October 20, 2016 Categories: California Clean Energy Climate Change Fossil Fuels Low-Carbon Fuel

10 Years of California’s AB 32 Climate Law: Lower Carbon, Higher Growth

Arnold Schwarzenegger’s term as Governor of California was certainly memorable, not just for the blunt bravado of his speeches, but also for a keen understanding that climate change was an issue too important to be mired in partisan gridlock. When he, along with current-Governor Jerry Brown, California Air Resources Board Chair Mary Nichols and legislative leaders past and present came together to celebrate the 10 year anniversary of passing AB 32, California’s landmark climate law, he was in peak form. The  Governator boasted of signing the bill over howls from his own party and of suing the federal government to recognize that greenhouse gases are, in fact, dangerous pollutants (while dropping in an obligatory Terminator reference, of course).

The occasion certainly deserved a memorable speech because AB 32 is one of the most important laws any nation or state has passed to address the problem of climate change. It put California in the lead on global climate policy and served as a model for the world. Now, with the pollution reduction targets of AB 32 extended and deepened by the passage of SB 32, it’s a good time to look back and reflect on the benefits that 10 years of smart climate policy have brought us.  

Governor Schwarzenegger and Governor Brown both asserted that it was possible to grow the economy and cut emissions at the same time, while AB 32’s opponents predicted economic catastrophe. Until recently, few jurisdictions had actually engaged in serious climate policy, so fact-checking these claims was impossible. Thankfully, those days are over. California now has 10 years of climate policy under its belt, and the facts show that climate action is a clear economic winner [1].

 

AB 32 was the key force breaking the link between the economy and carbon emissions.

The reason why I smile when I hear the word “decoupling”.

If you’re a climate policy enthusiast, you may recognize this graph, it shows how California’s economy has severed the link between fossil energy consumption and economic prosperity. While California’s population and economy (measured by Gross Domestic Product, GDP) have grown – despite a recession-related economic downturn in 2008 – GHG emissions have declined. More impressively, emissions per person and emissions per unit of economic activity have declined a lot.

This is big news. For much of the industrial era, fossil energy consumption strongly tracked economic activity; we made things, moved things, and kept our homes comfortable with fossil energy. Simply breaking this link, decoupling economic growth from increased reliance on fossil fuels, is the essential first step toward a future in which the climate is stable and our economy prosperous. The graph shows very strong evidence that California’s economy has started to do just that.

Critics, however, continue to claim curbing carbon pollution must be harming our economy. They try to move the goalpost,  claiming  that if environmental restrictions were removed, we might have done even better than we have.

It’s impossible to conclusively answer this question because we don’t know what would have happened without AB 32 and other climate policy. We can, however, get a sense of how California’s economy has performed compared to parts of the country that have not taken the same level of aggressive climate action that California has in the last ten years. By comparing economic indicators between the state with the strongest climate policy and all the others, we can get a sense of how climate policy affects economic growth. Let’s go to the numbers:

 

Sure looks like AB 32 is compatible with strong growth to me.

California leads in most key economic growth indicators, compared to the other 49 states.

There’s certainly a lot to like here, from California’s standpoint. California clearly leads the rest of the country in many key indicators. While economic statistics always need to be taken with a grain of salt – there are many other factors at work and data from different sources are not always perfectly comparable – it’s very difficult to deny that there’s a pattern: California has generally seen higher growth, more job creation and more personal income growth than the rest of the nation. Our electricity bills are also significantly lower than the national average, despite most of our population living in the air-conditioner-dependent south of the state.

If California’s climate policy was as toxic to business as critics would have you believe, or if California was as business-unfriendly as the (thriving) business lobby claims, one would expect to see less favorable numbers.

Continued economic growth is just one of many benefits that climate leadership has brought California. As we have cut carbon pollution, we have improved local air quality, built a booming clean energy technology sector, and reduced dependence on volatile fossil fuel markets. Our leadership has encouraged new industries to develop, to produce solar panels, wind turbines, efficient appliances and other climate-friendly devices at commercial scale. This leadership helps make these vital technology more readily available, at lower cost, to the rest of the world.

While there is still much work to be done, all the evidence we have to date indicates that California has benefitted greatly from its climate policy and that these benefits extend beyond our borders.

 

 

 

[1] AB 32 was passed in 2006 and while many elements of this policy didn’t take effect for several years, markets and investments knew they were coming and adjusted their business and investment decisions accordingly. In any event, LCFS has been in effect since 2010, the cap-and-trade market since 2012 and renewable portfolio standards since 2002, so if there were any short-run negative economic impacts to these policies, it’s reasonable to assume they would have shown up in current data.

[2]Source: U.S. Bureau of Economic Analysis: http://www.bea.gov/itable/

[3] Source: U.S. Congress Joint Economic Committee : http://www.jec.senate.gov/public/_cache/files/b2fb1607-cbaa-4d20-871f-c58170cbf5c0/jec-state-economic-snapshots-september-2016.pdf

[4] Source: U.S. Energy Information Administration http://www.eia.gov/electricity/sales_revenue_price/pdf/table5_a.pdf

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