Green economics 101: California's AB 32 and Proposition 23
Professor Kahn of UCLA presents a primer on California's greenhouse gas protections and the current ballot measure to overturn them.
Have you ever written a good paper and wondered whether you should send it to the American Economic Review or the UCLA Daily Bruin Newspaper? I have published in both outlets but the choice is an easy one. The Daily Bruin has a faster acceptance time and the editor roughs you up less and my salary increases by more when I publish there. Click on that link above to see my newest contribution to economic science. Google Scholar needs to incorporate student newspapers into its database. A publication is a publication.
BY MATTHEW E. KAHN
Proposition 23, if enacted by voters, will freeze the provisions of AB 32 until California’s unemployment rate drops to 5.5 percent or below for four consecutive quarters. AB 32 is the code name for California’s Global Warming Solutions Act of 2006. This law requires that by 2020, the state’s greenhouse gas emissions be reduced to 1990 levels, a roughly 25 percent reduction from current estimates. The California Air Resources Board has the regulatory authority to prepare the plans to achieve this emissions reduction goal.
As a free market environmentalist, I strongly hope that Proposition 23 will fail. International and domestic efforts to reduce our greenhouse gas emissions have failed.
The U.S Senate refused to vote on the American Clean Energy and Security Act of 2009. Our refusal to enact a credible incentive to decarbonize the economy means that world population and per capita income growth will only increase greenhouse gas emissions. This will further exacerbate the coming challenge of climate change.
While the rest of the United States and most of the rest of the world have been unwilling to take credible steps toward capping their emissions, California has been willing to shoulder this leadership role. Are we a “hero” or are we a “sucker?” Shouldn’t we simply free ride like everyone else? I don’t think so.
I moved to California three years ago because I wanted to live and work in a progressive, cutting-edge state. During this time of deep recession, California is trying to figure out how our economy will “get its groove back.”
While there is a lot of hype around the “green economy,” I do believe that the synergies between our leading universities, the venture capital money and our state’s progressive ideology, combined with clear government incentives and signals (provided by AB 32), help to give California an edge in the nascent green economy.
In many of his past movies, Gov. Arnold Schwarzenegger starred as a man willing to take risks to protect his loved ones and to do what was right. In this spirit, AB 32 represents an opportunity for the state to target its entrepreneurial energies and to pursue a key environmental goal. This “double bottom line” is quite attractive.
As AB 32 is implemented, California will be a guinea pig for the whole world. California’s firms and researchers will experiment and tinker and learn as we individually attempt to reduce our carbon footprint. Some ideas will succeed and others will fail but the knowledge generated will be crucial for helping the world economy to decarbonize.
AB 32 is not a “free lunch” for our state, but its implementation costs have been exaggerated by supporters of Proposition 23. In the medium term, AB 32 will help our state to simultaneously reinvent our economy and to help achieve global sustainability goals.
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