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Saturday, Mar 2, 2024

Letting the Air Out of Regulation

With key components of AB32 set to take effect this November, many key industries are holding their breath and hoping for some speedy policy changes. Recently, two independent studies on AB32’s impacts were commissioned by Western States Petroleum Association and the California Manufacturers and Technology Association. Both studies concluded that the onerous regulations created by the California Air Resources Board would effectively force several industries out of California, costing the state hundreds of thousands of jobs, and billions of dollars in tax revenue and economic investment.

The first study, conducted by the Boston Consulting Group for the petroleum association, concluded that Californians could be paying upwards of $6 per gallon of gasoline by 2015. And up to half of the oil refineries in California could shut down by 2020. Most of California’s refineries reside in Los Angeles County and the industry employs nearly 75,000 residents here. The loss of these refineries could result in the elimination of tens of thousands of high-paying local jobs, not to mention the loss of business for small local companies that count refineries among their best customers.

The second study, sponsored by the manufacturers association, estimates the combined price tag for three major new regulations associated with the law: CARB’s low carbon fuel standard, cap and trade, and the state’s stringent 33 percent renewable mandate for electricity production will raise energy costs and are expected to reduce the state’s GDP by up to 8.9 percent by 2020.

The real problem for certain business sectors is the virtual impossibility of meeting the lofty goals that CARB and the state have set for them. In the case of the low carbon fuel standard, some compliant fuels do not exist or are unavailable in sufficient quantities. With respect to the renewable electricity standard, and cap and trade, the logistics and capital costs are prohibitive.

Two of the state’s major employment sectors that will be adversely affected are the petroleum and food manufacturing industries. These industries will be forced to purchase credits, without which they will be unable to legally operate in California, via a CARB-operated auction. Our in-state businesses will be forced to compete for these essential allowances with international investors and speculators whose interest is profit – not carbon reduction – and the cost of those credits will undoubtedly be passed on to consumers.

Then there’s the impact on the ports. The ports of Los Angeles and Long Beach are currently implementing capital improvement projects necessary to maintain their competitive edge in a growing global battle with the Panama Canal and the Eastern seaports. These regulations could marginalize or even undermine the immense strides both ports have made toward becoming leaders in the global seaport arena.

Huge impact

Although AB32 will have a huge impact on California’s business community, the pain won’t stop there. Those who might get hit hardest are low- and middle-class families. At a time when they struggle to put food on the table, implementation of AB32 would drive up the cost of utilities, food and fuel, among other expenses. It would also eliminate numerous well-paying blue-collar jobs and send families into further financial crisis.

Another unintended consequence will be the effect of these regulations on local governments, which could face a double whammy. As businesses downsize or close down and joblessness increases, tax revenues decline. At the same time, AB32’s higher energy costs will put additional strain on already strapped municipal budgets as cities must pay more to fuel police, fire and emergency medical vehicles and keep the lights on in our public facilities.

CARB has remained steadfastly unresponsive to persuasive arguments presented by the business community.

Ironically, that posture may lead to the success of AB32, albeit in a way the law’s authors could not have intended. Both studies concluded that the emission reduction goals set forth by AB32 will be achieved mostly through reduced manufacturing and a slowing of the economy, not new technologies.

One thing is for sure. Absent legislative intervention, AB32 will drastically obstruct California’s economic recovery and might trigger a new recession unlike any the state has ever seen.

Randy Gordon is president and chief executive of the
Long Beach Area Chamber of Commerce.

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