Californians don’t need to read climate legislation to know something has changed over the past two decades. They see it every time they pay their electric bill, fill up the gas tank, or wonder why so many employers and jobs are leaving the state.
Next month will mark the 20th anniversary of the enactment of Assembly Bill 32, the California Global Warming Solutions Act of 2006. At the time, Gov. Arnold Schwarzenegger proclaimed that Californians didn’t need to choose between protecting the environment and the economy.
The environmental transition was supposed to create new business opportunities, grow the economy and promote consumer affordability. A win-win-win-win, we were told.
The evidence over the last 20 years confirms that when politicians proclaim a win-win, it’s a good idea to hold on to your wallet.
Thanks to AB 32 and subsequent legislation, California has established increasingly restrictive greenhouse gas emission targets that, if all goes according to plan, would be net zero by 2045.
To achieve these goals, California has imposed a cap-and-trade program, low carbon fuel standard regulations, renewable energy requirements and clean car mandates. Two decades later, we have enough evidence to judge the results.
In a positive sign, California reached its emissions goal for 2020, and since the 2007 peak, California’s emissions have declined 22%. But this achievement is less impressive than it sounds.
California’s emissions have rebounded and the state is no longer on track to reach its 2030 goal. National emissions also reached California’s 2020 emissions goal without the mandate and the state’s decline from the national peak has been a similar (but slightly smaller) 20%.
Importantly, national emission declines are not necessarily driven by states implementing California’s suite of policies. New York, which follows the California approach, has experienced an 18% decline in emissions. Ohio, which has not implemented any global climate change policies but embraced fracking and natural gas, has reduced its emissions by 30%.
This data raises questions about whether California’s burdensome regulations are necessary. Stipulating they are, for argument’s sake, California’s unique policies have sped up the decline in average emissions by a mere 2 percentage points over the national average. Not only is this a small amount compared to California’s emissions, but it is minuscule worldwide.
Unlike U.S. emissions, global emissions have been growing since 2007. California’s extra emissions reduction is too small to notice compared to the growth in global emissions. Therefore, if the goal of AB 32 is to meaningfully address global climate change, then the policy has failed.
Even if one accepts the environmental gains, another question remains: at what cost?
California is the least affordable state in the country and the state’s unaffordable energy system is an important contributor to this problem. While energy has traditionally been more expensive in California, AB 32 has made things significantly worse.
Consider electricity. When AB 32 became law in 2006, Californians paid around 38% more than the national average. Higher electricity costs are especially burdensome for lower-income families. Today, Californians wish the premium was only 38% higher; instead, they pay nearly double.
The same goes for gasoline. Before AB 32 was enacted, gasoline in California, while volatile, cost around 10% more than the national average. Thanks to the subsequent introduction of cap-and-trade, the low-carbon fuel standard and higher gas excise taxes, Californians now pay around 50% more for a gallon of gasoline than drivers elsewhere.
Higher fuel and electricity prices drive up the costs for a broad range of goods and services across the state. Therefore, the claim that AB 32 would help consumers was clearly wrong. Consumers are suffering from a high cost of living that is often cited as a driver of the state’s exodus of people and businesses.
The exodus of businesses also indicates that California’s economy is not benefiting from AB 32. Not surprisingly, California’s share of the national economy has declined from its peak and is now back at 2017 levels. The employment markets show similar patterns.
The record is clear. California’s global climate change regulations slightly accelerated the state’s greenhouse gas emissions decline, but by an insignificant amount. These reductions have come at a large cost to families, businesses and the economy.
AB 32 isn’t delivering the results Californians were promised. After 20 years, it is time for legislators to finally judge climate policy by results, not intentions. And based on results, AB 32 has simply been a failure.
Wayne Winegarden is a senior fellow in Business and Economics at the Pacific Research Institute and co-author of the PRI study, “The Cost of Going Green.”