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Proposition 23: Would it worsen gas-price shocks?

Gas prices

California’s 2006 global-warming law would save the state’s consumers as much as $670 per household in 2020, in the event of a global surge in the price of crude oil, according to a report released Monday by economists for alternative-energy advocacy groups.

The U.S. economy has experienced five price shocks over the last three decades in which crude oil prices rose an average of 179% in one year.

Titled “Shock Proofing Society: How California’s Global Warming Solutions Act (AB 32) Reduces the Economic Pain of Energy Price Shocks,” the study is aimed at countering a November ballot initiative, Proposition 23, which would delay implementation of the global-warming law. Its analysis is based on projections for 2020 and conservatively assumes only a doubling of crude-oil and natural-gas prices.

The 55-page report was written by economists from three organizations: Energy Independence Now, the Center for Resource Solutions and the Environmental Defense Fund.

Proponents of Prop. 23, however, say the global-warming law, which promotes solar, wind and alternative fuels to replace oil, gas and coal, will increase the price of energy. They project up to a 60% rise in electricity rates, up to 57% higher natural-gas rates, and a $3.7-billion annual increase in the cost of gasoline and diesel fuel.

Prop. 23 is primarily funded by oil refiners, including Valero Energy Corp., Tesoro Corp. and Koch Industries, and is backed by the California Manufacturers and Technology Assn. and the trucking industry. It would delay the implementation of the global-warming law, also known as AB 32, until unemployment in the state, now over 12%, drops to 5.5% for at least a year.

Controversy over the economic effect of Prop. 23 has been raging for months. An open letter on July 19 signed by 118 economists with expertise in California energy and climate issues, warned that any delay in implementing AB 32 would “be more costly than initiating action now.” The letter was signed by Stanford University Nobel laureate Kenneth Arrow, as well as prominent economists from UC Berkeley, UCLA, USC, UC San Diego, UC Santa Barbara and UC Riverside.

The “Shock Proofing Society” report is the first attempt to analyze the effects of AB 32 in the event of sudden increases in gasoline prices, according to Environmental Defense Fund economist James Fine. And, according to Chris Busch, an economist with the Center for Resource Solutions, "This is the first report that quantifies how AB 32 would affect California's dependence on crude oil and natural gas."

The law aims to reduce the state’s emissions of carbon dioxide from fossil fuels and other greenhouse gases to 1990 levels by the end of the decade. Scientists say that gases from industry and transportation are heating the planet and already have begun to affect California, with melting snow packs and rising sea levels.

Previous calculations by economists with the California Air Resources Board assumed steady energy prices and figured that, overall, AB 32 would save Californians $7.5 billion in 2020, assuming gasoline prices remained close to today’s levels. Today's prices are significantly lower than in 2008, when prices spiked 45% to $4.59 per gallon.

Factoring in potential price hikes based on past history, however, the report calculates an additional $4.8 billion in savings to consumers in the event of a moderate price hike and $9.6 billion in savings in the event of a large oil shock. This would translate into household savings of $337 to $670.

The calculations were made with the input of the Air Resources Board and the California Energy Commission, using the U.S. Department of Energy’s price forecasts.

-- Margot Roosevelt

Photo: Gasoline prices, shown at a San Mateo, Calif., Shell station, tipped higher than $5 per gallon in 2008. Credit: Justin Sullivan / Getty Images

Comments () | Archives (20)

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These rosy projections of AB32 are wishful thinking at best. Prop 23 will save up to 1.1 MILLION jobs by 2020, and save 500,000 jobs by 2012.

Prop 23 will save us from outrageous increases in gas & energy prices that will further cripple California's economy. We are already the most business hostile state in the nation with our existing misguided environmental regulations and tax structure.

There are few "green jobs" and bad legislation proclaiming we are "green" does not create private sector jobs, just job killing over compensated govt. employees at CARB and other unaccountable agency's.

This topic is so funny to me. You green peas have know clue what reality is. Yes gasoline automobiles pollute that is a fact. Our cars now days pollute very little emissions compared to 10 to 20 years ago. I work at an automotive dealer and we replace hybrid batteries all the time. The funny thing is once we replace it we cant do anything with the old one because it is considered toxic waste. So for all you idiot green peas who want electric and hybrid cars: in 20 years we will have warehouses packed full of millions of toxic batteries. Think into the future and not in the now. Don't get me wrong I do care about our environment but there is a right way and a wrong way. Vote Yes on 23 people or you will be getting taxed to death.

Travel and tourism is one of the most important “export-oriented” industries in California.Who would want to visit here if our beaches and air are polluted.Spending by visitors generates sales in lodging, food services, recreation, transportationand retail businesses – the “travel industry.” These sales support jobs for Californiaresidents and contribute tax revenue to local and state governments. Travel is especially important in the non-metropolitan areas of the state, where manufacturing and tradedservices are less prevalent.
Ever since the BP spill I don't trust anything the oil companies are behind.

Facts and Figures
Domestic and international visitors spent $87.7 billion in California destinations in 2009
The nearly $90 billion in spending supported 881,000 jobs and accounted for combined earnings of $29.8 billion
Travel spending also generated $1.9 billion in local taxes and $3.4 billion in state taxes
Domestic Travel- 183 million person-trips were made to California and 27 million of those CA non-resident trips were for leisure purposes.
International Travel- Approximately 12.5 million person-trips to California in 2009. 4.8 million were from overseas origins, 6.3 million were from Mexico and 1.2 million were from Canada

For all you who believe that some oil magnates from Texas care one whit about jobs or fuel costs in California: are you really that blind and stupid? These guys are trying to buy an election in order to make more money. Period. I suppose you also believed that PG&E cared about your "right to vote" when they tried to buy a prop 16 election (P.S., they were just trying to lock in a monopoly). Take off your ideological blinders and deal with reality. These guys are lying to you so they can make more money and they don't give a damn about jobs, your right to vote, or the planet we all share.

Why does it seem like every long comment posted here has been funded and carefully pieced together by an oil company executive?

For factual information on Koch Industries efforts to support jobs and lower energy costs in California , please visit

Why CA AB32 global warming act needs to be suspended/delayed/halted

The only thing CA leads in is not landmark green laws but in being a 15-20% high unemployment 3rd world bankrupt entity, a beggar state which has driven out productive tax-paying businesses and citizens and replaced them with a hoard of 3rd world uneducated welfare leeches, who pack the ghettos which encompass wide swathes of the greater LA basin region.

I say pull back/delay implementation of restrictive environmental job-killing acts such as AB32, and get CA moving again with high-paying blue-collar traditional power industry construction trades jobs. Put our vast numbers of unemployed/underemployed/idle construction workers into high-paying trades jobs such as the oil and traditional power energy industries can provide. We do not need anymore Obama stimulus road construction projects, which only add to our already catastrophic debt loads, and all other large-scale infrastructure building projects will also add to our crushing debt.

The millions of promised CA green jobs are a mirage. Companies receiving Fed green jobs stimulus $ are outsourcing Green Jobs production to China or other states, due to excessive environ/regulatory/high tax costs of doing business in CA.

Chinese COAL MONSTER burns 3 billion tons of coal a year. They spew likely 10,000 time more GHG emissions that CA. So what CA does means nothing as far as worldwide GHG emissions. If purpose of AB32 is to convert all cars to electric then savings from future gas spikes is irrelevant.

"Scientists say that gases from industry and transportation are heating the planet and already have begun to affect California, with melting snow packs and rising sea levels."

Those are disputable scientific findings, based on questionable, perhaps even biased agenda- driven research. Assuming these findings are correct, how can a 3-7 cm rise in sea levels per decade have any significant effect upon CA, when tides rise and fall as much as 6 ft twice a day!

More cassandra sky-is-falling scaremongering by environ extremists.

If environmentalist are serious about GHG they would have pushed for more nuclear energy in CA. Why are we still burning coal, and not converting to natural gas and Nuclear power for most of our power.

Wind and solar canot competee with fossel fuels except thru heavy gov susidies, and will no solve problem of GHG emissiona from tranport sector.

Try to use the common sense and FACT. You guys were bought by those Gore's gang.

I have no problem with someone quoting out of context the experience of the UK, but what I do know is that the UK energy sector is not controlled by the UK but outside Companies, who are busy selling each other to each other and back again, creating companies, in tax havens and charging over the odds their consumers, for every $1 spent by these companies they charge their customers $10 and in a under regulated market the companies reign supreme, hence from when North Sea Gas and Oil was found and we had quotes from the Government " Gas will be free" in the future, that from when the country controlled the production of Gas and Electricity, now with it all sold off to private companies there is no control, so Californians beware, prior to the energy companies prop 23 being defeated the cost of energy will be raised month on month using bogus crisis to enable them to do it.

Investing in green energies sure worked well for Spain with their green initiatives putting the country on the brink of bankruptcy and the unemployment over 25%.

Since California's Global Warming Solutions Act by excluding nuclear power does exactly the opposite, proposition 23 is doing right thing by stopping Californian foolishness.

The cleanest energy, least GHG's, least resources, and most renewable form of power is nuclear. It should be but is not part of the California or most other RES's.

Since the cost of nuclear is a tiny fraction of wind/solar and geothermal it would likely end further builds of these unlikely resources, less even than fossils.

American designed NRC approved American designed AP-1000's are being built for less than two cents a kwh by American engineers in 4 years in China. The Tennessee valley authority is building first of a kind nukes under insane NRC regulation for 5 cents a kwh and phasing out coal plants. This is a fraction of the 12.5 cents a kwh paid in LA today. If taxpayers knew this support for nukes would approach 100%.

A worldwide investment in 10000 mass produced nuclear reactors paid for by ending expensive fossil fuel use, would eliminate most air pollution saving millions of lives annually, end the global warming/ peak oil problem within a ten year time frame, provide a huge job producing boost to the economy, and require only a small part of our industrial capacity.

Sec Chu is slowly pounding into Obama's thick head that the US would need only $2500B in mass produced nukes to eliminate fossils financed by the $800B paid every year into the coffers of Big Oil/Coal.

Anti nuclear zealots with their opposition to the inclusion of nuclear power in RES standardes like Bill 23 are driving us right over that as little as ten years civilization ending Climate/Peak oil crisis with their silly "renewable" religion. Their support of Big Coal/Oil's antinuke fight eliminates three million every year from coal air pollution, and seems determined to do in lots more folks in very big ways as they destroy Gaia.

Global warming seems to be occurring, but there is little evidence that anything humans can do would have any effect on it.

We are just a thin layer of scum on a big, moist world, and what we do with our relatively tiny amount of oil or coal has no predictable effect on climate.

Instead of pretending to rule the world, the California Legislature should be trying honestly to rule the budget!

It was only two years ago that it cost more than $60 to fill up my little compact car tank. That time was Katrina's fault. But the time before that was war in the Middle East. What's next? We need cleaner, California-made fuels like algae and electricity made from wind. I'm tired of having no other alternatives to expensive oil. I'm all for the state thinking long term about our energy demands, and creating opportunities for California ingenuity.

Global Warming or not we still have to admit that taking care of the Earth is far more beneficial than hurting it. We need to control our oil addiction. By being hooked on oil (which is imported mostly) we give power to foreign interests with our future. Do you know how potentially devastating a price increase of oil would be to our economy? We need to end our dependence from oil because it isn't endless and the less there is of it the more the price will spike up. Solar and Wind energy are far more likely to last longer than Oil.

Climate control costs are known. And we know that the costs of doing nothing are far higher than those of getting our addiction to oil under control. Technological innovation in the energy sector will lead to greater competition among energy providers, which will lead to lower prices. And this report is correct: a great choice in energy sources means a much less pain at the pumps and in our energy bills when oil shocks occur. The clean energy sector is growing rapidly in California. By implementing AB 32 we stand only to save money and to make money through conservation and alternative growth. So vote NO on Prop. 23.

Could Paul be any more wrong? His information is clearly the sourced from the fossil fuel industry’s clean energy smears.

Climate Science is settled and the benefits of capping greenhouse gases are known.

You sound an awful lot like the gambler who only keeps track of his winnings and conveniently forgets his losses.

My God how deep did you have to dig for this argument?

We need to get off oil now--there is an endless supply of solar and wind power out there. The oil companies want to keep us addicted and keep our money!


Some nations, and states such as California, have decided that they can make the world greener by regulating greenhouse gases implicated in global warming. One greenhouse gas, carbon dioxide, has been singled out as a target “air pollutant” for government emission controls.

Carbon dioxide accounts for only about 7% of global greenhouse gases, and it is a principal and natural metabolite (by product) of half of every living thing on earth. You exhale it with every breath. Plants turn carbon dioxide into the life-sustaining oxygen that we inhale from their process of photosynthesis.

The United Kingdom (U.K.) adopted the European Union’s carbon dioxide emissions regulations and carbon trading system in alignment with the Kyoto Protocol after 2005. Accordingly, U.K. climate regulations put a price on carbon dioxide emissions, and heavily subsidize renewable energies such as wind, biomass and solar power. U.K. electric power producers pay for the emission controls and alternative energies, and pass the new costs on to energy consumers.

In July 2010, the U.K.’s Department of Energy and Climate Change reported the cost increases that power consumers will incur under the new greenhouse gas regulations. Such climate control regulations will raise gas prices in 2020 by 18%. The climate controls will raise electricity prices by 33% over the next 10 years. Worse, non-domestic consumers of U.K. energy will see 24% rises in gas prices and 43% rises in electricity prices.

This U.K. experience with costly climate regulations should be a stark warning to recession-bound U.S. and state government attempts to quiet eco-lobbyists with new climate regulations. Moreover, no global, national or state government can truthfully assert any meaningful control of global climates from new carbon dioxide regulations.

California voters could vote to rein in the 2006 California Global Warming Solutions Act (Assembly Bill 32) by voting for a ballot initiative that will appear on this year’s statewide election ballot November 2nd. The initiative, Prop. 23, would suspend the implementation of A.B. 32. until the state’s unemployment rate is reduced to below 5.5%.

Climate science remains unsettled. The unpredictable interactions and ultimate atmospheric fates of clouds and aerosols stand in the way of reliable global warming cause-and-effect findings. Truth is, unless and until a cost/benefit analysis can be agreed upon, and world oil prices stay above $80 per barrel, no pragmatic nation (or state) will self-inflict the higher energy prices that necessarily attach to climate regulations -- especially during economic recession. Climate control costs are known. The benefits are unknown.


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