California and four former California governors.

(Editors note: For media interviews SCLC or for more information about the Southern California Leadership Council's, please contact George McQuade, 818-340-5300 or 818-618-9229. For more about SCLC or AB 32 Study visit: http://www.laedc.org/sclc/index.htm)

*New* October 2008 - Response to CARB Economic Analysis Supplement (EAS) to the Draft Scoping Plan (PDF 188K).

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