California Legislative Analyst Issues Two Reports Critical of State’s Climate Laws

In the first report, “Assessing California’s Climate Policies — An Overview,” LAO reviewed California’s climate legislation. LAO concluded that it is difficult to assess whether GHG reductions were the result of state action or instead were attributable to general economic developments or existing federal policies and would have occurred even absent California’s climate laws. LAO explained that state laws reducing emissions in one regulated sector might alter sources of emissions without changing overall levels of emissions. LAO thus recommended that the legislature prioritize strategies that reduce GHG emissions at the lowest cost and ensure accurate and robust evaluation of their effectiveness.

In the second report, “Assessing California’s Climate Policies — Transportation,” LAO explained that California administers four major categories of programs to reduce GHGs associated with transportation: reducing emissions from light-duty vehicles, reducing emissions from heavy-duty vehicles, increasing the use of lower carbon fuels and reducing vehicle miles traveled. LAO concluded that the overall economic impacts of these policies, including the effects on GHG emissions, is unclear. LAO further found that the large number of California transportation policies targeting GHG emissions makes it difficult to assess the net effects of each policy and that California’s transportation-sector policies are relatively costly ways to reduce GHGs as compared to potential alternatives.

In particular, LAO explained that there is a broad consensus among economists that economywide pricing — for example, cap-and-trade or a carbon tax — is less costly than California policies aimed at reducing emissions in the transportation sector such as the low carbon fuel standard (LCFS). LAO suggested that the legislature might want to modify or eliminate some of the more costly programs and rely more heavily on cap-and-trade or a carbon tax to encourage the lowest-cost emission reductions. LAO found that the higher costs associated with the LCFS “have real adverse effects on households” but little environmental benefit. Specifically, LAO reported that the LCFS might result in “fuel shuffling” in which the LCFS alters the location of where biofuels are supplied but does not change the overall type and amount of such fuels. Further, although the LCFS might reduce some co-pollutants, such as nitrogen oxides and particulate matter, it also may cause adverse environmental effects — such as erosion and habitat loss — associated with increased use of land to produce biofuels. Given these findings, LAO suggested that the legislature ensure that (1) the LCFS achieve benefits beyond California GHG reductions that alternative, less expensive programs cannot achieve, and (2) that these additional benefits outweigh the higher program costs of the LCFS. If the LCFS cannot meet these goals, LAO suggested that the legislature might consider eliminating or substantially modifying the LCFS program.

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LAO’s reports concerning the status of California’s climate laws highlight that a number of these policies impose significant and unnecessary costs without any assurance that they deliver meaningful reductions in GHG emissions. LAO’s analysis underscores the continuing need to assess whether California’s programs, including the LCFS, should be reconsidered.