Analyst's report: AB 32 will hurt California economy

A report by the state Legislative Analyst's Office forecasts a significant impact on some parts of California's economy from AB32, but concludes the exact impact is hard to calculate, and the overall impact on the economy will be modest.

The analysis, commissioned by Assemblyman Dan Logue, R-Linda, looked largely at how the measure to curb the state's carbon emissions would compel economic leakage to other states and countries if California had a "go-it-alone" approach to global warming. Logue said the analysis laid out why AB32 would do the state more harm than good.

"If energy costs increase, job losses would be greater, businesses would flood out of the state, and unemployment would soar," said Logue, who is backing a pending November ballot measure to suspend AB32 until state unemployment drops to 5.5 percent and stays there for a year.

"For us to go it alone, once you include high taxes and overregulation, there would be a mass exodus of business," Logue said.

As well, the analysis criticized the state Air Resources Board, which is implementing AB32, for its lack of consideration of economic impacts.

"This in part is because the economic model used by ARB is not well suited to analyze leakage, including being able to provide the necessary detail about how leakage affects individual industries and sub-industries," the analysis states.

Industries most likely to be significantly affected by AB32 include energy-intensive ones such as producing or refining aluminum, forest products, minerals and glass; oil extraction and refineries; and firms with large amounts of trade where they have limited ability to pass on increased costs under AB32 to customers, the analysis states.

The director of resources and environmental protection with the Legislative Analyst's Office pointed out Logue only asked for a report on costs associated with AB32 and a "go-it-alone" approach by the state, not any potential benefits.

Mark Newton also said a focus on negative impacts in the next five years is easier to document than any possible ones further into the future.

"With climate change, it's a policy issue, and this analysis is a recognition that there are costs with AB32," Newton said. "Clearly, legislators and policy makers need to consider those costs along with benefits and other areas that would be addressed by AB32."

Steve Maviglio, a spokesman for a group opposed to Logue's initiative, said the analysis showed the businesses most hurt by AB32 are the same ones funding Logue's campaign.

"It's no secret that it will cost more for the polluters Mr. Logue is fighting for to clean up their act, and as the Gulf Oil spill proves, the economic and environmental consequences of their not doing so is substantial," Maviglio wrote in an e-mail.

Because the state's economy has largely shifted to service-based businesses and jobs in recent decades, the analysis states, the industries most affected by AB32 constitute a small part of the overall state economy.

As well, the analysis noted many other states and regions are looking to or have adopted policies and legislation meant to address climate change, though many are not as stringent as AB32, which would lower state carbon emissions to 1990 levels by 2020.

California's approach, Logue said, is too draconian for any other government to consider something similar."My issues is, if there's going to be a global warming formula, we should be playing by the same rules as the rest of the country," he said.