Greenhouse gas emissions cap will cap California's economy

by Jack M. Stewart
June 8, 2006
California has a burgeoning population that will continue to grow for the foreseeable future. The California Department of Finance projects that the state will pass the 40 million mark in 2012 and 50 million by 2036. To prepare the state for this growth, legislators should be passing bills that will foster high wage jobs with good benefits. Unfortunately, there is a bill in the legislature that would take the state in the opposite direction by limiting the state’s economic activity to 1990 levels.

The proposed “California Global Warming Solutions Act of 2006” would impose an emissions “cap” and require manufacturers to reduce emissions to 1990 levels. Carbon dioxide (CO2), the largest source of greenhouse gas emissions, is simply a byproduct of energy consumption. The more energy we use, the more CO2 emissions we produce. Capping greenhouse gas emissions and requiring a roll-back to 1990 levels is nothing more than capping energy use and, consequently, manufacturing and economic activity.

Even without limits on energy use, California manufacturers have lost ground in the last few years. According to the Employment Development Department, over 379,000 jobs have been lost in the manufacturing sector since December 2000, a 20 percent decline. The average salary for the manufacturing jobs that California is losing is $56,000, well above the average income in California. To turn this around, we should be sending a strong message that we want manufacturers to remain and expand in California, not capping their energy use and leading them to locate in other states or countries.

Ironically, when manufacturers expand outside California, we lose not only jobs, but also the chance to keep greenhouse gas emissions as low as possible. California today leads the country and the world in energy efficiency, registering the third lowest emissions per capita in the United States. Stringent state policies and high energy costs will continue to put downward pressure on energy use into the future. Manufacturers who chose to expand in California will have to embrace the latest technologies for energy efficiency to stay competitive. It is foolish to adopt a policy that purports to reduce emissions but only moves those emissions elsewhere for no benefit to the planet - better to keep manufacturers here with the tools to be as efficient as possible.

Keeping manufacturers competitive in the state also requires that we have adequate energy supplies. The bill to reduce greenhouse gases would require energy producers to reduce their output and oil refiners to dramatically cutback their energy usage to 1990 levels. For gasoline alone, this could mean a reduction of 17 percent, the equivalent of shutting down three average-sized refineries. The result would be a catastrophic loss of fuel supplies that would be very painful for consumers and the state’s economy. Chief Economist for the American Council for Capital Foundation, Margo Thorning, recently stated in a San Francisco Chronicle greenhouse gas opinion article, "A large body of economic research by respected U.S. academic and energy-modeling firms shows that near-term mandatory emission reduction targets will increase energy prices and reduce economic growth and employment."

I believe California can have a strong economy and a healthy environment. The bill to impose a greenhouse gas emissions cap and roll-back to 1990 levels will accomplish neither purpose. We need a better plan for California’s future.

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