RE-READING – FIGHTING CLIMATE CHANGE IS GOOD FOR THE ECONOMY (from October 13, 2009)

Both the newly rejoined fight for a national Renewable Electricity Standard (RES) in Congress and the vicious attack on AB 32, California’s climate change law, are struggles between New Energy advocates who are convinced better policies can have a favorable impact on the economy and the environment and entrenched Old Energy interests who don't want policies changed.

Recalcitrant fossil fools claim policies supportive of New Energy will impede growth and kill jobs. Studies like the one summarized in the piece below validate the New Energy advocates' argument. The only growth impeded and jobs lost will be in the Old Energies and those impacts will be more than offset by New Energy gains.

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)

SUMMARY
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.

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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).

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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.

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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.

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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.

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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 of 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.

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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.

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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.”

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- 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..."