The World According to CARB: Not Clobbering Businesses with a Huge Hidden Energy Tax is a ‘Windfall?’
The recent statement by a California Air Resources Board (CARB) spokesman that not charging major California employers a billion dollars a year or more for emissions allowances would be a “windfall” for the businesses was breathtaking in its audacity.
Business leaders held a news conference Tuesday reiterating their support for the goals of AB 32 (Global Warming Solutions Act) and a well-designed cap-and-trade carbon program as a tool to get there. However, we also made clear our strong opposition to CARB’s plan to charge businesses for their emissions allowances essential to their ability to continue doing business in this state. This would basically function as a new multi-billion dollar energy tax even as millions of Californians are unemployed and their would-be employers struggle in the midst of the state’s economic doldrums.
This cavalier statement represents either a stunning lack of understanding of California’s terrible economic condition, or it could signify a shocking disregard for the fiscal pain that will be inflicted by CARB’s greenhouse gas (GHG) reduction program even if the state doesn’t charge for allowances.
And it certainly denies the fact that if you threaten to clobber someone with a huge new tax but then decide against it, the taxpayer is left with the same amount of money. Revenue neutral is not a windfall in anyone’s book.
Whatever the reason, it provides a clear picture of the World According to CARB, a parallel universe of thought that allows the agency to move forward with a multi-billion dollar hidden energy tax while turning a blind eye to the serious consequences it will have for the California economy and a deaf ear to the state’s non-partisan Legislative Analyst who has stated the auction component is not necessary for us to reach our greenhouse gas reduction goals.
I’d like to provide a picture of the World According to California food processors in the hope it will make clear the harm CARB’s plan will have.
Thirty-seven food processing plants – representing 0.5 percent of the state’s GHG emissions – will be participating in the cap-and-trade program that allows businesses to trade their surplus emissions credits with companies that are exceeding the standard.
The standard will be lowered over time with the idea of encouraging companies to find cost-effective ways to reduce their GHG emissions rather than buying ever more emissions credits through the market. However, if the current plans for an auction remain in place, businesses will be forced to spend billions just buying credits instead of using those dollars to make their operations more energy-efficient.
This misguided strategy ignores the fact that it’s steadily lowering the cap of allowable emissions that will encourage companies to upgrade facilities, not imposing a multi-billion dollar tax. Hardest hit will be energy producers and energy-intensive industries, forced to try expensive new techniques to meet the goals. Costs will ultimately be borne by major energy consumers – hospitals, universities, schools, manufacturers – at first, but all California consumers will feel the impact.
An economic study found California’s food and vegetable processing industry will incur increased costs of more than $151 million over the next seven years of this program. More than $67 million will be costs directly attributed to the cap-and-trade auction. Another $84 million will come from increased energy prices. The added costs to an individual plant will be $5 million to $6 million by 2020.
These new costs will be hitting a food processing industry that this year has seen four plants closed and hundreds of workers lose their jobs. The reasons for closing those plants varied, but is it smart policy to add another big reason to take these operations to other states, none of which has a comparable GHG program?
It must be a priority of regulators to protect businesses and jobs even as they move forward to meet the goals of AB 32.
It’s not just important that the Legislative Analyst says charging for emissions allowances is not necessary to meet GHG reduction goals. The independent analyst also warned that increased costs will be passed on to consumers. California products would suffer in the marketplace against lower cost products from out-of-state competitors, further exacerbating our economic troubles.
The cap and trade program should not include paying the state a completely unnecessary tax in order to continue conducting business in California. Businesses are already struggling to meet the enormous costs of devising and implementing strategies to meet the state’s GHG emissions reduction goals and they cannot afford the multi-billion dollar tax the current plan includes.
Eliminating the tax might save jobs. A windfall it ain’t.