Red Ink and Green Jobs

Citizens of the Golden State get nervous about carbon rationing plans made in flusher times


In 2006, when California Gov. Arnold Schwarzenegger signed a mandate for dramatic reduction of greenhouse gasses into law, the state's economy was in a very different place. Unemployment was 4.5 percent and residents felt rich thanks to inflated home values. Today, 12.5 percent of Californians are out of work, the state is in budgetary meltdown, and Californians are re-evaluating their priorities.

Economic distress and skepticism about the power of the state to create "green jobs" are fueling a growing movement to stop deep cuts in emissions standards—which would require Californians to consume 25 to 30 percent less energy than they otherwise would have by 2020—from kicking in.

The Global Warming Solutions Act (also known as Assembly Bill 32, or AB 32) would ration greenhouse gas emissions—forcing them back to 1990 levels by 2020—through a mix of policies including a cap-and-trade carbon market along with a set of complementary measures. Those measures include setting fuel efficiency standards for appliances and buildings, requiring that 33 percent of the state's energy be produced from renewable sources, setting a low carbon fuel standard for vehicles, and zoning changes to discourage automobile travel, among other new regulations and mandates.

Proponents of the 2006 law assert that its implementation will create a plethora of new "green jobs." For example, a recent press release issued by the California Business Alliance for a Green Economy quotes self-described "long time environmental activist" and current green economy venture investor Tom Soto as saying, the law "will help to drive California's economy toward a more prosperous, cleaner, more efficient future, meaning more jobs being created in one of the most difficult times in our country's history." Similarly, Cynthia Verdugo-Peralta, founder of VPC Energy and Strategic Energy, Environmental & Transportation Alternatives declared, "When it comes to job growth, there is substantial, irrefutable evidence that growing more efficient and greener will create jobs, not kill them." Verdugo-Peralta added, "That's why I am heartened that CARB's [California Air Resources Board] new economic analysis reaffirms the benefits of implementing California's Global Warming Solutions Act."

Verdugo-Peralta is referring to a new report issued last month by the California Air Resources Board (CARB), the state government agency that will largely oversee the new carbon rationing scheme. That analysis finds that implementing emissions cuts will increase the price of electricity by between 0-20 percent, the price of natural gas by between 13 and 76 percent, and the price of gasoline by 6-47 percent.

A competing analysis using the same data by the global consulting firm Charles River Associates finds the costs of carbon rationing are likely to be higher. This is primarily because the requirement that 33 percent of California's electricity be produced using renewable fuel sources and other similar mandates will inefficiently boost overall costs. Charles River Associates estimate that the 2006 law will increase California's electricity prices between 11 to 32 percent by 2020, and that gasoline and diesel prices will rise between 14 to 51 percent by 2020.

The CARB best case analysis estimates that the new mandates and carbon market will actually increase employment slightly by 2020, and that per capita income will rise by 0.1 percent by 2020, or about $30 per person. In its worst case scenario, incomes would be reduced by 0.6 percent, or about $300 per capita. 

By contrast, the Charles River analysis finds that implementing the carbon rationing law will cost between 0.5 and 1.1 percent per capita by 2020, reducing personal incomes by $200 to $500. The cost differences between the two analyses arise largely from how they treat the mandates. The CARB report suggests that the higher energy prices faced by Californians will be completely offset by conservation and energy efficiency mandates embedded in the law because they force Californians to reduce the amount of electricity and fuel that they will use in 2020. The Charles River analysis finds that the costs of implementing those mandates more than outweigh their benefits.

With regard to "green jobs," the CARB's best case analysis estimates that implementing the law will boost California's employment by 10,000 extra jobs by 2020; its worst case projects 330,000 fewer jobs than there would otherwise have been by 2020. Just ahead of the release of the new CARB report, the California Legislative Analyst's Office (LAO) issued an analysis of the law's net impact on jobs in California. While not offering firm figures, the LAO analysis took into account increases in "green jobs" and job losses in other sectors, especially in fossil fuel industries and found that "the aggregate net jobs impact in the near term is likely to be negative." The LAO report did conclude, "In a relative sense, however, [AB 32's] effect on jobs in both the near term and longer term will probably be modest in comparison to the overall size of the state's economy." Even under the best of circumstances, California's carbon rationing scheme will not produce enough "green jobs" to make a significant dent in the state's very high unemployment rate. Interestingly, Golden State green economy boosters seem to agree.

Take for instance, the Many Shades of Green report issued in December 2009 by the San Francisco-based green think tank, Next 10. That report looked at the growth of green jobs in California between 1995 and 2008. The media widely quoted Next 10's upbeat claim that "California green jobs increased by 36 percent from 1995-2008 while total jobs expanded only 13 percent. As the economy slowed between 2007-2008, total employment fell 1 percent, but green jobs continued to grow by 5 percent." A 36 percent increase sounds impressive. But when one looks at the actual numbers, green jobs increased from 117,000 in 1995 to 159,000 in 2008, and currently constitute about 1 percent of California's total employment. And a five percent increase in green employment nets out to something like 8,000 total jobs, while between January 2007 and 2008, 182,000 Californians lost their jobs. Currently, nearly 2.3 million Californians are looking for work. Next 10 founder F. Noel Perry admitted to the San Francisco Chronicle, "Green tech is not a panacea. We believe green jobs are going to be a significant part of future jobs growth in California. But at the same time, we know they are a small proportion of the total jobs we have now."

The CARB and green economy boosters like Next 10 have strong ideological predilections that encourage them to minimize the costs of carbon rationing while maximizing the benefits of green investments. Of course, opponents of the carbon rationing law have the opposite motives. It is nevertheless instructive to see what opponents fear the effects of implementing the Global Warming Solutions Act will be on California's economic prospects. The AB 32 Implementation Group commissioned a preliminary analysis of the CARB's new study from the consulting group T2 and Associates. The consulting group is headed by Tom Tanton who is also a senior fellow at the libertarian Pacific Research Institute. The T2 analysis estimates that AB 32 will reduce California's gross state product by 2 percent at a cost about $700 per person and result in the net loss of about 485,000 jobs by 2020.

The AB 32 Implementation Group is seeking to put an initiative on California's November ballot that would delay the adoption of AB 32's carbon rationing scheme until California's unemployment rate dropped below 5.5 percent. Originally entitled the "California Jobs Initiative," it has been retitled by California State Attorney General (and soon to be Democratic gubernatorial candidate) Jerry Brown to the somewhat less catchy, "Suspends Air Pollution Control Laws Requiring Major Polluters To Report And Reduce Greenhouse Gas Emissions That Cause Global Warming Until Unemployment Drops Below Specified Level For Full Year Initiative." Supporters of carbon rationing point out that the initiative is being backed by out-of-state oil companies.

The initiative—however colorfully titled—will likely get on the ballot. Just today, Next 10 released a poll that finds that a majority of Californians still support AB 32, especially if the funds collected through the cap-and-trade scheme are mostly rebated to state residents. Support has eroded a bit, falling from 83 percent in 2007 to 69 percent today, but it remains to be seen how Californians will react once the campaign against the 2012 implementation of carbon rationing takes off. Already, the two leading Republican candidates for governor, former eBay CEO Meg Whitman and state insurance commissioner Steve Poizner, are urging a go-slow approach on implementing AB 32. If the economically dispirited voters in the Golden State appear ready to deep six California's ambitious climate regulations, the prospects of Congress passing a similar national carbon rationing plan this year will look bleak indeed.

Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is available from Prometheus Books.


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  1. There are green jobs in California. The problem is, the DEA keeps raiding them.

    1. Or the LA City Council votes them out of existence. Like they couldn’t use the sales tax revenue or anything.

  2. Consider this a plea to “green energy” advocates. Stop trying to bullshit me that higher energy prices will create more jobs that it destroys.

    Instead make your case that the sacrifice will be worth it. Transparent lying, no matter how loudly proclaimed or how often repeated, doesn’t help you case.

    1. “Transparent lying, no matter how loudly proclaimed or how often repeated, doesn’t help you case.”

      It hasn’t hurt the liberals.

      1. This could be true given the fact they call themselves “liberals” when nothing could be farther from the truth and people still fall for it and say they are liberals. Some prefer to refer to them as Liberals (capital L) indicating a progressive/socialist/statist, in other words the opposite of liberal. They are no more liberal than the average conservative or even moderate for that matter.

        With luck we may see positive change yet. Either the libertarian message is finally starting to get out, or people are just beginning to realize the obvious, either way the independent libertarian thinker is growing in numbers, they are the true liberal.

        As Scott Rasmussen recently observed: “The American people don’t want to be governed from the left, the right, or the center. They want to govern themselves.”

        The day may come yet when those who have used government as a weapon against us are finally side-lined and made irrelevant. Things would have to get a little worse before that is likely to happen. The way they’re handling things not much chance that won’t happen.

    2. J sub D|4.6.10 @ 3:29PM|#
      “… .Transparent lying, no matter how loudly proclaimed or how often repeated, doesn’t help you case.”

      Somewhat OT:
      In an article about “One Laptop per Child”, John Negroponte admitted that he (and they) well knew there was no way to get “$100” laptops for kids, as he (and they) claimed. He simply said ‘It sounded better than “$280” laptops and so they lied.
      And he seemed quite proud of it.

    3. Transparent lying, no matter how loudly proclaimed or how often repeated, doesn’t help you case.

      But that’s the way of the prog.

      1. The lying only appears thinly veiled to the non-progressive.

        The progressive’s fellow progressives accept every lie as truth without questioning it or even consideration.

        Therefore it’s only logical the intended target of the progressive’s lying is themselves.

        Too bad these people as a general rule never learned how critically important skepticism is in life. They are believers, the faithful, everything they participate in, politics, science, anything, it becomes religion to them or they aren’t involved.

        They are the very last people on earth who will ever understand science, they threw that possibility away when they chose unquestioning faith over skepticism. Science is never settled, nothing is ever a certainty. Yet these people go directly from speculation to fact without ever even questioning that speculation. Any who do question are automatically treated as heretics.

        Manufacture of imaginary crisis so one can secure work has been a mainstay of politics a very long time. This isn’t the first time science has been perverted to bring more credibility to the political angle. Nor is it the first time those involved made a religion of their involvement in either.

  3. Come November, y’all wish you’d be Californians. We got great weather, AB32 died, and Boxer’s gone! Take that Illinois!

    1. What matters is who’s in Sacremento.

    2. Nothing would please me more. I can remember when even L.A. was a nice place. Have many friends in California, SoCal mostly. It stinks they have to suffer for what they never agreed to.

      I can also remember when I used to tell people they’d wish they were Arizonans come fall. Now I’m the one freezing all but a few days a year.

      Global warming my ass, turn up the damn heat!!

    1. If it didn’t portend such dire consequences for the rest of the nation, it would be the Show of the Century to watch the State of California’s statist fantasies implode like some dying star.

      1. Not sure that is a bigger problem, more like it’s one the big problems that will get much bigger as the free fairy dust and unicorns for all save the environment legislation chokes off the revenue needed to even make an attempt to prevent complete ruin.

        It’s going to get added to the debt, the cost of bailing them out. And because of that they won’t change.

        How many barrels of oil do you think Mexico would give us for the state (minus a narrow strip the harbor at long beach, we might want to keep that part)?

        Wouldn’t do much good if they didn’t buy the citizens responsible for destroying the state as part of the deal. Chances are with those terms Mexico would pay us to keep the place.

    2. Good article and comments.

  4. Do you seriously think these people don’t know the actual effects of what they’re doing? It’s In A Good Cause, and most important, none of it is happening to them…

  5. I know this is wrong, but I have to admit that I would find it interesting to see how much economic damage Californians can do to themselves.

    Without another concrete example (I guess Michigan is not enough) of one of our key states spectacularly collapsing under the weight of failed non-capitalistic policies, maybe the rest of the US won’t learn.

    The part I hate is that this type of collapse impacts so many people’s lives.

    1. It would be great if the Fed would stop propping up WS so the smug progressive A-holes in NYC could get their just deserts.

    2. It would only be wrong if you hoped California broke off and fell into the ocean before, and not after Californians had finished destroying themselves economically.

      I’d tell you to say 50 Hail Marys and you’ll be forgiven, but theres that little hate issue of yours it really pisses the Holy Father off.

  6. It does, WJ, but it’s those same people that have voted for all this shit. Like Mencken said, they deserve to get it good and hard.

    1. Unfortunately, it will also impact those of us who voted “No” and/or *didn’t* vote for all this shit.

      1. Ain’t collectivism great?

        1. Yes!

  7. Ronald,
    I appreciate your analysis, but you got (at least) one major fact wrong: there is no energy rationing! Nor does the program seek to reduce “energy use” by 25-30%. AB 32 reduces emissions, NOT energy, and certainly not the benefits, economic or otherwise, that energy brings us. To say otherwise is a totally bald misrepresentation.
    As you point out, most of the reduction in carbon is accomplished by:
    a) renewable energy (33% by 2025) and low carbon transportation fuels (using advanced biofuels, electricity, natural gas, in place of gasoline). These don’t reduce energy, let alone ration it, they just change where we get it from. Go ahead and use all the clean energy you want!
    b) programs to help people and businesses adopt energy efficiency. This may reduce energy use, but it certainly doesn’t ration it. What it does do is provide the same amount of benefit – same heat, light, driving, refrigeration, etc. – for less energy. And less money by the way. Energy efficiency saves money – keeping it in consumers pockets, who then spend it in local communities, who spend it on employees and local suppliers etc. etc. Unlike when consumers spend on oil, the funds from which goes to Texas and Saudi Arabia and do very little for the economy of California. So there is one big source of the economic benefits – money saved by consumers is money spent in California communities.
    The only “rationing” here is the carbon cap-and-trade system that may be a part of AB 32 eventually. And that isn’t a ration for any particular person, but for the economy as a whole. It says “this is the amount of pollution scientists say the earth’s climate system can bear. Let the free market decide where it is best spent” Cap-and-trade is actually the most efficient, free market way to get any environmental problem solved. Every gosh darn economist, libertarian or otherwise, that has ever thought about it agrees that this is the case. So, if you have a problem with “rationing” and the only rationing that anyone is talking about is cap-and-trade, then you are going against hundreds of years of your own intellectual tradition. You should think about that.

    1. ^ (rolls eyes)
      Do you really think that mandating “renewable energy” when there is scant science, let alone technology, to accomplish that *isn’t* “rationing”?

      And: “What it does do is provide the same amount of benefit – same heat, light, driving, refrigeration, etc. – for less energy. And less money by the way.”
      Either my sarcasm detector is on the fritz, or we got a real whacko here.

      1. I don’t understand why Barack [sniff] doesn’t just ask me to handle all of this.

      2. LoL, Ron. How dumb can you be?

        “scant science” my ass. What are tens or even hundreds of thousands of publications, decades of development, and countless products if NOT a manifestation of the mountain of science out there.

        Btw, I have been buying 100% renewable energy for years, at a mere 15% premium to the market rate. Surely, having to give up that cup of Starbuck’s Joe every month will send me into an economic apocalypse.

        1. So glad to hear that you have decided that paying a 15 percent premium for “renewable energy” is a great investment of your money, Chad. Please, however, refrain from deciding what is a good use of my money. Maybe I don’t particularly feel like giving up my coffee every day so that we can have a multitude of wind turbines cluttering up the landscape and seas of solar panels.

          The bottom line is that it has been demonstrated pretty well that many of the so called renewable energy sources have their own environmental effects and are quite impractical both from a cost and energy generation standpoint. I’m not sure what publications, development, and products you refer to that the rest of us are apparently pointedly ignoring that could completely get rid of coal, gas, and oil, but please enlighten us. While you’re at it, maybe you could explain your thoughts as to why the rest of us haven’t seen the benefits and practicality that are so obvious to you. I hope it’s not another evil oil company conspiracy theory.

        2. Btw, I have been buying 100% renewable energy for years, at a mere 15% premium to the market rate.

          You’re getting the low hanging fruit. I would expect it will only get more expensive as more people choose to — or are forced to — pay for green electricity.

          1. You are only half-right: you ignore the fact that I am NOT getting economies of scale and the related product development. More or less, these two effects will cancel the low-hanging-fruit phenomenon.

            Either way, the price premium is trivial, as will be its effect on the economy.

        3. And just because you and BT deserve it:
          BT: “What it does do is provide the same amount of benefit – same heat, light, driving, refrigeration, etc. – for less energy. And less money by the way.”
          Chony: “…I have been buying 100% renewable energy for years, at a mere 15% premium to the market rate…”
          So, one of you is a bald face liar. Or, more probably, both of you are.

          1. I’m sorry you missed what I thought was a clear distinction of mechanisms (that’s why I outline-lettered them a) and b)).
            Energy efficiency (same energy services (heat, light, cooling, etc) with less energy) is one mechanism. The other is renewable and other low-carbon energy, which may cost more money per unit.
            Of course, combine these efforts – use clean energy but use less of it – and you can be paying the same total bill.
            California has higher per-unit electricity than most other states, in return for having a very clean energy mix, but the average resident’s bill is exactly average (on par with the coal-heavy Midwest, even after controlling for climate differences).
            Clean energy AND energy efficiency. No lie.

            1. Of course, combine these efforts – use clean energy but use less of it – and you can be paying the same total bill.

              Lets not overlook that efficiency often requires a capital investment. The most efficient devices are generally more expensive to buy.

            2. BT Turner|4.7.10 @ 9:05AM|#
              “…Of course, combine these efforts – use clean energy but use less of it – and you can be paying the same total bill….”

              Well, it’s hard to argue that if I used no energy, I would save money.
              And that refers to “clean” energy exactly how?

        4. Btw, I have been buying 100% renewable energy for years, at a mere 15% premium to the market rate.

          I’m calling bullshit on this.

          Please specify your energy consumption and prices paid.

        5. Chatting Chad…full of shit as always.

        6. Btw, I have been buying 100% renewable energy for years, at a mere 15% premium to the market rate. Surely, having to give up that cup of Starbuck’s Joe every month will send me into an economic apocalypse.

          So you are paying more than other people to get the same result?

      3. I hope this doesn’t mean Chad and BT and me can’t continue to be children forever, Ron L, because we can’t hear you!


        Can’t hear you!

    2. Cap-and-trade is actually the most efficient, free market way to get any environmental problem solved. Every gosh darn economist, libertarian or otherwise, that has ever thought about it agrees that this is the case.

      Good heavens. How uninformed can one person be?

      Here is Tyler Cowen citing Robert Samuelson’s disagreement that cap-and-trade is the best way to handle the problem. Here is Arnold Kling citing Megan McArdle’s making the same point.

      This is with little searching and no contrary hits among libertarian economists. I expect you can find me zero libertarian or free market economists who thing cap-and-trade is the best way to address this issue.

      1. Over 90% of economists favor putting a price on carbon. Most even agree that we should do so even if no one else does.

        Sorry, you lose again.

        1. Egad.

          As you would be well aware if you had glanced at my links, I was specifically addressing cap-and-trade. Every economist of a free market bent I know of would prefer a straightforward carbon tax to cap-and-trade due to the transparency against special interest gaming and the lack of cover it affords politicians.

          As for your oft-repeated statistic, it is far more accurate to say that over 90% of economists who have published articles at all related to climate change prefer a carbon tax or cap-and-trade over command-and-control when asked the question…

          Between market based mechanisms, such as a carbon tax or cap?and?trade system, and command?and?control regulations such as performance standards,which is preferable as a tool to reduce greenhouse gas emissions?

          This result goes under the category of duh.

          1. Thanks Mike for calling me on not being clear. I suppose I intended my clause, “get any environmental problem solved,” to assume the environmental threshold case.
            As the links you point to make clear, the economic effects of cap-and-trade and a carbon tax are *theoretically* identical, with the difference being your views on whether the environmental or economic threshold is controlling.
            And, as you agree, everyone agrees that one of these forms of pricing carbon is the efficient way to try to address the climate change problem.
            This is indeed a “duh” conclusion. So why the gnashing of teeth?

            1. The “duh” conclusion is that markets are preferable to regulation for reducing greenhouse gas emissions.

              The gnashing of teeth is due to the fact that it is not at all proven that the benefits of reducing greenhouse gas emissions are at all worth the costs.

        2. What shit for brains would plan or do anything based on what an economist says…except Chad?

        3. Chad|4.7.10 @ 6:52AM|#
          “Over 90% of economists favor putting a price on carbon…”

          I call BS. Cite please.

        4. There is already a price on “carbon” and almost all sane economists agree it is best established by supply and demand … sorry, you lose again.

    3. It increases inefficient allocation of resources.

    4. Could there be a more fitting example of what drugs will do to the mind?????

  8. Chad|4.6.10 @ 10:14PM|#
    “LoL, Ron. How dumb can you be?”
    Chony, fortunately not nearly as dumb as you show yourself to be:

    “What are tens or even hundreds of thousands of publications, decades of development, and countless products if NOT a manifestation of the mountain of science out there.”
    You bet! Why, those thousands of publications and products almost match the number and quality of publications and products promising perpetual motion machines. And I’m sure you own stock in every one…..

    “Btw, I have been buying 100% renewable energy for years, at a mere 15% premium to the market rate.”
    Oh, my! *Only* a 15% premium? And of course your ignorance extends to the fact that the premium is far worse than that once you add in the subsidies.
    Why, I’m sure you’re more than willing to toss another 25% of your income into taxes supporting even whackier schemes!
    Have at it, Chony! The world needs more ignoramuses. For humor, at least!

    1. No, Ron – It IS LESS than 15% (hell, less than 0%) once you add in the subsidies. *facepalm*

      Why do you forget to “add in” all the subsidies of fossil fuels? Oh, what a minor mental lapse you had! Surely, pure coincidence!

      1. Solar biofuel wind subsidies OK?

  9. The good ol’ days when life was simpler and we all laughed at ignoramuses while we took bets on how long it would take the men in the white coats to come take them to the ignoramus special happy house.

    It quit being as funny sometime after Reagan emptied the special happy houses and no one came to take them away anymore.

    They need free food, free shelter, free medical, free everything, poor little fellas are obviously institutionalized.

    You’d think in kind and generous nation like ours we could find a way to re-open the special happy houses. If not at this rate it won’t be long before they finish turning the entire country into their special happy house.

  10. If it’s not worth doing with massive unemployment and a bad economy, it’s not worth doing.

  11. Every study i’v seen shows that wind and solar power are twice as expensive as coal generated electricity. Add to that the fact that we would have to cover thousands of square miles with these contraptions in order to generate enough electricity to meet the California mandate. What will the enviornmentalists say about that?

    1. What will the enviornmentalists say about that?

      That your neighborhood looks like a fine place to bulldoze for wind energy and solar panels.

  12. These studies illustrate why we pleebs take everything produced by elites with a grain of salt. Explain to me again how increasing the price of EVERYTHING, especially energy, will not have a significantly negative effect on jobs and quality of life.

    There are two options, regardless of one’s view of global warming; constrain the economy significantly, or depend on growth (money) and innovation to provide the answer.

    I bet against government every time, especially when the other choice is the market. No realistic payback on carbon regulation could compare with dealing with any issue as it arises in a much richer nation.

  13. BTW, in what rational reality do governments peering into the bankruptcy abyss consider raising the cost of living between 20-40%?

    It is beyond sanity. This is a great example of why we need 50 laboratories rather than 1; the professors and think tanks will more quickly discover the stupidity of their theories.

    My suspicion is that the Ivy League, or socialist heaven, would lose all credibility in less than 20 years.

  14. It couldn’t happen to a nicer bunch of Rahmtards.

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