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Co-Author of Report Cited by AB 32 Opponents Backs Away From Findings

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The move by republicans and polluters to suspend/kill AB 32, California’s Global Warming Solutions Act that seeks to reduce greenhouse gas emissions and spur green job growth, was dealt a devastating blow on Friday — one of the authors of the much-cited (and much-criticized) Varshney/Tootelian report (VTR), which predicts an economic catastrophe if California implements AB 32, is now backing away from the report’s claims.

Facing yet another round of criticism — this time in a report by Stanford University economist Jim Sweeney that found VTR to be “highly biased…based on poor logic and unsound economic analysis” and overstates the costs of AB 32 “by a factor of at least 10” — Sanjay Varshney has refused to defend his report’s claims. When asked by a reporter for the Sacramento Business Journal to respond to Sweeney’s criticism, Varshney, who is Dean of the Business School at California State University Sacramento, would only say, “I haven’t really kept up with the debate. It will be very difficult for me to comment.” (You need to be a subscriber to see the full article.)

Hardly what you’d call a full-throated defense, or even a boilerplate response about his confidence in both his methods and his conclusions. And Varshney should be well-prepared to address the kind of criticism found in the Stanford report since it echoes criticisms found by other economists, as well as the Union of Concerned Scientists.

The main and most obvious criticism of VTR is that it only looks at the projected costs of implementing AB 32 ($24.9 billion) while purposefully omitting any of the savings that AB 32 would generate ($40.4 billion) — a net savings of $15.5 billion.  

It is a methodology that literally makes no sense. How can you account for the cost of buying a more fuel-efficient car, then not account for the money drivers would save at the pump by driving a more fuel-efficient car? How can you include the cost of building a home so it uses no net energy, then not include the savings for a family living in that home who no longer has to pay energy bills? Yet that is exactly what VTR does, a methodology the Stanford report calls “highly biased and has no credibility.”

Virtually all of VTR’s conclusions are based on this decision to look only at costs without savings, which the Stanford report estimates causes the results of VTR to be inaccurate by a factor of ten or greater. The authors of VTR try to justify their methodology by claiming that the estimated savings generated by AB 32 are “too speculative to consider at this time,” an explanation the Stanford report says has “little credibility” since VTR has no problem citing the costs of implementing AB 32, many of which are also speculative. And, as said before, it makes no sense to include the cost of increasing energy efficiency without including the savings from using energy more efficiently. The Stanford report goes on to highlight more errors and flawed methodology used in VTR, like claiming that saving $30/month by driving a new fuel-efficient car amounts to a $30/month increase in gas costs for those who stick with their current cars. It’s no wonder economists Christopher Thornberg and Jon Haveman of Beacon Economics called VTR “one of the worst examples of schlock science we’ve ever seen.”

Yet VTR — for which Varshney and Dennis Tootelian were paid $54,000 by the California Small Business Roundtable — is virtually the only evidence that AB 32 opponents give for their doomsday predictions that AB 32 will ruin California’s economy, cost the state a whopping 1.1 million jobs (more than have been lost as a result of the current recession) and raise consumer prices. Republican Meg Whitman has mentioned its findings as a reason why she has promised to suspend AB 32 if she is elected governor, as has a representative for her republican opponent, Steve Poizner. VTR has also been cited by numerous newspapers, including the editorial board of the Wall Street Journal, who heralded its findings as proof that there would be no “free green lunch” in California if AB 32 is implemented.

The fact that candidates like Poizner and Whitman (along with anti-AB 32 groups like the AB 32 Implementation Group) would put so much stake in a fatally flawed report that makes no secret of its most glaring failure is telling. But what are AB 32 opponents to do now when even one of VTR’s principal authors won’t defend its findings? Will they spend hundreds of thousands of dollars to fund a petition drive calling for the suspension of AB 32 when their main justification for suspending it — the conclusions of the VTR report — no longer applies? And considering the numerous studies that have found that AB 32 would create jobs, position California as a leader in the growing green/clean energy economy, reduce costs for businesses and consumers, and improve the health of Californians while reducing greenhouse gas emissions, what justification can AB 32 opponents give for defending a status quo that enriches the state’s worst polluters?  

Environment

AB 32 Opponents Vulnerable on Pollution’s Health Hazards

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(AB 32 is important for a number of reasons… – promoted by Brian Leubitz)

Imagine if Toyota made this statement:

“It has come to our attention that, due to faulty gas pedals, a small number of our cars have killed or injured a small percentage of our customers. However, to recall and repair our cars to address this problem would simply be too costly, especially in this difficult economy. So we are delaying a recall for one year, after which time we will re-evaluate the economic climate and decide whether conditions are favorable enough to initiate a recall. We ask for your patience and understanding during this time.”

Naturally, there would be a furious uproar. How dare a company attempt to put short-term economic interests ahead of people’s health and safety? Yet this is essentially what the opponents of AB 32, California’s nation-leading environmental legislation that seeks to reduce greenhouse gases in California to 1990 levels by 2020, are asking Californians to do. And since there is ample evidence that AB 32 would actually provide a needed boost to California’s economy without harming small businesses, what AB 32 opponents are attempting to do is arguably worse.

Not wanting to appear pro-pollution or tone deaf to Californians’ concerns about the environment, opponents of AB 32 — like Meg Whitman and dirty energy astroturf front the AB 32 Implementation Group (an especially Orwellian moniker for a group that doesn’t want AB 32 implemented) — claim they are deeply concerned about the state of the environment in California. And they should — Californians breathe some of the worst air in the nation, with 95% of Californians living in areas with unhealthy air. The top four most polluted cities in America when it comes to ozone (the primary ingredient in smog) are in California, with six California cities in the top ten. When it comes to the most polluted cities ranked by particulates in the air, the top three cities are in California, with six in the top ten.  

According to the American Lung Association, “numerous studies have linked air pollution to lung cancer, asthma attacks, heart attacks, strokes and early death as well as increased hospitalizations for breathing problems.” There is also growing evidence that air pollution actually causes asthma in otherwise healthy children, whose smaller lungs require kids to breath at a faster rate. In addition, a study by the University of Massachusetts and the University of Southern California found that the effects of air pollution fall disproportionately on poor and minority communities. A report by the NRDC determined that if emissions in California are not reduced to 1990 levels, over 700 Californians will die prematurely in 2020 alone, along with thousands of cases of asthma and other respiratory illnesses aggravated by pollution.

The response by AB 32 opponents? “Sucks to be them.”

Am I exaggerating? Not really. That’s because by acknowledging that air pollution is a serious problem, AB 32 opponents are also acknowledging that the health risks caused by pollution are real and serious. If they want to dispute that, they can take it up with the American Lung Association. That’s a fight I’d like to see, and one AB 32 supporters should make them have.

With the economy polling as the #1 concern of Californians, I understand why AB 32 is largely being looked at through the prism of job creation. And AB 32 supporters should be winning easily on this front — the non-profit Center for Resource Solutions (CRS) found that three reports undertaken by the California Air Resources Board (CARB), University of California researchers and Charles River Associates/Electric Power Research Institute using very conservative estimates were correct in their conclusion that implementing AB 32 would generate robust economic growth. By contrast, CRS found that the report by Varshney and Tootelian that AB 32 opponents use to justify their job-loss scaremongering relies on outdated models and takes the perplexing step of ignoring any possible savings or benefits from adopting AB 32.

However, I worry that the media, striving for “balance”, will conclude that one discredited report somehow cancels out three vetted ones, and Californians who will never read the CRS analysis will conclude the same. So Californians, influenced by gobs of advertising and lobbying money from the dirty energy industry, will probably go with their gut instinct, which will tell them that upgrading and changing things (like cars, computers or TVs) usually costs money, and when you’re in debt (like California is) or worried about losing your job, it makes sense to hold off on new purchases. Besides, it’s easier to be scared of making a bad thing worse (job loss) than of losing something you’ve never seen (the green tech economy). It’s unfair, but there’s a good chance it’ll happen.

That’s why supporters of AB 32 would be wise not to put all their strategic eggs in the job creation basket. Because by acknowledging the health risks caused by air pollution, opponents of AB 32 are essentially confirming one of the best reasons why waiting to implement AB 32, like Toyota delaying a recall, is simply unacceptable.