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California’s
efforts to reduce greenhouse gas emissions, build New Energy and Energy
Efficiency and create a New Energy economy make an invaluable
contribution to the state’s productivity and without such efforts its
economy would be significantly hampered.
In Energy Prices & California's Economic Security,
University of California, Berkeley, Adjunct Professor David
Roland-Holst demonstrates conclusively that, far from being the
economic drag its opponents claim, the implementation of New Energy and
Energy Efficiency in the fight to reduce greenhouse gas emissions
(GhGs) and reverse global climate change has been and will continue to
be an economic engine for California (and could be for the rest of the
world).
According to Professor Roland-Holst’s findings and
calculations, California could lose $80+ billion in Gross State Product
(GSP) and 500,000+ jobs by 2020 if it turns away from its New Energy
and Energy Efficiency efforts.
If the state’s leaders find the
unanimity to (1) sustain AB 32, its groundbreaking GhG-cutting law, (2)
mandate the more demanding 33% Renewable Electricity Standard (RES) now
being debated that would require the state’s regulated utilities to
obtain a third of their power from New Energy sources by 2020, and (3)
continue a 1% yearly required increase in Energy Efficiency,
California's GSP will gain $20 billion, 112,000+ jobs will be added and
the state will have a shield against inevitably rising energy costs.
The
report is another affirmation for New Energy advocates such as
President Obama, Al Gore and former President Bill Clinton who have
long contended a New Energy economy will boost U.S. prospects.
It
is also a big boost for California Governor Arnold Schwarzenegger, who
has been locked in conflict with his fellow Republicans and especially
aspiring Republican gubernatorial nominee Meg Whitman over the issue.
Schwarzenegger is a passionate advocate for New Energy, Energy
Efficiency and the fight against global climate change while Whitman
and fellow recalcitrant Republicans mistakenly contend those concerns
are detrimental to economic growth.
COMMENTARY
For
the last few years, California has been among the standard bearers in
the fight against climate change while the federal government looked
the other way. Governor Schwarzenegger’s Nixon-to-China political
positioning, with the support of Silicon Valley’s turn to New Energy,
allowed him to indulge his environmentalist impulses despite the
grumbling of his Republican base.
It worked while the economy
was expanding. Now, with California finances in free-fall and his
term-limited governance turning lame duck, Governor Arnold is getting
blowback and some are wondering if California’s forward looking
policies will be sustained by the conservative mindset that inevitably
emerges with tough economic times.
With the support of Next 10,
Berkeley Professor Roland-Holst has formulated an economic response to
the Governor’s conservative, financially-minded critics, presenting
thoroughly documented arguments for policies that move the state away
from the use of fossil fuels because they not only make good sense in
the fight against climate change but make dollars and cents as well.
Roland-Holst considers 6 possible scenarios for California, all based
on data from the U.S. Department of Energy (DOE) Annual Energy Outlook
(AEO).
click to enlarge
Two
of the Roland-Holst paper's scenarios assume a 33% Renewable
Electricity Standard (RES) to be in place. The study was written before
the present contentiousness between the Governor and the legislature
over the 33% RES fully erupted and the Governor signed the 33% RES into
law by executive order only to have lawmakers challenge its legal
validity.
Should the state’s economic doldrums lead to political
stasis and foster the emergence of a deadlocked legislature, it is
possible there could be no 33% RES, no sustained AB 32 with its
standard-setting emissions-reduction policies and no effective Energy
Efficiency programs. Meanwhile, as per the AEO, energy prices would
climb. That’s scenario 1.
In scenario 2, economic recovery does
not preclude a political deadlock that keeps the state from advancing
its policies. At the same time, an expansion associated with economic
recovery drives increasing international competition that generates
increasing demand for ever more limited fossil fuel supplies, making
the energy price rise steeper than the AEO prediction.
click to enlarge
Scenario
3 assumes economic recovery and an AEO-sized expansion along with the
extension of AB 32, setting limits on emissions and establishing Energy
Efficiency standards beginning in 2012. It assumes there is an RES
requiring only 12% of California’s energy come from New Energy sources
by 2020.
Scenario 4 changes scenario 3's RES to 20%.
Scenario 5 changes scenario 4's RES to 33%.
Scenario
6 assumes there are strict emissions reductions from AB 32, a 33% RES
and an Energy Efficiency standard requiring the state’s utilities to
implement a 1% per year improvement.
Interestingly, the paper’s
foremost finding is that increasing fossil fuel costs will hurt the
California economy if policies such as (a) AB 32, designed to curtail
the state’s greenhouse gas emissions (GhGs), (b) a 33% RES and (c)
Energy Efficiency requirements are not imposed on the state’s emitters
to transition away from reliance on them.
Specifically:
(1) Fossil fuel dependence will reduce the Gross State Product (GSP) by $80 billion.
(2)
It will produce 500,000+ fewer jobs because the fossil fuel industries
are well-established to be less manpower-intensive and a stumbling
economy generates less employment.
(3) Continuing fossil-fuel
dependency and the failure to implement emissions-reduction policies
will result in electricity prices as much as $100 per person higher in
2020.
(4) Although the implementation of a 33% RES cannot prevent a
significant increase in electricity prices by 2020, a failure to shift
away from reliance on fossil fuels will see California businesses and
households losing a dollar from in-state labor and labor intensive
goods and services for every dollar they spend on capital-intensive
fuel imports.
click to enlarge
On
the other hand, if the state sustains its commitment to GhG cuts, the
33% RES and aggressive Energy Efficiency, the California economy will
benefit enormously. Policies that steer the state away from fossil
fuels and toward a New Energy economy will prevent vulnerability to
energy price fluctuations, increase the GSP and grow jobs.
Specifically:
(1)
AB 32 and the 33% RES will protect the GSP from $71 billion in higher
energy costs and prevent 352,000 jobs from being lost.
(2) A 1%
per year increase in Energy Efficiency required by AB 32, in
conjunction with the 33% RES, will boost the GSP $33 billion more and
add 387,000 more jobs.
It is widely taken as a given that
world energy demand, diminishing accessible and cheap fossil fuel
supplies and the burdens of a price on GhGs will combine to drive up
the cost of reliance on fossil fuels. The Roland-Holst paper simply
quantifies the protections provided against such rising prices inherent
in policies that require GhG reductions and drive the development of
New Energy and Energy Efficiency.
The study does not make an
effort to consider the costs of worsening impacts from climate change
or the savings of preventing such impacts. It foresees but cannot fully
quantify, except primarily in terms of job creation, the “dramatic
opportunities for emergent technologies” from policies that foster the
birth of a New Energy economy.
click to enlarge
The
paper includes in its conclusions the recognition of uncertainties. It
is simply not possible to definitively predict the future or the course
of innovation. It is only possible to set policies to foster innovation
and promote research to unveil uncertainty.
Professor Nathan
Lewis of the California Institute of Technology is at the absolute
cutting edge in the development solar energy technology. He made the
decision to dedicate his biggest research efforts to solar energy after
carefully considering all the possible energy choices available to meet
increasing world demand.
In discussing his choice, Professor
Lewis always includes the urgency of climate change as a significant
factor for choosing New Energy over the Old Energies. He acknowledges
that there is still some uncertainty about the progress and impacts of
climate change but, as Professor Lewis likes to say, we only get to run
the experiment once.
click to enlarge
Given
the findings of Professor Roland-Holst’s investigations, the conclusion
that policies and investments in emissions-reduction, New Energy and
Energy Efficiency policies – which make climate sense and will make
dollars and cents – would seem the unavoidably inevitable choice with
which to run the experiment, considering what is riding on the outcome.
Note on method: The Roland-Holst study incorporates the University of California's Berkeley Energy and Resources (BEAR) breakthrough method of modeling the economics of energy.
click to enlarge
QUOTES
-
David Roland-Holst, Professor/study author, UC Berkeley: “The global
financial crisis has hit hard in California, where unemployment,
mortgage foreclosures and an unprecedented state budget deficit are
among the highest in the nation. But the current decline in demand in
global energy markets is temporary and risks lulling policymakers and
the public into a state of denial about long-term fossil fuel price
trends…Even using conservative official estimates, we find that
California risks far greater economic peril by remaining heavily
dependent upon fossil fuels. Energy efficiency and renewables offer a
valuable hedge against the risks of higher energy prices.”
- F.
Noel Perry, Founder, Next 10: “There has been considerable public
debate over the projected economic impacts of California’s
first-in-the-nation climate policies…To date, no one has modeled the
economic impact of doing nothing to change our energy mix. Today’s
report clearly reveals the economic risk inherent in overreliance on
fossil fuels.”
click to enlarge
-
From the Roland-Holst paper: "California’s response to rising
greenhouse gas (GHG) emissions has drawn one of the world’s largest
economies into an unprecedented policy dialogue that will influence
energy and environmental decisions around the world...Energy efficiency
and renewables offer a valuable hedge against the risks of higher
fossil fuel prices, quite apart from the fact that fossil fuel
consumption generates over 80 percent of global GHG
emissions...California’s ambitious program will create dramatic
opportunities for emergent technologies and green job creation, while
setting a standard for other state and national governments to watch
and consider emulating..."
Study says California saves by fighting global warming
Josh Richman and Lisa Vonderbruegger, October 7 & 12, 2009 (Political Blotter via Contra Costa Times)
and
Aggressive
Renewable Portfolio Standard & Energy Efficiency Can Protect
California from Higher Energy Prices & Promote Economic Growth
October 6, 2009 (Next 10)
posted by Herman K. Trabish
