Governor Schwarzenegger Shifts Policy on AB32

Governor Schwarzenegger Shifts Policy on AB32

In sharp contrast to a recent study from the Legislative Analyst’s Office (LAO) reporting implementation of AB32 would bring about a net job loss and raise state unemployment in the near future and stressing that long term effects are “uncertain”, CARB released their own report this week stating the bill would yield neither major economic gains nor losses – essentially making it a wash for California businesses and consumers.  CARB did concede that AB32 would hurt some industries but others will improve, and therefore counterbalances the impact to the state economy. They noted that manufacturing and productive industries would generally suffer, while service industries may benefit.

It appears Gov. Schwarzenegger is coming down on the side of the LAO and the 2.25 million unemployed in California.  The Governor’s letter asks CARB to pull back on aggressive cap-and-trade plans to create a complex emissions permit auction system.  Citing costs and record high unemployment levels, Schwarzenegger makes it clear he “strongly supports” an introductory period where permits are allocated for free by the CARB and allowing businesses to adjust to the new regulations. 

While this ‘precaution’ seems positive at first glance, it is a short term solution to a long term problem.  Putting off the implementation of a complex trading scheme for a few years does not make the process more transparent, efficient or cost effective. It merely delays the inevitable and temporarily hides the price tag of an over-reaching policy.  The system will still be open to the same pitfalls – like price manipulation, job loss and exorbitant costs – in three, five or ten years as it would if it were implemented today. There are of course numerous other regulations, besides the cap and trade provision, being implemented under AB32.

While acknowledging that AB32 is a policy California simply cannot afford is a step in the right direction, we still have a long way to go to get this right.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.