You are here

Climate Law No Cash Cow for California

Op-Eds and Articles

It is said by many that there is a scientific consensus in support of global warming, but there is also an economic consensus on global warming policy: Fighting climate change is costly.

California politicians, however, deny this economic consensus. To back their unorthodox economic theories, these deniers point to a study released this fall by the California Air Resources Board claiming that the Golden State’s plan to reduce greenhouse gas emissions to 1990 levels by 2020 would generate $14 billion for consumers in avoided fuel costs, thanks to increased energy efficiency.

In fact, the deniers’ case rests on shaky science, because the CARB study uses cherry-picked data that overestimates the benefits and underestimates the costs of using energy-efficiency measures to address global warming.

CARB calculates that three-quarters of the energy savings would come from a regulation requiring automakers to build vehicle fleets with an average fuel efficiency of 35 mpg by 2016. According to CARB’s logic, higher fuel efficiency means lower fuel consumption, which supposedly would save California drivers about $10 billion at the pump through 2020.

To calculate that $10 billion in savings, CARB multiplies the number of gallons “saved” by the per-gallon cost of gasoline, which is estimated using a 2007 California Energy Commission report that projects future gasoline prices. Inexplicably, CARB chooses the Energy Commission’s “high” price estimate for its calculations, even though “base” and “low” price estimates are offered. By choosing the “high” price case, which is 80 percent greater that the “low” price, CARB seems to be selectively choosing data to inflate the benefits to consumers.

CARB’s decision to use a high gasoline estimate is perplexing given that California’s fuel efficiency measure would lower the price of gasoline. Because eleven other states have adopted California’s fuel efficiency policy, the 2016 miles-per-gallon target would become a de facto national standard, rather than a regulation specific to the Golden State. A national fuel efficiency standard, in turn, would slash demand for gas in the U.S., the world’s largest consumer of transportation fuels. And lower demand leads to a lower price.

Naturally, inexpensive gas gives motorists an incentive to drive more. This “rebound effect” helps explain why the total number of miles driven in the United States has increased by 150 percent since 1975, according to the Federal Highway Administration, despite the fact that fuel efficiency in cars and trucks has almost doubled during the same period.

There are costs to more driving, especially in California. For starters, traffic would increase. Residents in Los Angeles, San Diego and San Francisco could expect to spend even more time idling in their cars.

More driving also leads to more pollution. According to a study from the libertarian Cato Institute, a 50 percent increase in fuel efficiency would increase net emissions of volatile organic compounds by almost 2 percent, nitrous oxides by 3.4 percent and carbon monoxide by 4.6 percent.

Finally, traffic fatalities would increase. Vehicle weight is inversely proportional to fuel economy, so California’s regulation would pressure drivers into smaller cars that are more dangerous than heavier, less fuel-efficient autos. According to USA Today, there are an additional 7,700 annual car fatalities for every mile per gallon gained in fuel efficiency in the national fleet.

CARB’s analysis, however, ignores these unintended consequences of fuel efficiency regulations. It therefore underestimates the costs of climate policy.

The sad part is that California regulators easily could avoid all of these unwelcome side effects by enacting a simple gas tax, which would reduce driving – and therefore emissions – in California without affecting the global oil market. Indeed, economists agree that a gas tax is the easiest, most efficient method to reduce greenhouse gas emissions from the transportation sector.

California politicians, however, don’t have the mettle to support an unpopular gas tax. Instead, they ignore the costs and inflate the benefits of policies like increased fuel-efficiency standards.

11/6/2008 William Yeatman