Andrew Chang is the managing director of Andrew Chang and Co., a management consulting firm in Sacramento.

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Another View: AB 32 will add costs, hurt California economy

Published: Sunday, Aug. 26, 2012 - 12:00 am | Page 2E
Last Modified: Wednesday, Sep. 12, 2012 - 9:12 am

Californians are tired of divisive politics taking the place of meaningful policy debates. But in their Aug. 16 Viewpoints article "Clean energy law drives innovation, creates jobs, attracts investments," W. Bowman Cutter and Matthew E. Kahn do just that and distract from the real discussion surrounding AB 32.

Despite their claim that it will produce tremendous economic benefits for California, many studies have found that AB 32 will harm California's economy; the only debate is how much.

The California Air Resources Board acknowledges AB 32 will result in a net loss of up to $35 billion in gross state product, while researchers at Andrew Chang and Co. found that California will lose $153 billion, even under optimistic conditions.

Why do our results vary? Whereas our benefits are consistent, ARB failed to consider a number of costs that are included in our analysis, including new power transmission lines, backup power, truck fuel standards and implementation costs for local government. Moreover, ARB's study was developed without the benefits of data indicating that the new fuels market ARB pinned its hopes on has not materialized.

Also, our study goes beyond others to suggest ARB can achieve the same reductions and significantly reduce economic damages by leveraging more cost-effective solutions and minimizing programs that export dollars out of California.

Despite Cutter and Kahn's claims that AB 32 is all benefits, it is irrefutable that AB 32 will impose costs on California. As noted by our study, ARB's current AB 32 programs, including cap and trade, will cost the average California family $2,500 per year and destroy 260,000 jobs. The Sacramento metropolitan area alone can expect to lose more than $93 million in local tax revenue by 2020. The rosy message propagated by ill-informed and self-serving proponents is the real fairy tale.

Bowman and Kahn note that cost-benefit analyses should be open for genuine review. I agree. Our study was reviewed by a number of experts; we took their feedback seriously and made adjustments accordingly. We also heavily documented our methodology, provided a pre-release briefing to ARB and offered to work with them further. To the best of our knowledge, our standard of review and professionalism meets or exceeds that of any other AB 32 study.

The fact is AB 32, including cap and trade, comes at a significant cost to families, businesses and local governments. Our study should be the basis for the next substantive debate: Does ARB meet its statutory responsibility to produce the maximum cost-effective solution?

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