L/W sets targets that would reduce GHG emissions to 15% below 2005 levels by 2020; 30% below 2005 levels by 2030; and 70% below 2005 levels by 2050. Covered emissions are assumed to include everything from combustion of fossil fuels in the United States, plus non-CO2 GHG emissions included in the L/W cap. The price of carbon permits (what companies must pay to emit CO2) could reach between $55 and $64 per metric ton of CO2 (MT) by 2020 and could increase to between $227/MT and $271/MT by 2030.3
Impact on Jobs Under L/W
, California would lose 129,982 to 195,528 jobs in 2020 and 337,863 to 449,745 jobs in 2030. The primary cause of job losses would be lower industrial output due to higher energy prices, the high cost of complying with required emissions cuts, and greater competition from overseas manufacturers with lower energy costs.
Decrease in Disposable Household
Income Higher energy prices would have ripple impacts on prices throughout the economy and would impose a financial cost on households. California would see disposable household income reduced by $1,244 to $4,032 per year by 2020 and $5,163 to $9,414 by 2030.
L/W’s Impact on Energy Prices
Most energy prices would rise under L/W, particularly coal, oil, and natural gas. The price of gasoline in California would increase between 72% and 151% by 2030, while electricity prices would increase by 38% to 49%. Table 1 shows the increase in electricity, gasoline, and natural gas prices faced by a typical California household compared to national household increases. California residents would pay between 111% and 152% more for their natural gas by 2030. 1 S. 2191 2
The study used the National Energy Modeling System (NEMS) and assumptions provided by ACCF and NAM for this analysis. NEMS is used by the US Energy Information Administration for energy forecasting and policy analysis. “Low” refers to the Low Cost Case, which assumes higher nuclear capacity, less constraints on new generating technologies, etc. Both cases use higher capital costs than the baseline. “High” refers to the High Cost Case, which assumes low nuclear additions, constrained new generation technologies, high oil prices, etc. (See the full report for all assumptions). 3 All dollar figures in this report are presented in constant 2007 dollars.
Factors Contributing to Higher Electricity Prices
L/W would reduce GHG emissions from all sectors of the economy (transportation, residential, commercial, and industry); however, as the largest emitter of GHGs, the primary impact would fall on the electric sector. L/W would result in the electric industry shutting down most carbon-based generation and/or using expensive, as yet unproven technology, to capture and store CO2. To meet the stringent goals of L/W, the electric industry would also have to substitute high cost technologies, such as biomass and wind, for conventional generation.
Impact on Economic Growth
High energy prices, fewer jobs, and loss of industrial output are estimated to US reduce California’s gross state product (GSP) by between $20 and $27.7 billion per year by 2020 and $73.6 and $86.9 billion by 2030.
Impact on Industry California’s major economic sectors
will be affected by emission caps .4 The current two largest sectors, chemical manufacturing and computer and electronic product manufacturing, show decreases in output of 5.9% to 6.6% and 2.0% to 1.6%, respectively in 2020. All manufacturing sectors will suffer output losses of between 2.5% and 4.1% by 2020, while output from energy intensive sectors fall between 9.1% and 12.8%. These losses would be significantly higher by 2030 and would have a lasting impact on California’s economic base. Emphasis on non-fossil fuel generation in California would result in a 6.2% to 13.1% increase in electricity generation.
Impact on Low Income Families
The impacts of L/W will be felt especially by the poor, who spend more of their income on energy and other goods than other income brackets. By 2020, higher energy prices mean that low income families in California (with average incomes of $17,312) will spend between 14% and 16% of their income on energy under L/W compared to a projected 12% without L/W. Others on fixed incomes, such as the elderly will also suffer disproportionately.
Impact on State Budgets
The increases in California’s energy costs under L/W will impact expenditures throughout the state. Specifically, California’s 13,652 schools and universities and 473 hospitals will likely experience a 20% to 24% percent increase in expenditures by 2020 and a 64% to 84% increase by 2030. For government entities, costs for services, including public transportation and vehicle fleets, such as school buses, will also rise under L/W.
4 MAN = Manufacturing; EIS = Energy Intensive Industry; CHEM = Chemical manufacturing; COMP = Computer and electronic product manufacturing 5 These projections assume that the energy expenditures by income quintile in the state are the same as the average for the census division, since there is insufficient data to accurately calculate this quantity on the state level. 6 These projections assume that the expenditures on schools and hospitals are the same as the average for the census region, since there is insufficient data to accurately calculate these quantities on the state level.
For a copy of the comprehensive national and 50-state reports, please visit http://www.accf.org/ or www.nam.org/climatechangereport.
For additional information, or to schedule and interview, please contact Laura Narvaiz for NAM at (202) 637-3104 or
, or Mike Burita for ACCF at (202) 420-9361 or
The National Association of Manufacturers is the nation’s largest industrial trade association, representing small and large manufacturers in every industrial sector and in all 50 states.
Headquartered in Washington, D.C., the NAM has 11 additional offices across the country.
The American Council for Capital Formation (http://www.accf.org/) is a nonprofit, nonpartisan organization dedicated to the advocacy of tax and environmental policies that encourage saving and investment.
The ACCF was founded in 1973 and is supported by the voluntary contributions of corporations, associations, foundations, and individuals.