CA cap-and-trade will cost jobs, economic growth

posted at 2:55 pm on May 25, 2010 by Ed Morrissey

When Arnold Schwarzenegger signed AB 32 into law in 2007, he called California’s cap-and-trade bill a pathway to a green-energy economic bonanza.  A new study commissioned by California’s state auditor calls it a bust.  The Wall Street Journal reports that the study shows that AB 32 will push jobs out of the state, and draws the appropriate lesson about a national cap-and-trade system for energy and manufacturing production:

California, that former land of opportunity, was one of the first states to pass its own version of “cap and trade” to reduce greenhouse gas emissions. In 2007 when Governor Arnold Schwarzenegger signed the law, called AB-32, he said it would propel California into an economy-expanding, green job future. Well, a new study by the state’s own auditing agency—its version of the Congressional Budget Office—has burst that green bubble.

The study released May 13 concludes that “California’s economy at large will likely be adversely affected in the near term by implementing climate-related policies that are not adopted elsewhere.” While the long-term economic costs are “unknown,” the study finds that AB-32 will raise energy prices, “causing the prices of goods and services to rise; lowering business profits; and reducing production, income and jobs.”

The economic reality here is what the Legislative Analyst’s Office calls “economic leakage.” That’s jargon for businesses and jobs that will “locate or relocate outside the state of California where regulatory-related costs are lower.” The study says the negative impact on most California industries will be “modest,” but energy-intensive industries—specifically, aluminum, chemicals, forest products, oil and gas and steel—”may significantly reduce their business activity in California.”

Yes, some new “green jobs” will be created. But the “net economywide impact,” it says, “will in all likelihood be negative.”

Where have we seen this before?  Oh, yes, in Spain — where the attempt to artificially create a “green economy” through government intervention against traditional energy resulted in a financial disaster:

Pajamas Media has received a leaked internal assessment produced by Spain’s Zapatero administration. The assessment confirms the key charges previously made by non-governmental Spanish experts in a damning report exposing the catastrophic economic failure of Spain’s “green economy” initiatives.

On eight separate occasions, President Barack Obama has referred to the “green economy” policies enacted by Spain as being the model for what he envisioned for America. …

Unsurprisingly for a governmental take on a flagship program, the report takes pains to minimize the extent of the economic harm. Yet despite the soft-pedaling, the document reveals exactly why electricity rates “necessarily skyrocketed” in Spain, as did the public debt needed to underwrite the disaster. This internal assessment preceded the Zapatero administration’s recent acknowledgement that the “green economy” stunt must be abandoned, lest the experiment risk Spain becoming Greece.

The government report does not expressly confirm the highest-profile finding of the non-governmental report: that Spain’s “green economy” program cost the country 2.2 jobs for every job “created” by the state. However, the figures published in the government document indicate they arrived at a job-loss number even worse than the 2.2 figure from the independent study.

California attempted to minimize the damage to its economy by asking neighboring states to join a mutual-economic-suicide pact to impose the same controls.  None of them volunteered to jump off the Golden Gate Bridge along with California.  Most if not all of them must have been licking their chops at the prospect of California businesses looking eastward to escape the high costs and overreaching regulation in their current locations.

Voters will get a chance to deliver their own verdict on AB 32 in November.  The ballot will contain a referendum to amend the law in order to suspend its operation while unemployment in the state remains above 5.5% — and at the moment, it’s at 12.6% and going up.  If it passes, it will send a signal to politicians in both Sacramento and Washington that voters care a lot more about their jobs and pocketbooks than ecological hobby horses.


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It’s all part of the plan.

lorien1973 on May 25, 2010 at 2:57 PM

Everywhere you look socialism is failing.

Inanemergencydial on May 25, 2010 at 2:57 PM

Inanemergencydial on May 25, 2010 at 2:57 PM

Socialism fails for everyone but the ruling class.

search4truth on May 25, 2010 at 2:59 PM

“Damn it, Cohagen! Give deez people eeeaaaar!”

Doughboy on May 25, 2010 at 3:01 PM

Ah yeah…Green Jobs!

Socialism is collapsing everywhere…but here, it’s full speed ahead!

AUINSC on May 25, 2010 at 3:02 PM

Looks like I picked the wrong week to try to start a business in California…

Seven Percent Solution on May 25, 2010 at 3:06 PM

Just get in your Hummer and drive into the sunset Arnold…

PatriotRider on May 25, 2010 at 3:06 PM

OT: Is HuffPost inciting violence with it’s giant headline “IMPOTENT RAGE!”

faraway on May 25, 2010 at 3:07 PM

Looks like I picked the wrong week to try to start a business in California…

Seven Percent Solution on May 25, 2010 at 3:06 PM

You hiring?

doriangrey on May 25, 2010 at 3:09 PM

OT: Obama sending troops to Mexican border. UN? SEIU?

faraway on May 25, 2010 at 3:11 PM

The USS California is sinking. Quickly, somebody grab those bailing buckets and start dumping water IN the boat.

portlandon on May 25, 2010 at 3:12 PM

While the long-term economic costs are “unknown,” the study finds that AB-32 will raise energy prices,

Well, at least we’ll still be able to get low-priced power from Arizon… oh, darn.

LASue on May 25, 2010 at 3:16 PM

OT: Obama sending troops to Mexican border. UN? SEIU?

faraway on May 25, 2010 at 3:11 PM

National Guards @ the border to make sure Border Patrol DOES NOT arrest or detain illegals ?

macncheez on May 25, 2010 at 3:21 PM

Cap and Flee…Cap and Fleece…

right2bright on May 25, 2010 at 3:24 PM

I predict the referendum will be defeated. Never underestimate the complete stupidity of the average California voter. (The smart ones left a long time ago)

evilned on May 25, 2010 at 3:24 PM

National Guards @ the border to make sure Border Patrol DOES NOT arrest or detain illegals ?

macncheez on May 25, 2010 at 3:21 PM

More likely they are being sent there to arrest Arizona’s Governor and those state legislators who voted for SB 1070…

doriangrey on May 25, 2010 at 3:26 PM

My wife and I are discussing a move into Arizona….

Vntnrse on May 25, 2010 at 3:27 PM

They could buy power from Arizona.

the_nile on May 25, 2010 at 3:27 PM

It’s all part of the “Pain”

wheels on May 25, 2010 at 3:29 PM

Looks like I picked the wrong week to try to start a business in California…

Seven Percent Solution on May 25, 2010 at 3:06 PM

Just about any week is a bad week to start a business in CA. Try Nevada…

RedbonePro on May 25, 2010 at 3:29 PM

Last one out of California, please turn off the lights.

RadClown on May 25, 2010 at 3:30 PM

I go live with my 2nd California small business in August using a good portion of my savings.

I’m not looking to make a profit, I just hope I can contribute to the sucess of this country’s economy.

Ditkaca on May 25, 2010 at 3:30 PM

Last one out of California, please turn off the lights.

RadClown on May 25, 2010 at 3:30 PM

You won’t have to, Arizona already stated they would take care of that…

right2bright on May 25, 2010 at 3:32 PM

Ditkaca on May 25, 2010 at 3:30 PM

You are planning to make a small fortune then? By using up your big fortune?

pedestrian on May 25, 2010 at 3:38 PM

More likely they are being sent there to arrest Arizona’s Governor and those state legislators who voted for SB 1070…

doriangrey on May 25, 2010 at 3:26 PM

Well , when the Gov of AZ uses a sock-puppet to ridicule Oblahblah and ask him to ” joo yor yob” ,he gotta do something …to help Calderon !!

macncheez on May 25, 2010 at 3:38 PM

faraway on May 25, 2010 at 3:11 PM

I wonder if they’ll be issued ammo or its just for show..

a capella on May 25, 2010 at 3:41 PM

CA cap-and-trade will cost jobs, economic growth

Meanwhile,Hopey is busy pumping out BS,ObamaOil is
pumping out catostrophic death to the economy and
deathknell for the fishing industry and Tourism!!

canopfor on May 25, 2010 at 3:43 PM

Legislative Cap and Trade didn’t work in Spain or CollieFornia, so Obama basically bypassed Congress and had the EPA impose a “rule” by which new installations emitting 100,000 tons/year of CO2, or expansions to existing installations increasing emissions by 75,000 tons/yr of CO2, would have to obtain permits and demostrate “best available control technology” (BACT).

To put this in perspective, 100,000 tons/yr of CO2 corresponds to burning natural gas at a rate of 52 megawatts (MW), and since no power plant is 100% efficient at converting heat to power, this would apply to gas-fired plants generating more than about 30 MW, or coal-fired plants generating more than about 15-20 MW. Most commercial power plants generate hundreds of megawatts, although some small installations using natural-gas reforming to generate a few megawatts for a store, school, or hospital would be exempt. However, it is not clear that smaller installations are as efficient as large ones, so the regulation would favor the replacement of large, efficient generators by many small, inefficient ones, and actually encourage INCREASES in CO2 emissions.

This isn’t exactly “cap and trade” (yet), but if someone can demonstrate a feasible way of capturing and burying CO2, this could become “best AVAILABLE control technolgy”, which EPA could then impose on any other new power plant, or existing power plant whose permit is up for renewal. The power required to compress CO2 could consume 10-15% of the power generated by a gas-fired power plant, or 30% of the power generated by a coal-fired plant, meaning MORE fuel would be required to generate the SAME net power.

In light of the smashing “success” in Colliefornia, must we do this nationwide???

The major problem with this is that it was NOT imposed by Congress, so it cannot be repealed by Congress, even if the Republicans take over in 2011. This “rule” can only be abolished by replacing the EPA Administrator, which requires replacing Obama in 2012.

Cap and Trade would probably never pass the Senate, but who needs Congress anyway? Das Obamafuhrer has decided!!!

Steve Z on May 25, 2010 at 3:44 PM

Ditkaca on May 25, 2010 at 3:30 PM
You are planning to make a small fortune then? By using up your big fortune?

I know, I must be insane.

At this point I can’t stop the entrepreneurial juices flowing and I refuse to back down. I figure if I can make the 2nd biz work half as good as the 1st then I can really pay a ton of taxes thus helping my state’s as well as my country’s economy.

Ditkaca on May 25, 2010 at 3:44 PM

Last one out of California, please turn off the lights.

RadClown on May 25, 2010 at 3:30 PM

What lights? What is the carbon footprint of candles?

Steve Z on May 25, 2010 at 3:45 PM

Yeah, this brain fart on the Legislature’s part is almost as dumb as the “Obamacare light” state-run medical plan they came up with – with a price tag of $200 billion they don’t have.

mojo on May 25, 2010 at 3:49 PM

Don’t think that California’s economic suicide won’t have effects in the rest of the US. Let me give you an example.

The company I work for had to replace engines in 200 refrigerated trailers in order to operate them in CA. I’m fortunate that my company was in a position to do this. There’s lots of other companies that weren’t.

The current law requires that no engine can operate in CA past 7 years. This is killing owner operators who handle a large amount of port and rail traffic. Also the used truck market is devastated. Companies with larger fleets that would normally operate the equipment for 5 years then sell are finding no buyers for a truck with 2 years of useful life.

What’s resulted is a summer produce season starting up with greatly reduced truck and rail capacity to handle the volume. That in turn will translate to higher food costs back east.

While CA has done an outstanding job of driving out all its manufacturing base, the agriculture economy is still here, and for good reason. There’s no where else in the US that can grow food like you can in CA. The current round of CA carbon laws seems destined to wreck the agriculture industry by making it harder to transport their goods to markets around the country.

grahsco on May 25, 2010 at 3:53 PM

Y’know what’s funny? California is set to boycott any textbooks that are influenced by Texas’s curriculum. Because clearly Texas’s guiding philosophy is inferior to California’s. Now, let’s see — which of those two states is economically solvent and growing? What do you mean it’s not the all-knowing, all-seeing vastly-superior-to-all-other-states liberal California?! Liars.

aero on May 25, 2010 at 4:02 PM

You really need to live for a while in California to grasp the madness. There is a tax, a fee, an impact statement, a license, a permit for damn near everything. It really is out of control.

But in Utopia, all is well.

eaglesdontflock on May 25, 2010 at 4:05 PM

Are we out yet?

Of other peoples money that is……….

Koa on May 25, 2010 at 4:08 PM

Ellen Ripley was correct when she asked, “Did IQ’s go down suddenly while I was away?”

BackwardsBoy on May 25, 2010 at 4:10 PM

This may sound crazy but I am willing to vote for Democrats in California. The quicker they bring the system down the quicker a strong pro free market base can be built Democrat voters are not going to just accept that they have to depend on the free market until they see the state fail them. This is a difficult but neccesary path. Who believes if a Republican governor is elected California will all of a sudden turn into a low tax, roght to work state? I would rather let Jerry Brown, the guy that gave public workers the right to organize, preside over the destruction of the public sector. Every Californian that votes Democrat and is not a public employee will have their eyes opened. The realization will hit them like a sledge hammer: Vote Republican or leave the state.

Theworldisnotenough on May 25, 2010 at 4:20 PM

Well it’s already started here in Los Angeles. The mayor pulled a fast one by pretending our power company wasn’t going to give the city money it always gives the city because it wants a rate increase and after pretending to be outraged, Tony Villar jacked the rate up to offset the cost of the Green power he wants…

I really really hate Democrats!

CCRWM on May 25, 2010 at 4:27 PM

Everywhere you look socialism is failing.

That’s why your going to more and more of this directed towards America.

BDU-33 on May 25, 2010 at 4:46 PM

Yep, THREE YEARS, and we’re still waiting for all those ‘millions of green jobs’ Arnie is always talking about.

GarandFan on May 25, 2010 at 4:48 PM

Server farms are already leaving the state because electricity prices will skyrocket. INTEL and HP have pulled a lot of jobs. That’s OK, because the head of the Air Resources Board said, “…there are some jobs we don’t need.” Anybody here in CA been out of work for a year or so?

theCork on May 25, 2010 at 4:53 PM

And O-Burma Shave wants to Californicate the rest of the U.S. with
crap and tax.

Dhuka on May 25, 2010 at 5:20 PM

Dagnabbit! It’s supposed to be like this.

My life is sunshine, lollipops and rainbows,
That’s how this refrain goes, so come on, join in everybody!

Instead this is what we get…..

Oldnuke on May 25, 2010 at 5:20 PM

“The Economic Impacts Subcommittee of the Economic and Allocation Advisory Committee that was appointed by CARB Chairman Mary Nichols and charged with reviewing the report concludes that “many of the technologies that would be adopted under AB32 are either yet to be developed or currently prohibitively expensive.”

Another California Dream

theCork on May 25, 2010 at 5:25 PM

Every day is Earth Day in North Korea:

Darkness

California will look like that one day soon.

theCork on May 25, 2010 at 5:30 PM

We’ve seen this before. Crying that their efforts to save the planet are being punished, California pols will get Congress to impose the same set of idiotic standards on the rest of us (if EPA doesn’t beat them to it) to even the economic “playing field.” No worries, because once we all have the same stupid anti business policies none of the jobs can go anywhere, like, you know, China or India, or something. Right??

FalseProfit on May 25, 2010 at 5:41 PM

The Golden State is now the Beholden State. Indies and Conserves run while you can cause it won’t be long before the whole state implodes.

wordsmithy2009 on May 25, 2010 at 5:47 PM

The study says the negative impact on most California industries will be “modest,” but energy-intensive industries—specifically, aluminum, chemicals, forest products, oil and gas and steel—”may significantly reduce their business activity in California.”

CEMENT! Do not forget CEMENT!

ALL CEMENT will need to be imported under cap-n-tax of all flavors.

I know, it sounds boring, but ALL construction ends without Cement!

Freddy on May 25, 2010 at 6:13 PM

This will cost every California family about $3k in extra taxes each year. Join the California Jobs Initiative to STOP AB32. We need to get the word out.

NTWR on May 25, 2010 at 6:22 PM

If you live in Irvine PLEASE go to the City Council meeting tonight. The city is thinking of joining Rancho Cucamonga and others in supporting a STOP to AB 32. It starts in half an hour. GO.

NTWR on May 25, 2010 at 6:27 PM

CA cap-and-trade will cost jobs, economic growth

But they’ll continue live their lifestyle on the Left Coast unhindered.

Those people out there must have an endless supply of monetary income—else I am hard-pressed to understand why that state in particular hasn’t thoroughly collapsed already.

Dr. ZhivBlago on May 25, 2010 at 7:59 PM

Those people out there must have an endless supply of monetary income—else I am hard-pressed to understand why that state in particular hasn’t thoroughly collapsed already.

Dr. ZhivBlago on May 25, 2010 at 7:59 PM

Yes, some are quite wealthy. But unemployment is higher here than elsewhere. I’ve friends and relations who’ve lost business, homes, marriages to this recession. Others flee. Eventually California cities will have to plow under abandoned homes as Detroit has done.

theCork on May 25, 2010 at 8:21 PM

When Arnold Schwarzenegger signed AB 32 into law in 2007, he called California’s cap-and-trade bill a pathway to a green-energy economic bonanza. A new study commissioned by California’s state auditor calls it a bust.

Arnold: “It’s not a tumor!”

ya2daup on May 25, 2010 at 10:35 PM