Robert Murphy

            On December 11, the California Air Resources Board (CARB) approved the Scoping Plan for AB 32, aka “The Global Warming Solutions Act of 2006.”  The Board’s unanimous decision to go forward with their ambitious plan was impressive, given the scathing peer reviews that outside experts had given to CARB’s economic analysis.  Even those who are very worried about man’s effects on the climate should be troubled by this whole episode.

            AB 32 has the ambitious goal of reducing California greenhouse gas emissions down to 1990 levels by the year 2020, which would be about a 25% reduction from the projected baseline growth.  This target would be achieved through a combination of a statewide “cap and trade” program as well as other subsidies and mandates.  Now typically, when economists discuss the pros and cons of environmental legislation, they compare the benefits (in terms of reduced smog, mitigated climate change, and so forth) against the economic costs.  In other words, it is a balancing act, to see if it’s worth sacrificing this much GDP or this many jobs, for the sake of cleaner air or lower global temperatures.

            But that’s not what happened with AB 32.  On the contrary, CARB’s Scoping Plan contained an economic analysis (Appendix G in this pdf) that gave policymakers the happy news that AB 32 would boost California’s state domestic product, and would create jobs for its citizens!  Thus, CARB was telling the politicians that they could have their cake and eat it too: California could reduce emissions while the spurt in “green” industries would at the same time give a shot in the arm to the economy.  Truly a no-brainer.

            The fallacy in CARB’s reasoning is easy to spot.  Right now there is nothing preventing businesses from lowering their emissions, and consumers right now are able to adopt the “efficiency” measures that would allegedly save them so much money.  And yet, CARB would have us believe that the private sector is so incredibly shortsighted (or just hates the planet that much), that the California politicians have no choice but to force their constituents to become richer.

Robert Murphy

Robert Murphy has a Ph.D. in economics and is the author of The Politically Incorrect Guide to Capitalism (Regnery 2007).

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