Do Costs Matter When Climate Change Policies are Being Considered?

Ken DeVore
Legislative Director, NFIB

Regardless of differences in opinion about approaches to combatting climate change, California decided in 2006 that the state would have a comprehensive greenhouse gas (GHG) reduction program. Now, nine years later, the AB 32 programs are beginning to take effect and having a financial impact. That impact is being felt by consumers in their electricity bills and there are strong indications that other cost increases will be coming soon.

The unexpected magnitude of the costs, coupled with the uncertainty about future economic impacts, demand greater evaluation of the costs that will be associated with any new climate change proposals (SB 350, SB 32, and the California Air Resources Board Scoping Plan). This is hardly a revolutionary approach – in fact, cost analysis is an approach the state should prioritize for all new policies – but proponents of new climate change proposals seem surprisingly blasé about their need.

To be fair, there are several studies: Energy and Environmental Economics, “California State Agency’s PATHWAYS Project: Long-term Greenhouse Gas Reduction Scenarios;” Lawrence Berkeley National Laboratory, “Modeling California policy impact on greenhouse gas emissions;” and Next 10, “California Climate Policy to 2050: Pathways for Sustained Prosperity,” that review cost impacts and conclude that the proposals will actually lower overall consumer costs. Those studies make assumptions about the future costs with many caveats about population and economic growth. They may be correct assumptions or they may be faulty. However, the Wall Street Journal opined on a study in November, 2011, showing that AB 32 would cost the average household $3,857 in increased costs by 2020. So before any legislation moves forward, NFIB/CA is requesting that the legislature not blindly accept these assumptions but fully analyze the cost issues and allow a public debate over these far reaching policies.

Here are some basic questions that small businesses need to know about these proposals:

What will Californians have to pay in increased electric costs to reach the 50% renewable energy goal? Already, many school districts, hospitals, businesses and residents have seen increases in their electricity bills and many of the costs associated with AB 32 have not yet been built into the rates. The California Energy Commission’s own numbers estimate a 28% to 42% increase in electricity rates by 2020. Many of the studies that show consumers will pay less rely on “savings” to offset the higher electricity costs but those savings are vague and there is no indication when those savings will be available to consumers, much less whether they are quantifiable and verifiable. The alternative renewable energy sources being pushed can be several times more expensive than traditional energy sources, particularly since energy from dams and solar roof tops are excluded from the equation, and these costs will constitute half of consumer electricity bills.

What will ratepayers need to pay to transform the state’s electricity infrastructure? According to the studies, the 50% petroleum reduction goal will require the number of Zero Electric Vehicles (ZEVs) to climb from 100,000 to over 7 million. That increase will require a massive new investment in infrastructure to transform the transmission and distribution system and to build charging stations. Who will pay for the billions of dollars of new infrastructure? Are those costs built into economic projections models? And what provisions in the new proposals will prevent all the benefits going to those can afford Teslas and solar panels — and the costs being borne by middle and lower income families and small businesses? And electric cars are often heavier than others, and contribute to serious wear and tear on our highway systems without paying maintenance taxes at the pump.

How much will energy efficiency proposals cost California residents? We’re leaders in energy efficiency, and committed to further efficiencies. But all efficiencies have a cost, and we need to know what we’ll have to pay to make climate change goals feasible. But we do know that we’ll have to increasingly rely on electricity. Do the math: a new electric stove — $800 to $1200. A new electric water heater — $1200 to $2000. A new electric furnace — $600 to $1200. Will California residents and business be required to replace existing appliances? Will restaurants, for example, be required to replace all their gas stoves with electric ones? Will lower income homeowners and qualifying small businesses receive government assistance to convert their property?

These costs matter. They matter to small businesses and they matter to hard-working Californians. If we truly desire to maintain the integrity of the legislative process and protect our businesses and families, we need the legislature to conduct a full cost examination of climate change policy impacts.

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For more than 70 years, the National Federation of Independent Business has been the Voice of Small Business, taking the message from Main Street to the halls of Congress and all 50 state legislatures. NFIB annually surveys its members on state and federal issues vital to their survival as America’s economic engine and biggest creator of jobs. NFIB’s educational mission is to remind policymakers that small businesses are not smaller versions of bigger businesses; they have very different challenges and priorities. To learn more visit www.NFIB.com/california.

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