Western Climate Initiative: Here’s the rest of the story

Michael Gibbs, the Governor’s point man on regional climate initiatives, has provided commentary on the Western Climate Initiative and the Capital Panel Discussion held on May 15, arranged at the request of Assemblyman Niello. I was one of the panel members, yet feel I must have been at a different event than the one described by Mr. Gibbs. His commentary fails to mention the independent economic analysis presented by the Beacon Hill Institute that shows the harm to each of the participating states’ economic and job outlook. Mr. Gibbs also doesn’t mention that several of those states are backing out of the Initiative, for that very reasons—it will cost thousands of jobs. Finally, he fails to mention that, even if successful in reducing greenhouse gas emissions, the impact on future global temperature would be much less than 5/100 of one degree.

In its review of the Western Climate Initiative, the Beacon Hill Institute (BHI) at Suffolk University in Boston identified numerous flaws made by the seven-state consortium, calling into question WCI’s economic projections. The authors wrote, “Using the Western Climate Initiative’s own projections of increases in fuel costs, BHI finds that the policies will decrease employment, investment, personal income and disposable income. While WCI claims the ‘design is also intended to mitigate economic impacts, including impacts on consumers, income, and employment,’ they fail to quantify the impacts.” BHI found that California could lose as many as 78,694 jobs and see a $30.4 billion reduction in personal income by the year 2020.

The Initiative would put investment by firms at risk by slowing investment in the region by anywhere from $548 million to $1,448 million, including in the vaunted “clean tech” venture capital arena.

Mr. Gibbs suggested opponents of WCI are worried about “offsets” being prohibited from the initiative—we have explicitly and consistently said our key worry is that offsets are included. There is no difference between “offsets” and cap and trade. Cap and trade is a faux market, subject to political abuse and makes for poor public policy at any level.

We did not “fabricate” the inclusion of cap and trade (offsets) as that is an advertized central component of WCI.

In response to a question from the audience, another fundamental error of the WCI was revealed. The design completely confuses the concept of cost and value. The WCI and more generally AB32, assumes any greenhouse gas emission reduction—no matter how insignificant or how costly—is by definition cost effective, and in effect forces companies to pay ‘ticket scalper’ prices. The WCI trading scheme intentionally forces prices to equal the single-highest boutique price, similar to the pricing scheme for electricity back in 2000 energy crisis.

Responsible planning and implementation of WCI would at least account—somehow or somewhere—of the fact that full implementation would at most change average global temperature in 2050 by less than 5/100 of one degree. Yet Mr. Gibbs demurs and claims that his is not a “scientific body passing judgment on climate science.” Yet that is exactly what they are doing—by forcing a non-economic, ineffective, costly and intrusive program on the citizens and taxpayers of participating states. Yes, but we must act– responsibly and deliberately, balancing costs and considering other important priorities. That desired outcome demands thoughtful and serious debate coupled with factual analysis, not arm waving invective.

Thomas Tanton is a senior fellow in energy studies at the Pacific Research Institute.

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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