Statement by CRS Policy Director Chris Busch on CARB's Recently Released Economic Analysis

Mar 24, 2010 7:15 PM ET

(3BLMedia/theCSRfeed) San Francisco, CA - March 24, 2010 - CARB’s new analytical effort which combines a sophisticated macroeconomic model and a detailed model of energy production and use firmly plants their modeling work at the frontier of state of the art for climate policy analysis. . 

While providing greater detail, CARB's new results are not fundamentally different from prior studies of AB 32. Like other mainstream analyses, CARB’s results predict that California will benefit from robust economic growth while implementing AB 32 policies. The Economic and Allocation Advisory Committee (EAAC), an impressive collection of modeling experts appointed by the Governor, provided critical ongoing feedback and independent review which has strengthened the final product.   Nonetheless, many of AB 32’s benefits are not captured by CARB’s modeling efforts. In fact, the only benefit considered is the cost savings from energy efficiency. Energy security, improved public health and lower health care costs, additional technological innovation, and avoided damages due to climate changes are all benefits conventionally left out of climate policy analyses, and this is true of CARB’s assessment too.   The consulting firm Charles River Associates (CRA) is also releasing a new economic study today, which was conducted on behalf of a group of industries that will be covered by AB 32. In broad terms, their results are similar to CARB’s. They show strong continued growth in the California economy through 2020 and macroeconomic impacts of AB 32 that are dwarfed by this expected growth. One major difference is that CRA assumes people, businesses, and markets are perfectly rational and that no regulation can produce net benefits. Given our current economic troubles and their roots in irrational exuberance and lack of regulation of the financial markets, most people would find such an assumption laughable. Nonetheless, this leads CRA to reject the possibility that some energy efficiency policies actually yield paybacks that more than balance the initial cost. CRA also assumes that the costs of clean energy alternatives are higher than CARB does. These are the main reasons for differences in the findings of CARB and CRA.   In our report Climate Policy and Economic Growth, we surveyed previous efforts to analyze the future economic effects of AB 32, and we will release an updated version of the paper to provide a fuller understanding of these new numbers in advance of the public workshop on this topic to be scheduled in April. Our study joins a growing body of research which finds that climate policies such as AB 32 are very likely to have positive net economic effects.   Addressing climate change will bring about innovation and new business opportunities. California is well positioned to be a leader in the emerging trillion dollar global clean technology market. The world needs California’s leadership and we can benefit from providing it. It’s time to move ahead with confidence.   About Center for Resource Solutions. CRS is a national nonprofit that creates policy and market solutions to advance sustainable energy. For more information, visit”   Contact: Chris Busch, PhD, Center for Resource Solutions, (415) 568-4284