December 11, 2008
CONTACT: Charlotte Baker
[email protected]

IER Encourages CARB to Consider Economic
Implications of AB 32

CARB Charges Staff to Revise Economic Analysis by
December 2009

Washington, DC – This week the California Air Resources Board formally adopted its Scoping Plan for AB 32 that would initiate a series of drastic (if aspirational) cuts to future emissions of carbon. The plan included a resolution to address the economic costs of AB 32 and charged the staff with revising the economic analysis by December 2009. The Institute for Energy Research (IER) submitted formal comments to the California Air Resources Board (CARB) this week before thier vote urging CARB to address the deficiencies with the economic analysis before moving forward with implementation.

IER has serious concerns regarding the plan’s analytical findings, perhaps the most glaring of which claims the implementation of AB 32 will help save the California economy by saving its residents money and creating new jobs. Outside analysts have reached a far different conclusion. A recent study
commissioned by the Electric Power Research Institute estimated that California’s greenhouse gas regulations will cost between 0.2 and 1.2 percent of gross state product.

IER’s comments addressed the weaknesses of CARB’s analysis, including the plan’s inaccurate depiction of the tradeoffs involved and consequences to be expected from AB 32. Specifically, the comments support the assertion that CARB (i) overestimates the environmental benefits likely to result from AB 32’s targets for greenhouse gas emissions, and (ii) underestimates the costs in terms of reduced economic output of AB 32.

Robert Murphy, chief economist at IER, characterized CARB’s economic analysis as deeply flawed and perhaps willfully misleading, giving no guidance on the impact of AB 32 or even acknowledging a responsibility to pursue that analysis. “Before deciding on whether to go ahead with AB 32, policy-makers need to know how high its price tag will be. But CARB’s analysis claims that AB 32’s aggressive targets are not only free, but will actually boost the California economy! Though I am encouraged CARB is updating their economic analysis to address the deficiences we laid out in our comments we need to see CARB staff come back with a serious weighing of the tradeoffs before they pursue implementation.”

IER urges CARB to address their concerns and perform a proper analysis before moving forward with implementation. IER praises CARB for calling on staff to revise its economic analysis and urges policy-makers to delay implementation until CARB receives a more honest and accurate assessment of AB 32’s economic impacts.

To speak with IER’s experts please contact Charlotte Baker at:

[email protected]
or (202)434-8200.

The Institute for Energy Research (IER) conducts historical research and evaluates public policies in the oil, gas, coal, and electricity markets. Founded in 1989 from a predecessor non-profit organization, IER is a public foundation under Section 501(c)(3) of the Internal Revenue Code. IER articulates free-market positions that respect private property rights and promote efficient outcomes for energy consumers and producers. For more information visit

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