A local academic has emerged as the leading source of dark forecasts in a recession-fueled debate over whether California's war on global warming will hurt or help its economy.

Sanjay Varshney, dean of the business school at California State University, Sacramento, predicts dire consequences if the state moves forward with plans to cut greenhouse gas emissions.

His figures – dismissed by some economists – have been cited by business groups and politicians calling on the state to delay carrying out AB 32, the state's landmark climate change law.

In a July paper paid for by the California Small Business Roundtable, an advocacy group, Varshney reported that trimming emissions would cost the average household $3,857 a year, kill more than 1.1 million jobs and cut the state's economic output by nearly 10 percent.

Costs for food, fuel, electricity and housing would all rise, he predicts, driving a 26 percent drop in discretionary spending, slashing tax revenues and squeezing small businesses.

Those figures, the result of Varshney's first venture into environmental policy analysis, have planted him at one of the poles in the climate change debate.

At the other pole are environmental and green-business groups that predict AB 32 will make California more innovative and efficient, driving economic growth and creating jobs.

Varshney's study has been cited by everyone from the San Diego Union Tribune's editorial board to leading industry advocates in Sacramento. Last month, Republican Meg Whitman nodded to Varshney's job numbers as she made postponing AB 32 a key promise in her run for governor.

"We first must get our economy back on track," she wrote in an op-ed in the San Jose Mercury News.

In an interview in his CSUS office, Varshney, 42, a native of India, said he was honored by the mention. He said he supports fighting climate change in concept and doesn't have an agenda.

"The idea was certainly not to make this political," he said.

Under AB 32, California must cut its greenhouse-gas emissions back to 1990 levels by 2020. Meeting that target will demand big increases in energy efficiency, renewable electricity and alternative fuels, among other changes. The law's regulations begin to take effect in January, with emissions cuts phased in over the next decade.

The debate over whether those cuts will crush the economy or boost it has been bubbling since Gov. Arnold Schwarzenegger signed the law in 2006.

Schwarzenegger has consistently pitched a vision of a low-carbon future filled with green jobs and technological innovation.

Studies funded by environmental advocates and foundations have concluded that efficiency gains and demand for new energy technologies will deliver an economic boost. A study last year that assumed somewhat more aggressive emissions cuts than required by AB 32 predicted a roughly 3 percent boost to the state economy and 403,000 new jobs by 2020. The study was commissioned by Next 10, a Palo Alto-based nonprofit.

"Every time we're able to save money on fossil fuels, we can spend more money on in-state goods and services," which are more job-intensive, said David Roland-Holst, the study's author and an adjunct professor of economics at the University of California, Berkeley.

AB 32 calls for the state Air Resources Board to produce a peer-reviewed economic analysis that would, in theory, settle the issue.

The agency's first attempt, incorporating Roland-Holst's modeling, found AB 32 would boost gross state product by about 0.3 percent and save households about $500 a year.

But outside economists weren't convinced.

After the report's release last October, reviewers tore into it for understating AB 32's costs, among other problems. Harvard University economist Robert Stavins wrote that it was "terribly deficient." The nonpartisan state Legislative Analyst's Office called the study "inconsistent and incomplete."

Last December, the Air Resources Board ordered the analysis to be redone. A major revision is due by the end of the year.

Call The Bee's Jim Downing, (916) 321-1065.