The coronavirus has hit Southern California especially hard. With businesses forced to close their doors to customers, many have shuttered for good unable to handle the sharp downturn in income. As a result, more than 3.6 million Californians filed for unemployment over 8 weeks in March and April.
Millions who are now living on unemployment or taking significant pay cuts are looking for relief from the state’s high cost of living. As lawmakers explore ways to help those impacted by the coronavirus-fueled recession, reforming state energy mandates enacted in the name of fighting climate change could provide significant savings.
How much do state energy mandates cost us? In more typical times, California drivers paid a 37 percent premium for gasoline versus the national average when they filled up their cars in 2019. Today, even with gas prices falling due to reduced demand, drivers are paying a 55 percent premium.
Sacramento mandates also drive up electricity costs. Residential customers across the Golden State pay 46 percent more for electricity than the national average every time they turn on the lights – and business customers pay 69 percent more.
With summer soon upon us, Californians will feel a bigger pinch when air conditioners are fired up to keep people cool from soaring temperatures.
But it doesn’t have to be this way. In fact, if state legislators reformed these laws and adopted a market-based approach to energy policy, Californians could save big, while still continuing the state’s progress in the fight against climate change.
A new study, “Legislating Energy Prosperity,” estimates that Californians could save as much as $2,000 annually if state lawmakers and Gov. Newsom embraced market-based energy reforms.
Today’s energy status quo hurts working class residents in communities like Santa Ana, Downey, and Moreno Valley. Many who live in rural and inland California can’t afford the state’s high cost of living, which U.S. News pegged as second-highest in the nation in their annual Best States rankings.
Sacramento’s big government energy mandates add to this unaffordability by forcing many to live in “energy poverty” – spending 10 percent or more of their incomes paying energy bills.
Junking expensive and unrealistic 100 percent renewable mandates and solar requirements and state-only mandates on gasoline and instead adopting free-market energy policies would be like giving a major tax cut for Californians struggling economically in these tough times.
Consider what we’d all potentially save. Depending on the scenario, eliminating inefficiencies in California’s electricity market could save consumers anywhere between $5.3 billion and $15.7 billion. Over time, Californians would also save up to $11.0 billion annually in lower gas prices, depending on consumption.
Not only would these reforms put more money in people’s pockets to spend on their families, but they would also increase average annual real state GDP by up to 3.3 percent at a time when the state’s economy needs a boost. This would also generate more tax revenue for local and state government budgets as they face massive revenue losses and are looking for resources to prevent painful budget cuts.
Advocates for the status quo say Sacramento’s energy mandates are an essential part of the state’s fight against emissions and global warming. Take a closer look and you’ll see that these policies aren’t terribly effective in helping the state reach its emission reduction goals. Other states that have embraced market energy policies have seen emissions fall by 14 percent since 2007, compared to just 9 percent in California.
In other words, California can achieve its climate goals without imposing massive costs and regulations on the working class.
It’s not often that we can have a win-win situation. But if Sacramento policymakers went outside their comfort zones and embraced energy policies that actually make sense – rather than government mandates that add massive costs to poor and minority communities – we can all save big and further California’s national leadership in fighting global warming.
Wayne Winegarden is senior fellow in business and economics at the Pacific Research Institute, and author of the new study, “Legislating Energy Prosperity.” Daniel Turner is founder and executive director of Power the Future. Download the study at www.pacificresearch.org.