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California Cap And Trade Program Effects On Jobs Unknown

Emily Goldberg |
November 13, 2012 | 4:07 p.m. PST

Staff Reporter

(Creative Commons/Flickr)
(Creative Commons/Flickr)
Wednesday, California will take a risky step on the beginning of a journey to fight global warming; the state’s cap and trade program will hold its first allowance auction.

The program is part of AB 32, California’s climate change law that mandated a reduction in carbon pollution to 1990 levels by 2020. The program will put a price on greenhouse gas emissions in the state by forcing companies to meet the caps or buy credits if they cannot. 

While the program is intended to give companies an incentive to limit their carbon emissions, how this program will affect the economy and job creation is unclear.

“Results from other similar programs have been mixed so it is hard for us to understand the situation right now,” said Juliana Wang, University of Southern California assistant professor of the Practice of Environmental and Natural Resource Economics. “We will have to wait and see after the program is implemented to have empirical data.”

Wang added that the results of the program are specific to each industry. Industries will little carbon footprint will gain an advantage by selling their extra credit to other companies. However, companies that struggle with lowering their carbon footprint may be forced to adjust production, hire fewer employees or leave the state.

“There is the phenomenon of ‘race to the bottom’ and the hypothesis says that certain companies will leave this region for another region where regulations are not as strict, but empirical evidence is mixed,” Wang said.

Due to this phenomenon, some business groups remain doubtful that the program will be successful. According to SFGate.com, business organizations including Western Sates Petroleum Association (WSPA) have launched a petition drive calling on Gov. Jerry Brown to stop the auction before it begins. The group’s concern stems from the potential of the program to raise gasoline and electricity prices, sending California companies running to other states. So far, Brown has declined all requests.

When Schwarzenegger signed AB32 into effect in 2006, he and the law’s other supporters saw AB 32 as a way to force the federal government into action to make strides against global warming.

As reported by SFgate.com: "The argument made five years ago for the California system was, 'Well, this is going to pressure Washington to move forward,' and it wasn't foolish for people to think that," said Robert Stavins director of Harvard University’s environmental economics program. "Obviously, that didn't happen.”

Thus, California will serve as a guinea pig for the cap and trade program. The closest America ever came to seeing cap and trade implemented on previous accounts was two years ago when Washington congressional Democrats almost passed legislation to begin cap and trade programs nationwide. However, the proposal died in the Senate after Republicans did not agree with the severity of global warming and thus did not find the program necessary.

 

Reach Staff Reporter Emily Goldberg here.   



 

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