Global Warming Bill Could Become Big Pork Barrel

Wendell Cox
Wendell Cox is principal of Demographia, an international public policy firm. He is a founding senior fellow at the Urban Reform Institute, Houston and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. Mayor Tom Bradley appointed him to three terms on the Los Angeles County Transportation Commission

Crossposted on Orange County Register

One of the principal justifications for the California High Speed Rail line planned from Anaheim to San Francisco is to reduce greenhouse gas emissions. Gov. Jerry Brown and the California Air Resources Board seem poised to spend “cap and trade” revenue from Assembly Bill 32 (the “Global Warming Solutions Act” of 2006) on building the train. Yet, there are strong indications that the GHG emission reductions be exceedingly costly and contrary to the spirit of AB32.

The expected GHG emission reduction would occur from reducing the miles operated by cars and planes as passengers switch to high-speed rail. The calculation of net GHG emission reduction results from the reduction from less car and plane use minus the increase in electricity generation for the train.

The latest GHG emission reductions are simply not credible. The current claim is that in 2035, after completion of the “blended system” that would provide high-speed rail service between San Jose and the San Fernando Valley, the reduction in GHG emissions would be 4.4 to 5.0 million metric tons annually. This is 40 percent to 60 percent higher than the 3.1 million ton reduction CHSRA claimed for the full (not blended) high-speed rail system in 2008, including extensions to Sacramento and San Diego.

If anything, the present estimate should be substantially lower. The shorter system (which excludes Sacramento and San Diego), the slower, less-frequent trains, and the lower ridership projections would combine to make the GHG reduction more modest. Further, automobile fuel efficiency can be expected to improve much more than was expected in 2008, by virtue of improving vehicle technology and federal regulations that now require new cars to reach an average of 54.5 miles per gallon by 2025. This could as much as halve the GHG emissions per mile of car travel by 2035. In short, the present CHSRA is highly optimistic.

The second, and even more damning difficulty is the exorbitant cost that will be necessary to achieve the GHG emission reductions. The United Nations Intergovernmental Panel on Climate Change has found that sufficient GHG emissions can be achieved within a range of $20-$50 per ton. CHSRA has not provided an estimate of the cost per time of GHG emission reduction. However, in our Due Diligence Report, published in 2008 by the Reason Foundation, Joseph Vranich and I used CHSRA assumptions and data to estimate the cost per ton of GHG reduction at approximately $1,950, nearly 40 times the maximum of the international range. We also provided a worst case estimate of more than $10,000 per ton, based upon expected cost escalation (which has now been exceeded) and more reasonable ridership projections.

However, based upon developments since that time, even the costly CHSRA based $1,950 per ton is an gross underestimate. The more modest blended system will have fewer riders and the cost of driving a car will be less, because of the improved fuel economy. Finally, the cost of the blended system itself is projected at approximately 70 percent more than the full Phase 1 system was projected by CHSRA to cost in 2008 (inflation adjusted).

Despite these high costs, it has been suggested that AB32 revenues be used to pay for high speed rail. AB32 was passed by the Legislature and signed by Gov. Schwarzenegger in 2006. The bill established aggressive targets for GHG emissions in the state. It contains a “cap and trade” program that requires companies to pay, through an auction process, for emissions that exceed their state-imposed targets. These payments become available to CARB for the purpose of reducing GHG emissions.

It will not be easy to achieve the AB32 targets. Each and every dollar will need to be spent as efficiently as possible in this challenging effort. Any amounts spent above the IPCC maximum range of $50 per ton will be wasteful by definition and will detract from efforts to reduce GHG emissions.

Facing the prospect of virtually no substantial additional federal funding and the financially strapped state treasury, Governor Brown has suggested the use of cap and trade revenues to pay for high-speed rail. Yet, the Governor has not provided any statistical analysis to indicate that the expenditure of cap and trade revenues on high-speed rail can be achieved within the IPCC $50 maximum per ton.

Further, CARB Chair Mary Nichols told Business Week that high-speed rail would be a “legitimate” use of AB32 cap and trade revenues. Again, there is no statistical analysis to indicate that the cost per time of GHG reductions from high-speed rail would be within the IPCC range, and it appears likely that it would be many times that amount, as noted above.

Thus, the implementation of AB32 is emerging as a political slush fund for projects favored by whoever is in power in Sacramento, in this case, Gov. Brown and the Democratic majority in the state legislature. Obviously, this makes a mockery of the AB32 GHG emission reduction targets.

AB32 has been criticized for its detrimental impact on business in California. That is just the beginning of the problem. The intended use of revenue for high-speed rail indicate that AB32 could be deteriorating into just another pork-barrel program.

Wendell Cox is principal of Demographia, an international public policy firm in the St. Louis area. He has authored or co-authored studies on high-speed rail in California, Florida and North Carolina.

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