Waiver Denial: All Pain or All Gain?

On December 19, the federal government denied California a waiver to impose vehicle standards more stringent than national standards under a law passed five years ago, Assembly Bill 1493. The gambit is another example of California’s counterproductive energy policy, heavy on government intervention.

California has set climate policy goals to reduce greenhouse gas (GHG) emissions by 80 percent by 2050. The California Global Warming Solutions Act of 2006 (AB 32) mandates reductions in future California GHG to 1990 levels by 2020. The California Air Resources Board (MI, on December 6, set a target at 427 million merric tons by the year 2020-a nearly 30 percent reduction from expected emission levels, AB 1493, even though enacted before AB 32, is considered a major implementation mechanism.

House Speaker Nancy Pelosi told the Environmental Protection Agency on December 21, two days after the waiver denial, that Congress would closely scrutinize its decision to reject California’s request to tighten rules on greenhouse gas emissions.

“The actions of the EPA in denying the California request cannot help but raise serious questions about the support of the Bush administration for state efforts to safeguard the environment and the health of their residents,” Pelosi wrote in a letter to EPA Administrator Stephen L. Johnson.

Consider what state officials like California Air Resource Board (CARB) Deputy Executive Officer Tom Cackette acknowledged about the policy. Cackette was questioned under oath during proceedings in Vermont regardng that state’s desire to adopt regulations identical to California’s. He acknowledged what usually goes unspoken and unreported, namely that the policies will have no impact on the climate.

Q. “You’re not aware, as you sit here today, of any calculation that would suggest that it would be large enough to measure even if the entire country adopted AB 1493, correct?”

A: “I’m not aware of any studies.”

Q: “And you’re not aware of any studies that suggest that even if the entire world adopted AB 1493 that you’d achieve a reduction in ambient temperature that would be large enough to measure, correct?”

A “I’m not aware of any studies, yes”

Policies that address our energy and environmental needs are important, but lawmakers and regulators should not be in the business of selecting some technologies and excluding others, nor moving so fast that better technologies are shut out, simply by timing. Worse are mandates that provide little benefit, but at high costs. The Electric Power Research Institute has estimated the impact of AB 32, the umbrella legislation, using advanced, widely accepted economic models. There will be significant costs in the state, increasing as future GHG emissions ratchet down, and our population and economy grow. Cumulative real costs to the California economy could be as much as $511 billion through 2050 if the goals are actually met.

The average cost of this policy (over 40 years) would be approximately $32,000 to every California household. The long-term cost would be the equivalent of nearly two thirds of one year’s median income to every household in California. The costs to low income and minority communities in California would be even more severe. The price increases would be regressive in that poorer households would bear a larger burden relative to their income than would wealthier households.

Government intervention is especially troublesome when the free market is making significant progress on an issue like greenhouse gas emissions, and for little or no particular benefit. The approximately 130 million metric tons to be reduced in California represent less than ‘1/2 of one percent of world carbon dioxide emissions: that certainly won’t make any difference. The specific benefit of increased vehicle standards is even less, and becomes zilch when compared to the new federal standards. And it slows achievement of air quality improvements for smog, by slowing vehicle replacement

The waiver denial, meanwhile, came on the same day President Bush signed the 2007 Energy Bill, which includes updated and more stringent vehicle standards, but four years later than Califonia’s proposal. The waiver request is all but certain to return to court. A parade of lawsuits to obtain permission for more stringent standards will impose significant costs on California consumers and provide little or no meaningful results.

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.

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