How a New California Climate Law Will Strangle Manufacturing

COMMENTARY Environment

How a New California Climate Law Will Strangle Manufacturing

Sep 1st, 2016 3 min read
David W. Kreutzer, Ph.D.

Senior Research Fellow, Labor Markets and Trade

David Kreutzer researches and writes about labor markets and trade.

California just hung up a big “Manufacturing Workers Need Not Apply” sign. It took the form of extended, stricter, and even less realistic carbon dioxide regulations.

A new California bill extends legislation previously set to expire in 2020 and imposes dramatically deeper emissions cuts for 2030. Under the new measure, California must cut its carbon dioxide emissions to a level 40 percent below its 1990 level by 2030.

It’s worth noting that California’s population is projected to be 50 percent higher in 2030 than it was in 1990. It’s also worth noting that carbon dioxide is colorless, odorless, and nontoxic. Its purported health and climate impacts result from carbon dioxide’s effect on global warming. However, no amount of emissions regulation in California (or even the United States as a whole) will have a significant impact on global warming—the developing world’s demand for affordable energy will swamp any cuts made by the U.S.

But the added regulatory burden will almost certainly drive up energy costs, which is bad news for consumers and businesses—and especially bad for energy-intensive industries like manufacturing.

California’s existing regulations have already done damage. Since 1990, California energy prices have risen faster than the rest of the country. By 2014, the average price of electricity in California was 46 percent higher than the average for the country as a whole; and even more problematic for manufacturing jobs, the industrial price of electricity in the state was 75 percent higher.

Economic studies repeatedly show the manufacturing sector will suffer with the higher energy prices brought on by carbon dioxide restrictions. (For example, see here and here.) So it shouldn’t be surprising that California’s manufacturing has missed out on the robust rebound in manufacturing employment enjoyed in the rest of the country.

What is surprising is that the California government would use new legislation to double down on the energy-strangling policies that contributed to the manufacturing malaise in the first place.

Though maybe it shouldn’t be too surprising given the mega-rich and mega-influential Californians who have outsized influence on climate policy combined with equally outsized hypocrisy and willingness to impose costs from which they are themselves insulated.

Two examples should suffice for illustration.

First is a hedge fund billionaire who manages an environmental charity that bankrolls some of the biggest organizations fighting against affordable energy. While the groups he supports work to jack up gasoline prices, he rides to work every day in a 1,500 horsepower yacht.

Second is an actor who rarely misses an opportunity to push energy-killing climate policies on everybody else, but finds private jets and monster yachts more suitable for himself.

California’s rising income disparity may be both a cause and an effect of its manufacturing unfriendly energy policies. Perhaps the super-rich don’t care about casting off manufacturing jobs for expensive but merely symbolic climate gestures. However, a lot of working people do.

This piece originally appeared in The Daily Signal