California: A Harbinger of Things to Come

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California A Harbinger of Things to Come?

• Thomas Tanton
• Senior Fellow
• Pacific Research Institute
• March 3, 2008

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Summary

• Intensity matters more than aggregate emissions
• Other factors are important not just regulatory
  caps
• Amidst all the hyperbole that the US is not
  doing anything the US is the only country
  actually reducing both per capita and (at least
  in 2006) aggregate emissions.

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AB 32

• The California Global Warming Solutions Act of
  2006 (AB 32) mandates
• Reduce California GHG to 1990 levels by 2020.
• Reduce greenhouse gas (GHG) emissions by 80
  percent by 2050.
• California has a target 427 million metric tons
  by the year 2020 - 30 percent reduction from base
  case, if the regulators actually know what
  happened in 1990.

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Just Chaos
Six Agencies and Growing Spreading to Other
States Often Cross Purposes
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Pavley Bill

• Sets GHG Emission Standards/MPG Requirements
• Subject of EPA Waiver/lawsuit
• NO modeling done ex-ante
• Little to no effect on Global CO2
• Heavy cost to manufacturers and consumers

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Low Carbon Fuel Standards

• California consumes 44 million gallons of
  gasoline and 9 million gallons of diesel every
  day
• LCFS requires 10 less carbon in fuel
  Established by Executive Order
• Means at least 5 million gallons of something
  else

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Whats Right?

• The LCFS is an Intensity Target and as such does
  not create artificial and meaningless Caps on
  emissions nor Economy
• But encourages diesel over gasoline and thus
  leads to local air pollutionother unintended
  consequences

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Double and Triple Dipping

• PIER Program Already Taxes Gasoline and Diesel
  Production via electricity
• Renewables Subsidies Already Taxes Gasoline and
  Diesel Production via electricity
• RPS also raises rates
• CPUC/UC proposal for Climate Institute ( yet
  another 60 million/year)
• Nationally, ethanol and renewable electricity
  HIGHEST subsidized energy forms

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Energy Content
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Life Cycle Analysis

• Right Idea but averages dont count in real
  life MAJOR fallacy of composition
• Accounting nightmare if done correctly
  meaningless if not

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Economics of California Climate Policy

• Will AB 32 impose a cost on the California
  economy?
• 510 Billion Hit 1-2 of GSP
• Employment Leakage
• Lower Productivity
• Progress Thats Been Made Over Decades NOT due to
  Regulations

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Other Factors

• Economic Structural Shift
• Climate
• Housing Trends and Demographics
• Energy Resource Mix

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