For Immediate Release: April 16, 1998

Preliminary Findings of New Report Projects Devastating Economic Impact in the State

San Francisco – According to the preliminary findings of a study to be released next month by the Pacific Research Institute and The National Consumer Coalition under the auspices of Consumer Alert, enactment of the Kyoto Protocol would spell disaster to the citizens of California. Because of the size of California’s economy – exceeded by only six nations in the world – and the crucial role that energy plays both in the state’s economy and in Californians’ daily lives, meeting the terms of the Kyoto agreement would be felt enormously by every person, family, and organization throughout the state.

"California would be particularly hard hit because of its heavy reliance on oil, natural gas, and electricity, all targets in the Clinton-Gore Administration’s push for sharp reductions in greenhouse gas emissions," says Glenn Schleede, the author of the study.

Among the study’s preliminary findings on the impacts that various alternative measures would have in California:

• Californians would likely have to make do with less electricity as well as higher electricity bills. Proposed greenhouse gas emission reductions could force California to reduce substantially its dependence on electricity generated with natural gas and its heavy reliance on coal-based electricity imported from other states. Economical alternative sources of energy are not available. Californians (including schools, hospitals, nursing homes, and government agencies) already pay electricity prices well above the national average. Higher prices forced by emission limits considered by the Administration are likely to exceed any decreases resulting from the restructuring of the electric industry now underway in California.

Estimated cost: Various taxes on electricity could result in annual additional costs to California’s electric bills of $2.6 billion to $10.4 billion, or $237 to $946 per household.

• Taxes on motor fuels are other measures that might be imposed. As in the case of electricity, higher costs or taxes on motor fuels will hit consumers. Californians are especially vulnerable because of the heavy dependence on motor vehicles in the state.

Estimated cost: A $.50 per gallon increase in taxes on motor fuels would add at least $7.7 billion a year to Californians’ driving costs, or $715 per household – a 40 percent increase; a $1 per gallon increase would add $15 billion, or $1,430 per household – an 80 percent increase.

• Higher energy costs or federal taxes would mean job losses in every community in California. Higher energy prices mean fewer dollars available to spend on groceries, clothing, housing, medical care, and other services. The result would be a direct loss of job opportunities for people employed in stores, factories, offices, or on farms. Tax dollars that flow from California to Washington, D.C. take jobs out of every community.

Estimated cost: A $.50 per gallon increase in taxes on motor fuels would mean a community of 500 would see an annual dollar outflow of $122,500, or the equivalent of 4 job losses; a $1 per gallon increase would double the job loss.

• Higher energy costs would mean higher prices for products from California’s factories and farms. It would also mean less ability to compete in U.S. or world markets with products from areas or countries that do not experience similar price increases. This could be a particular problem with competition for California exports among one or more of the 120+ countries (e.g. China, India, any countries in South or Central America) that are not required under the terms of the Kyoto Protocol to reduce greenhouse gas emissions.

• The elderly would be particularly vulnerable to rises in energy costs. Specific sectors of the population are particularly vulnerable to energy cost increases, such as older people living on fixed incomes. Approximately 11 percent of California’s population is 65 or older. A larger share of their income would have to go to higher energy and energy tax costs.

"Individuals and families in California deserve to have objective information on the real implications of the Administration’s plans for reducing greenhouse gas emissions," argues Schleede. "Unfortunately, the Administration has not made this information available, despite the fact it is precisely individuals and families who will bear all the costs and feel the impact of reduced energy supplies."

###

The San Francisco-based Pacific Research Institute is a non-profit policy organization that promotes the principles of individual freedom and personal responsibility by promoting policies that emphasize a free economy, private initiative, and limited government.

The National Consumer Coalition is an on-going educational coalition of 24 public policy groups that are committed to the consumer value of a market-economy in providing consumer choice, competition, and advances in technology.

Consumer Alert is a non-profit, non-partisan consumer group, with individual members in all 50 states, which focuses on public policy issues and consumer education. The study authored by Glenn Schleede, Impact of Potential "Greenhouse Gas" Emission Limits on the People and Economy of California, will be released in May 1998.