Is California’s Environmental Policy Worth Fighting For?

California’s environmental policy has made headlines recently, with Gov. Arnold Schwarzenegger announcing that he plans to sue the federal government over its refusal to let the state enact its own plan to reduce greenhouse gas emissions, and instead adopt a more lax federal plan. While the E.P.A.’s regulation promises to increase fuel efficiency standards by 40 percent come 2020, the California plan would cut emissions from new vehicles by around 30 percent by 2016.

But from an economic standpoint, is Schwarzenegger’s move a good idea for the state? In their new working paper “Too Good to Be True? An Examination of Three Economic Assessments of California Climate Change Policy,” the economists Robert Stavins, Judson Jaffe, and Todd Schatzki examine California’s Global Warming Solutions Act of 2006, which purports to reduce the state’s total emissions by 25 percent, bringing emissions back to their 1990 level by 2020. The authors review in detail the studies used as justification for enacting the policy, all of which found that the state could meet its 2020 target at no net economic cost. Their conclusions are summarized as follows:

[A]lthough opportunities may exist for some no-cost emission reductions, these California studies substantially underestimate the cost of meeting California’s 2020 target…. by omitting important components of the costs of emission reduction efforts, and by overestimating offsetting savings that some of those efforts yield through improved energy efficiency. In some cases, the studies focus on the costs of particular actions to reduce emissions, but fail to consider the effectiveness and costs of policies that would be necessary to bring about such actions. While quantifying the full extent of the resulting cost underestimation is beyond the scope of our study, the underestimation is clearly economically significant. A few of the identified flaws individually lead to underestimation of annual costs on the order of billions of dollars.

Billions of dollars of underestimated costs is no small mistake (calling into question whether the initial researchers faced political pressure to deliver that “no net cost” verdict), and these results could mean serious repercussions for a state that’s already facing a looming fiscal crisis, not to mention the ongoing costs of recovery for the 2007 wildfires for both the federal and state government.


Justin

There is not a scientific consensus about the human effects on global warming. There is only a media and celebrity consensus. It's nothing more than an assumption that we have any capability to control a complex climate system that we do not fully understand in the first place. It's a foolish and dangerous assumption at that, in my opinion.

What will you say when we waste trillions of dollars trying to control the climate, only to have no effect, or even make it "worse"?

See here for only one reference, and google for more:

http://www.newsbusters.org/blogs/noel-sheppard/2007/12/20/senate-report-over-400-scientists-dispute-manmade-global-warming

pentapod

I moved to California (San Diego) in 2007 and prior to that I'd always had the impression it was a relatively environmentally friendly state. I'm amazed at how little is actually done for the environment. Most first world countries I've lived in (which is several) have at least a basic recycling program, recycle bins on the streets in main cities beside rubbish bins, door to door collection, etc. Not California! There are a limited number of recycling centers in San Diego that you have to deliver your own things to, waiting in long lines. The easiest, and most popular solution, is simply to throw out all the recyclables into the trash, and several scruffy probably homeless people come around and sort through my building's dumpster on a daily basis looking for recyclables they can sell to the recycling centers. Since moving to California, my recycling program has been: put cans and bottles in separate bag beside dumpster so nice homeless people can make some change out of it.

Compare this to a system like Ontario's "Blue Box" program, where recyclables are collected several times a week, many areas even have compost collection in biodegradable bags. Compare to New South Wales, where every public rubbish bin has a separate recyclables section and every home has a recyclable bin beside the rubbish bin, collected weekly. In a supposedly progressive country and state, it's shockingly backwards.

With this complete lack of environmental programs in mind on the "street level" therefore it strikes me as ridiculous to be kicking up such a fuss and threatening to sue the government over greenhouse emissions policies, when there's clearly so little interest in really doing the environmentally correct thing that a street level recycling program isn't even available. I agree with Gary, it's all about political posing and posturing, and nothing at all about really helping the environment. If it were, there's plenty that could be done without focusing on this one issue.

Blustering and threatening to sue the government on this one issue is just a great way of looking as if he's concerned about the environment and looking as if he's trying to do something, while in reality he's simply distracting attention from the fact that many simple and obvious things that should have been done, and could be done without getting into an argument with federal policy, remain neglected and ignored.

Read more...

misterb

Melissa,

You don't state what the politics of Stavins, Jaffe and Schatszki are. If they are conservative/libertarian, then I don't believe their predictions any more than I believe Arnold's. Ultimately, predictions are bound to be inaccurate and self-fulfilling, both at the same time. If we can use actions like the CA emissions laws to upset the carbon-based power structure, good enough for me.

And don't imply that because the authors are academics or economists, they aren't political, because that's obviously crap. Humans by their nature are political, some are just better at it than others.

Ashley

As I understand it, waste collection is a county issue, not a state issue and thus not under the jurisdiction of the state governor. I lived in Orange County, CA for 7 years and witnessed one of the best curbside recylcing collection programs I've ever seen. So if San Diego isn't providing the same type of program, maybe take that up with the local representatives and let Gov. Schwarnwhatever deal with a problem that can be solved at a statewide level. Are we really going to hold up what could be a major advance in the fight against global warming because our newspapers aren't getting picked up 3 feet from all California front doors? None of this is to mention too that as goes California, so goes the rest of the U.S., which presents the possibility for an even bigger change in our response to global warming.

Inconvenient Posts

How will economists assess the plans needed to re-freeze the polar ice caps so California won't be under water in 2050? Or maybe their assessment will need to be on the re-location of millions of people to Montana or Utah. Will that be "cost-effective"? If you want to question man-made global warming, put your money where your mouth is and buy beach front property.

Stephanie

pentapod, I'm actually a little surprised that where you live in San Diego doesn't have easy access to recycling. I'm guessing condo or apartment complex? Individual houses do get their recyclables picked up curbside. Have you considered talking to management?

But yes, we could do better. I'd love to see more places with recycle bins out there for common use. Here in Poway we also have yard waste collection, which I don't think all parts of the county have, but is a nice plus for those who don't want to handle their own composting.

Sparty

As a resident of Michigan, a state that can use any help it can get, I view the implementation of the policy in California as a win-win situation. The first possible outcome is that California's economy suffers from the excessive costs of the regulations. In this case Michigan could potentially benefit from a transfer of resources due to the zero-sum nature of our national economy. If, on the other hand, the policies are actually effective, Michigan, along with the other 48 states, will learn from California.

Andy

I would just like to point out that unless the authors of the quoted paper ARE willing to quantify "the full extent of the resulting cost underestimation", why should we accept their conclusion that "the underestimation is clearly economically significant"?

Larry

Ken: "But the crude fact remains: tackling global warming now is exponentially cheaper than tackling global warming later."

Fixing global warming can be done much more cheaply if we give a little more time for our innovation machine to operate and make energy alternatives much cheaper. Now is the expensive time to act.

Justin: "There is not a scientific consensus about the human effects on global warming. There is only a media and celebrity consensus. It's nothing more than an assumption that we have any capability to control a complex climate system that we do not fully understand in the first place. It's a foolish and dangerous assumption at that, in my opinion."

There is a scientific consensus, but it's not unanimous, and many of its scientist advocates (e.g., on the IPCC) are not climatologists. That said, may of the changes that we need to make would be good anyway, in the sense that eliminating waste is generally a good thing. And reducing oil imports would only improve our security.

pentapod: "I'm amazed at how little is actually done for the environment."

It depends on the city. I live in Silicon Valley, which does have good recycling programs. It's also true that California is more energy efficient than the US average.

"it strikes me as ridiculous to be kicking up such a fuss and threatening to sue the government over greenhouse emissions policies, when there's clearly so little interest in really doing the environmentally correct thing"

People are interested as long as someone else pays. But that's true all over the world.

Deepish: "By threatening to enact state legislation which will, because of the relative size of the California economy, impact the other states California can pressure the Federal government into action."

That's generally not been true. Ca has had stronger air quality stds than the rest of the country for many years...

misterb: "If we can use actions like the CA emissions laws to upset the carbon-based power structure, good enough for me."

Good luck with that. Ca has shown no sign of actually doing anything to significantly reduce its carbon footprint. The posturing is fun to watch, but that's about as far as it goes.

Brentan "Another economic factor nobody ever considers is the market that would be created by these environmental initiatives."

That's the problem with these reports. The exaggerate those markets. Yes there will be new opportunities, and Ca is leading the way (e.g., Nanosolar, which just started shipping much cheaper solar cells that the print on their substrates - they cost much less than their competitors.

"Energy is an enormously large market (trillions of dollars) and clean technology companies look to pull in billions if not trillions as regulations for cleaner technologies come into play. The state or country who encourages these companies first will see the most to gain for their local economies."

Yes, companies will benefit, but just like ethanol subsidies benefit farmers, but also raise food prices and pound the environment as they plant to the fence lines, Ca's initiatives will have unpredictable consequences.

Incon "How will economists assess the plans needed to re-freeze the polar ice caps so California won't be under water in 2050?"

The IPCC predicts only a small amount of sealevel rise by 2050, or 2150 for that matter. Exaggerating costs you credibility.

Greg "the sole market-based approach they mention is cap and trade. That would, of course, turn the utilities' existing pollution into a huge asset."

Not if they auctioned off the permits, as they should.

Joshua "cost benefit analyses of environmental regulations systematically over-estimate the costs of compliance."

The real answer is that we have no idea. The answers in such exercises are almost always dictated by the assumptions, and the assumptions are rarely right. Cap and trade or (even better) taxes are certainly the lowest cost approach for this but they are tough politically. The command/control approach puts the costs on an unlucky few. GHG reductions of the amounts discussed are unlikely to directly affect quality of life in the short to medium term either way. Of course, raising taxes or dictating your choice of cars affects your quality of life, too.

"1969 was when the genuine progress indicator, an alternative measure of economic welfare, peaked."

You're kidding, right? We're living longer, healthier lives, with more travel, more education, etc. Our cars are bigger, safer, and...more energy efficient. Ask any Californian what their quality of life would be if their income declined by 2/3. But you better put body armor on first.

Sparty: "I view the implementation of the policy in California as a win-win situation."

As a Californian, you're welcome. Enjoy the jobs we send your way...

Read more...

laurent

Living in Europe, it is astonishing to read a comment such as the one made by Justin. Of course, there is a sientific consensus about global warming : why do you think they got the nobel prize ? To us, it is really surprising how much you seem trapped into your own country, never looking at the consequences of your (and mine, as an european) way of living. The worse thing is that we won't suffer from it but countries such as Bangladesh, Kiribati... will

Just Jeff

1.) To reduce your overall carbon footprint, buy a small used vehicle, therefore eliminating production related pollution and achieving near hybrid performance.
2.) Allowing single state greenhouse gas emission standards opens manufacturers up to regulatory blackmail. A state that wishes a new auto plant could threaten to raise they're emission standards if denied, therefore creating an whipsawing business enviroment. Bad for everybody.

Michelle

There is only a media and celebrity consensus that human activities are affecting the climate? It almost seems silly to respond to that, considering that not only has the Intergovernmental Panel on Climate Change come to a consensus about human-induced climate change, also have the American Meteorological Society, the National Academy of Sciences, the American Association for the Advancement of Science, and the American Geophysical Union (just to name a FEW) come to the same consensus. Totally not kidding.

But since this blog is actually about the economic benefits or disadvantages of taking on global warming... I agree that this is a sticky subject. California schools are taking a hit in the budget department, as well as prisons, and that's not something to be scoffed at. (I mean, if our kids aren't even LEARNING about global warming, how can we expect the future to be prepared to deal with it?) And the plan is obviously in need of some big amendments. But that can be done. And I would say that this kind of action is something that just needs to be started and others will follow, leading to more funding in the future. Even this California plan is much derived from Bloomberg's plan in New York City, which was much derived from Livingstone's plan in London. It has to happen this way, and it has to come from places like New York and California if other states and cities across the country are going to follow, eventually leading to a federal policy, which could potentially provide some cash, hooray. If anywhere can do it, it's California.

Read more...

Center for Clean Air Policy

Response: Center for Clean Air Policy Study Helps Lay Foundation for California Climate Policy

The industry-funded “Too Good to Be True” discussion paper released last week raises a number of good points about the types of analysis that will be required to inform the design of specific policies to implement California's landmark legislation, AB 32, The Global Warming solutions Act of 2006. One of the three studies evaluated in this paper, the Center for Clean Air Policy (CCAP) report, “Cost Effective GHG Mitigation Measures for California," was completed at a very early stage in the California dialogue on climate policy and was certainly not meant to be the final word on the topic. Rather, CCAP's study was meant “To inform the deliberations of the California Energy Commission's Climate Change Advisory Committee and to assist the Energy Commission in its development of recommendations in the Integrated Energy Policy Report.” This effort preceded both the Governor's Executive Order establishing statewide mitigation goals and the enactment of AB 32.

Industry and environmental group participants from a multi-stakeholder policy dialogue informed CCAP's analysis, which utilized the best data available at the time to identify and quantify a range of greenhouse gas emissions (GHG) reduction and sequestration opportunities in the state, including the total emissions reductions and sequestration that might reasonably be achieved and the potential costs of these reductions. CCAP also suggested a range of policy options that might be used to encourage implementation of GHG reductions. This work provided a useful starting point for members of the Governor's Climate Action Team to think about mitigation actions, emissions reduction targets, costs, and the pros and cons of implementing different policies to reduce GHG emissions in California's major GHG emitting industrial sectors, such as cement.

As California moves forward in defining climate policy approaches pursuant to AB 32, it will be critical to further evaluate such issues as emissions leakage, the effectiveness and costs of specific policies to implement mitigation actions, and whether proposed policies address market imperfections and barriers in a way that will lower overall program costs. The good news is that the foundational studies from 2006, the Climate Action Team, Berkeley, Resources for the Future, and CCAP -- among many others, including the Governor's Market Advisory Committee – have significantly advanced and elevated the analysis and deliberation needed to effectively implement AB 32. CCAP is very pleased to be a part of this dynamic, collaborative process.

Read more...

Ken

Well, it does indeed seem that the scientific consensus is that the relevant desision to be taken is not IF to tackle climate change, but WHEN to tackle climate change - now, or later when it becomes a global crisis of increasingly massive proportion.

Tackling global warming now may well be costly, and the political manipulation of reports to suggest zero net economic cost - if this indeed happened - is hardly desirable.

But the crude fact remains: tackling global warming now is exponentially cheaper than tackling global warming later.

Gary

Its all about incentives... in this case, the incentive being Arnold gets re-elected. Really its the politician's perfect fight- even if he doesn't win, he's a hero for trying.

Deepish Thinker

California's global warming policies are without doubt horribly flawed if the objective is to combat global warming at acceptable cost. However they do potentially have significant value as a political lever.

Effective and cost efficient responses to global warming (emissions trading or carbon tax) can really only be implemented at the federal level. Unfortunately the federal government is not currently interested.

By threatening to enact state legislation which will, because of the relative size of the California economy, impact the other states California can pressure the Federal government into action.

Bruce Johnson

pentapod -- I wouldn't judge California's environmental record by what happens in San Diego. -- California is a huge state with lots of different people and points of view. Would you judge New York's environmental or political actions by what happens in Atlanta?

California wouldn't have to lead on such matters if the federal government had a backbone to do so themselves. For all of it's flaws, such actions WILL be seen as visionary as our predicament becomes much more precarious.

Brentan

Another economic factor nobody ever considers is the market that would be created by these environmental initiatives. If California pushes stronger reforms first, there will be a huge market opening for companies and technologies that meet the goals. And if these companies develop in California, before other states, countries, etc start enforcing their own stringent requirements, the California companies will be ready and waiting when these other places enact their own tough policies. Much like silicon valley acts as the epicenter for internet technology, California could be center of cleantech.

Energy is an enormously large market (trillions of dollars) and clean technology companies look to pull in billions if not trillions as regulations for cleaner technologies come into play. The state or country who encourages these companies first will see the most to gain for their local economies.

In the short term, this may cost CA billions, but in the long term, they could be fostering the growth of a handful of niche companies that will bring in billions.

Read more...

buster

@pentapod,

while SD might not have a recycling program, los angeles most certainly does. as one said earlier, you can't judge the state on one city.

Gdub

@pentapod

I live in San Bernardino County, in a small (well, at least for California) town, and here as well as adjoining cities we have a good recycling program.

I don't know if it's always a county-wide issue. I believe some cities within our county handle waste differently.