EDF Review Confirms Findings that Show California Climate Change Plan Will Support Economic Growth

March 24, 2010


James Fine, 916-710-3371 (m), jfine@edf.org
Derek Walker, 410-980-0939 (m), dbwalker@edf.org
Lori Sinsley, 415-293-6097 (o), 415-902-8111 (m), lsinsley@edf.org

(San Francisco – March 24, 2010) California can grow its economy and reap immediate benefits from cleaner air while meeting air pollution reduction goals of its Global Warming Solutions Act of 2006 (AB 32), according to an economic analysis released today by the California Air Resources Board (CARB) and reviewed by Environmental Defense Fund (EDF). The analysis shows the economic impacts of CARB’s plan to implement AB 32 are likely to be small and positive, which is consistent with the growing body of research about the state’s climate change law. 

“We commend California’s Air Resources Board for giving us a more comprehensive snapshot of the economic impacts of its climate change law. When you add these findings to the billions of dollars worth of benefits already received from smart energy policies, one thing is clear: what the AB in AB 32 should really stand for is Absolutely Beneficial,” said Derek Walker, director of Environmental Defense Fund’s California Climate Initiative.

The agency combined a well-tested, peer-reviewed model of California’s economy known as the Environmental Dynamic Revenue Assessment Model (EDRAM), with an energy model, ENERGY2020, capable of showing changes in the generation mix, production costs and pollutant characteristics of the electricity sector. This pairing enables study of how energy costs will influence the relative balance of investments in infrastructure and labor in all economic sectors, thereby revealing the production and jobs implications of policies that put a price on climate change pollution.

CARB estimates that in 2020, fuel consumption will be 5% lower after implementing AB 32’s Climate Change Scoping Plan, the blueprint for reducing greenhouse gas emissions to 1990 levels by 2020. California’s Gross State Product (GSP) is projected to be affected slightly; instead of growing to $2,502 billion in 2020, it is forecasted to be $2,498 billion with AB 32 implementation—a slight difference of 0.2% in the context of 35% overall growth from 2008 to 2020. The analysis also indicates that personal income and employment are projected to increase very slightly (0.1%).

“These findings are consistent with others that show California’s economy will be virtually unchanged through 2020,” said Dr. James Fine, an economist for Environmental Defense Fund, based in Sacramento. “There will, however, be important changes that save households money, greatly reduce our dependence on foreign oil and improve the health of our communities.”

One key finding is that California households will save money on energy, food and transportation after scoping plan measures take effect to create diverse energy supplies, higher vehicle fuel efficiency, and more efficient buildings and appliances.

While cost savings alone make a compelling case for California’s program, CARB’s analysis did not calculate several significant economic benefits of fighting climate change. Those benefits include the substantial costs of inaction. A 2008 report produced by University of California at Berkeley found that if no action were taken to address climate change, damages across sectors would result in tens of billions of dollars in annual costs and would “expose trillions of dollars of assets to collateral risk.”

Another benefit of cutting global warming emissions is that pollutants such as particulate matter and nitrogen oxide will also be reduced, resulting in cleaner air and healthier communities, and savings on health care costs and lost worker productivity.

“Keep in mind that these modeling studies are conservative because they can’t predict the range of breakthrough innovations that the proposed policies will inspire,” Fine said.

CARB’s analysis has been developed with input from its Economic Allocation Advisory Committee, a blue-ribbon panel of economists, business leaders and financial leaders.

Charles Rivers Associates (CRA) also released a study today that uses assumptions similar to CARB’s, except more conservative treatment of efficiency and biofuels investments. Nevertheless, the CRA results generally are in line with and corroborate CARB’s findings.


About Environmental Defense Fund
A leading national nonprofit organization, Environmental Defense Fund represents more than 700,000 members. Since 1967, Environmental Defense Fund has linked science, economics, law and innovative private-sector partnerships to create breakthrough solutions to the most serious environmental problems. For more information, visit www.edf.org.