California’s new climate bill may dampen growth but it won’t cripple the economy

Gov. Jerry Brown announced during a news conference Wednesday that he would sign a pair of environmental bills approved by the Legislature that would reduce carbon emissions.
(Rich Pedroncelli / Associated Press)

California’s landmark climate bill, passed by the Assembly this week, has earned the ire of business groups that say it will cripple their industries. The law will not be a moneymaker for everyone, but it probably won’t wreak havoc on the economy either, research shows.

The new legislation, SB 32, which Gov. Jerry Brown has vowed to approve, requires a cut in emissions to 40% below 1990 levels by 2030. It extends a 2006 measure that called for reducing emissions to 1990 levels by 2020.

“The total impacts on the economy range from negligible from very slightly positive,” says Stephen Levy, an economist at the Center for Continuing Study of the California Economy in Palo Alto.


After the Legislature passed its initial carbon emissions bill a decade ago, California’s air regulator studied the economic effect through 2020.

That 2010 report, published by the California Air Resources Board, found that the law could slow growth slightly, but would probably have a negligible effect on personal income, compared with a scenario without any reduction in emissions.

Utilities and mining companies stood to lose the most jobs, the report said.

But the information sector, which includes tech jobs in Silicon Valley, would see increased demand for labor. That’s probably because getting to lower greenhouse emissions often requires developing new technology. Finance and agriculture could also see an increase in their need for workers, according to the study.

It is inevitable that a measure cutting emissions would also lead to job cuts, economists said, since some industries won’t be able to replace the work currently powered by fossil fuels. “That’s the point of legislation,” Levy said.

He added that the study didn’t factor in potentially broad economic gains, including improvements in workers’ health that would come from improving air quality in the state.

Levy was one of several economists who reviewed that initial study, and published a report showing California stood to lose at most 320,000 jobs. That is a significant number of positions, but their disappearance would not radically alter the economy in California, where the overall workforce has swelled to 19 million people.


In the best-case scenario, the state would add 10,000 jobs, the committee of economists found.

Since 2010, when the report was released, California has added more than 2 million jobs, including farm and nonfarm positions, for a growth rate of about 2% a year. That’s faster than the country as a whole, which grew jobs at around 1.5% a year over the same period.

The average weekly wage in California has increased by nearly 9% in that time, after adjusting for inflation, compared with a 6% increase for the country overall, according to Bureau of Labor Statistics data.

It isn’t a sure bet that the report’s optimism applies to the new law, or to the current economic climate.

Oil refineries have vigorously opposed the new standards, arguing that they give too much power to the state government and undermine market-driven solutions to California’s smog problem.

“There is no accountability in providing blank check authority to a state bureaucracy,” the Western States Petroleum Assn., an oil lobbying group, said in a statement. The group added that the new law “puts accessible and reliable energy at risk.” The group did not address a partner bill, AB 197, that increases oversight over the Air Resources Board, which will administer the initiative.


Manufacturing groups have also complained. The California Manufacturers and Technology Assn., said the bill would “increase costs on manufacturers … threatening manufacturing jobs, expansions and other investments.”

At the ports of Los Angeles and Long Beach, demanding even more emissions cuts may have a bigger effect than in the past.

The ports take in nearly 40% of all shipments to the country and rely heavily on trucks, which run on diesel.

Much of the large machinery hauling containers off ships is old and environmentally imperfect.

“You’re going to be increasing the cost of moving goods through California ports,” said Jock O’Connell, a trade expert at Los Angeles consulting firm Beacon Economics.

Feisty competitors on the South and East coasts have been eating into Los Angeles-area ports’ business, and in June the Panama Canal opened wider channels that may divert more traffic away.


“At some point [importers] reach a tipping point where they say it makes more sense to send goods through Houston, or Charleston,” O’Connell says.

That could be a threat to the hundreds of thousands of Californians who are directly or indirectly employed by port business. “You wind up jeopardizing an awful lot of blue collar workers,” O’Connell said.

In a news conference Wednesday, Brown dismissed concerns about jobs, saying evidence of losses is “very dubious.” Brown said he expected companies to adapt to the new rules, as they have in response to the state’s broader web of taxes and regulations.

“It’s up to government not to just rubber stamp the oil companies but to set some rules of the road that will make our society a better place,” Brown said.

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