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LAO's Flawed Look At Jobs and AB 32

by: Robert Cruickshank

Tue Mar 09, 2010 at 16:47:18 PM PST

Senate Republicans got the Legislative Analyst's Office to deliver an assessment of AB 32's impact on jobs that would, on the surface, seem to validate their claims that AB 32 will hurt jobs. The LAO hedged as much as they could, saying that much of the impact of AB 32 was uncertain, but did argue that some job losses would occur:

While CARB did not estimate job impacts for other time periods, it seems most likely to us that the implementation of AB 32 through the SP will result in the near term in California job losses, even after recognizing that many of the SP's programs phase in over time.

We'll almost certainly hear a lot about this analysis from the right and the global warming deniers. But is it accurate?

A closer look suggests it's not. The LAO analysis fails to actually explain their projected job losses in any great detail. There's no accounting of which industries might see near-term job losses or how many jobs might be lost, or which regulations would lead to these job losses. There is a rather vague and general discussion of possible impacts of things such as increased fuel economy standards, but overall there isn't really anything in the report to justify the headline claim that AB 32 will cause near-term job losses.

Further, the LAO did not assess how many green jobs AB 32 has already created. The LAO did charge that the California Air Resources Board "overstated" the number of jobs AB 32 would have created by 2020, but their case is quite weak. The LAO argues that the economic modeling assumptions used by CARB have been questioned by some economists, and that the overall impact of the regulations aren't yet well understood.

While that might be true, the LAO has merely asserted that the CARB projections could be in error - they have not conclusively demonstrated this to be the case. The LAO is raising some questions that would be good for the statisticians and economic modelers to debate, but that's about as far as it goes.

More problematically, the LAO did not contextualize this discussion at all. There is no discussion or analysis whatsoever of the costs to the state's economy of unchecked global warming, estimated by Next10 to be possibly as high as $4 billion per year for the rest of the century. Nor is there any discussion of the potential loss in green jobs if California suspends AB 32 indefinitely and other states and nations take the lead in creating those industries.

Instead the LAO's analysis seems to assume that the status quo is just fine, and that there are no major economic threats that AB 32 might help address. We all know the status quo is not acceptable, and that doing nothing on global warming, as the AB 32 opponents would have us do, is a recipe for ruin.

The LAO analysis does not really bolster the opponents' cause, though Republicans are already claiming it does. Still, the LAO would have been better off not delivering this flawed report, and waiting until they could provide more detailed evidence of their assertions about AB 32's near-term job impact and CARB's job estimates, as well as properly contextualized that discussion against the backdrop of a global race to innovate green jobs and the costs of the climate crisis.

Robert Cruickshank :: LAO's Flawed Look At Jobs and AB 32
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An incomplete analysis of 'green jobs' (0.00 / 0)
Interesting article on the LAO's report.  Thank you for posting.

The LAO did hedge in it's analysis and there is little doubt they could have, and should have, gone much deeper in their analysis.

While you are correct in saying that the LAO does not assess how many green jobs AB 32 has created, the other point to be made is that the LAO also fails to mention how many "private sector" jobs AB 32 might eliminate.  

The LAO fails to mention in its analysis is the recent study done by the Juan Carlos University in Madrid, Spain.  The study is important because it is one of the few comprehensive studies done on "green jobs."  The study showed that every "green job" created in Spain over the last eight years came at the cost of 2.2 regular jobs, and only one in 10 of the newly created green jobs became a permanent job.  

So yes, in the short run AB 32 may have created some "green jobs" but many of those would seem to have been at the California Air Resources Board.  In terms of private sector jobs which actually help to drive the economy, many have been in the form of consultants who are being hired by local governments desperately trying to discover an effective method of implementing AB 32 standards into their general plans (which by the way comes at a significant cost).    

Huh... (0.00 / 0)
Posted without much comment:


The links above lead to a useful collection of links concerning that study.  Not nearly as cut and dried as the oil industry's front groups tried to make it.

[ Parent ]
Looking at AB 32 as solely a jobs bill (0.00 / 0)
is a bit stupid. But that seems par for the course these days.  I hope that U.C.L.A. economist Matthew Kahn weighs in on this report. He has probably been as insightful about it's effect as anyone and reviewed it's initial financial analysis. He recently looked at AB 32 in the context of Congressional delays on climate legislation.

With the anticipation that the Federal ACES (passed by the House in June 2009) (the Waxman-Markey Anti-carbon bill) would be signed by Pres Obama, I had naively thought that California's AB32 (our anti-carbon law) would become a little brother to the federal law. But, if the Feds stall then this makes AB32 even more important as a guinea pig and a credible commitment for continuing the green push. The state's republicans will argue that California can't afford AB32. I don't believe this but the election of Senator Brown at the Federal level will make it imperative for the Air Resources Board to work with serious economists to design the carbon regulation in a cost-effective manner.

Changing CA, one open mind at a time.  

LAO fails to cite research to support their assertions (0.00 / 0)


A March 4 letter from the LAO to California State Sen. Dave Cogdill (R-Modesto) attempts to cast doubt on the economic benefits of the state's landmark global warming bill, AB 32. According to Jasmin Ansar, a climate economist with the Union of Concerned Scientists (UCS), Mac Taylor fails to cite any research to support his claims that the state's economy would suffer under AB 32.

The public release of Taylor's letter coincides with a statewide effort to gather signatures for a ballot initiative asking voters to nullify AB 32 unless state unemployment drops to 5.5 percent. Two Texas-based oil companies, Valero and Tesoro, are funding that effort.

"These economic attacks on AB 32 are baseless," Ansar said. "There are many independent economic studies that show that AB 32's clean energy and climate policies will have either a neutral or slightly positive impact on our economy. California has proven time and again that economic growth and environment protection go hand in hand."

On the first page of his letter, Taylor claims that "on balance the aggregate net jobs impact in the near term is likely to be negative." This statement is purely speculative. It is not backed up by any research. Taylor devotes the rest of his letter to criticizing a preliminary economic analysis of the California Air Resources Board's initial plan for implementing AB 32. He then concludes that "it seems most likely to us that the implementation of AB 32 will result in the near term in California job losses." Again, he presents this claim with no reference to any analysis that would support it.

Taylor's baseless claims are contradicted by a number of independent economic analyses that find significant job growth potential at the state and national level for many climate change policies:

 ·  Historically, energy efficiency, which AB 32 would expand, has been an economic winner for California. An October 2008 study by researchers at University of California, Berkeley found that California's energy efficiency policies generated nearly 1.5 million new jobs from 1977 to 2007, while eliminating fewer than 25,000.

 ·  A December 2009 report on clean energy manufacturing and related jobs by the nonpartisan research group Next 10 found that California job growth in such fields expanded 36 percent from 1995 to 2008. Overall, clean energy jobs represent one of the bright spots in California's economy.

 ·  An October 2009 Next 10 report concluded that if AB 32 were put on hold, the state would lose $80 billion in gross state product and half a million jobs by 2020. Conversely, implementing a 33 percent renewable electricity standard and a 1 percent annual improvement in energy efficiency would increase gross state product by $20 billion and generate 112,000 jobs.

 ·  A December 2009 Center for Resource Solutions review of several macroeconomic analyses concluded that climate solutions are affordable and that pollution reductions called for by AB 32 are consistent with economic growth.

Failing to act on climate change would be far more expensive than adequately addressing it. Another Next 10 report, published in November 2008, found that the state has $4 trillion in real estate assets, of which $2.5 trillion are at risk from extreme weather events, sea level rise, and wildfires. Climate change will come with a projected annual price tag of $300 million to $3.9 billion for California over this century, depending on how warm the world gets, the report concluded.  

State Control versus Local Control (0.00 / 0)
DanKalb with all due respect for every study you point out there are other national and international studies that show the exact opposite.  Not to mention the studies refuting climate change... but I digress.

So instead of going point by point in a back and forth I thought it would be more productive to address a point you made.  You noted "Failing to act on climate change would be far more expensive than adequately addressing it. Another Next 10 report, published in November 2008, found that the state has $4 trillion in real estate assets, of which $2.5 trillion are at risk from extreme weather events, sea level rise, and wildfires...."

It is important to note that under current law, local governments have the ability to address these concerns on their own accord within their General Plans.      

Cities and counties that are flood prone / earthquake prone / fire prone know who they are and have been taking adequate steps to address the local issues.  AB 32 and the host of associated laws simply come down as mandates -- let alone unfunded mandates -- from the state.

More problematic is that these mandates arrive at a time when local governments are hard-pressed to comply with existing law on other elements of the general plan.    

BTW... if the state has over $4 Trillion in assets... and those are a liability then perhaps it's time to consider selling some of those off so that we can meet our other financial obligations.  

[ Parent ]
The difference between us... (0.00 / 0)
Okay... so not really between us, but between a study cited by DanKalb and the LAO study.

While Next 10, a self-described "independent, nonpartisan organization focused on innovation and the intersection between the economy, the environment, and quality of life issues for all Californians," looked just at green jobs, the state's independent Legislative Analyst's Office looked at what the Global Warming Solutions Act will actually do to the overall economy.

[ Parent ]
Continuing the jobs talk... (0.00 / 0)
I highly enjoyed the insightful and thoughtful comment "looking at AB 32 solely as a jobs bill is a bit stupid."  

Ignoring the fact that California's green & economic policies are intrisincly linked is naïve at best - especially at a time when the State's unemployment is at an astounding 12.5%.  

It should come as no shock that legislation mandating the use of more expensive energy sources will result in aggregate losses to an economy.

The reality is that mandates kill jobs by raising energy costs.  The only reason these alternative energy sources need to be mandated in the first place is that they are too expensive to compete otherwise.  Thus, in addition to forcibly supplanting traditional energy jobs, renewable energy mandates raise energy costs and thus destroy jobs.

So, for every dollar of capital that is funneled to green projects due to government mandate, there is a dollar less to be capitalized on by more efficient economic agents.  The net result, of course, is a sub-optimal economic outcome, and California is not the first economy to make this simple economic logic manifest.

Many of the comments made also fail to recognize the fact that even prior to AB 32 California was moving towards a green economy WITHOUT the mandates.  For example California already had the "greenest" building standards in the nation.  

Also interesting how no one wanted to address the crushing costs AB 32 is already placing upon California's local governments as they struggle to find ways to address the new mandates while already struggling to meet their current fiscal obligations in the current economic climate.  

Huh? (0.00 / 0)
Since almost all of AB 32 rules and measures have not gone into effect yet, it is inaccurate to suggest that AB 32 is already costing local governments--or anyone else--a lot of money.  

This is typical of the anti-environmental interests who have opposed most every environmental protection measure in the state.  

They always claim that virtually every enviro rule/measure will cost way too much money to comply with and will hurt the public.  Then, after the measure/rule goes into effect for a while, we end up seeing that the actual costs were substantially less than industry economists had predicted.

Yes, AB 32 is not primarily about jobs--but helping to create clean energy jobs for a clean energy economy is a by-product of AB 32 that we should embrace--and the sooner, the better!  

[ Parent ]
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