The economic impact of California's AB32 law for fighting climate change

California's AB32 law will be a costly, but important first step in establishing a green economy.

Reed Saxon/AP Photo
Installers Arin Gharibian (l.) and Hayk Mkrtchayan (c.), and team leader Edward Boghosian (r.), all employees of California Green Design, assemble solar electrical panels on the roof of a home in Glendale, Calif., Tuesday.

Yesterday was a big day in California environmental politics. The Air Resources Board has released its new economic report providing details of its best predictions concerning the likely impact of this important regulation. Details are posted here:

Jim Sweeney and I published an editorial today in the Los Angeles Times. You can find a draft of that piece at We argue that AB32 offers some benefits and that we need careful economic analysis of its true micro economic effects.

I was also happy to see this US News and World Report article discussing my work on the impact of natural disasters.

Returning to AB32, I spoke to many different reporters today and I always said the same thing;

1. I don't love "macro models"

2. I do believe that this regulation is beneficial because of how it will change firms and households incentives and this MICROECONOMIC incentive change will spur green innovation and help the California economy in the medium term.

A smart writer from the San Diego Union Tribune pushed me asking about free riding. He asked why California must be the Guinea Pig? Why can't we free ride like everyone else (given that the rest of the world failed at Copenhagen to sign a global deal). I pushed back that California, Oregon and Washington are large enough together to form a home market effect to push the green economy regardless of what the rest of the nation is doing. But, upon reflection -- I do think he is right that President Obama should think about offering a "green carrot" to California for taking this costly first move for the social good of the "big green economy". I will return to this point in a future post.

Add/view comments on this post.


The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.

You've read  of  free articles. Subscribe to continue.