Saturday, March 07, 2009

AB32 and Economic Analysis

I've achieved some of my life's goals but today I can check off another one. I have published a letter in the San Diego Tribune. Below, I report letters by Rob Stavins and myself. I must admit that Eric Maskin's NY Times Letter published today is even better. Why did I write the SD Tribune? I was misquoted there a week ago and felt that I should try (in 200 words or less) to state my "true" views.

Educators respond on climate plan

Regarding “Scrutinize climate plan/Air board member Roberts should throw weight behind Senate bill” (Editorial, March 1):
The Union-Tribune indicates that in my review of the California Air Resources Board's economic analysis of its AB-32 implementation plan, I said “it was so 'terribly deficient' that it would harm efforts to deal with climate change.” You are correct that I characterized the economic analysis as “terribly deficient,” but did not imply in my commentary to CARB that “it would harm efforts to deal with climate change.” Looking toward the future, I noted in my comments that “I regret very much this inescapably negative conclusion, because of my desire to help CARB develop and execute a sound economic analysis,” and, I might add today, a sound policy going forward.


Cambridge, Mass.

The editorial stated UCLA economist Matthew Kahn said “sharply higher energy costs mandated by the new rules would take a heavy toll on California manufacturers and their 1.5 million employees.” I am shocked by this interpretation of my review of the economic analysis of the scoping plan. As of today, we simply do not know how electricity prices will be affected by AB-32 regulation. Even if electricity prices rise, some California manufacturing firms will thrive as AB-32 creates new business opportunities for firms that produce energy efficient goods. The legislation is likely to have some negative effects for energy intensive manufacturing firms. The net effect of this job creation and job destruction is hard to measure. I would be greatly surprised if AB-32 imposes a “heavy toll” on California manufacturing.
California's economy has the ability to reinvent itself in the face of opportunities and shifting incentives. For the record, I am a supporter of AB-32. This regulation offers large environmental benefits and is likely to impose only small net economic costs.


Los Angeles