NCPA - National Center for Policy Analysis


February 3, 2009

Gov. Arnold Schwarzenegger was all smiles in 2006 when he signed into law the toughest anti-global-warming regulations of any state.   Schwarzenegger and his green supporters boasted that the regulations would steer the Golden State into a prosperous era of green jobs, renewable energy, and technological leadership.  Instead, since 2007 -- in anticipation of the new mandates -- California has led the nation in job losses, says Stephen Moore, a senior economics writer for the Wall Street Journal editorial page.

What happened?

  • The regulations created a cap-and-trade system, similar to proposed federal global-warming measures, by limiting the CO2 that utilities, trucking companies and other businesses can emit.
  • It imposed steep costs ($23 billion of new taxes and fees on households through higher electricity bills) on companies that exceed the caps; since energy is an input in everything that's produced, this will raise the cost of production inside California's borders.

Now the state is losing jobs, a lot of them, says Moore:

  • California's unemployment rate hit 9.3 percent in December, up from 4.9 percent in December 2006.
  • There are now 1.5 million Californians out of work.
  • The state has the fourth-highest housing foreclosure rate in the nation, has lost more businesses than any state in recent years, and is facing a $40 billion deficit.

With cap and trade firmly in place, the economic situation is only likely to get worse, says Moore.

Meanwhile, other states are plundering the Golden State's industries by convincing businesses to pick up stakes and move out before the cap-and-trade earthquake hits.  Governors and Washington politicians who want to reduce their "carbon footprint," but are worried about the more immediate crises of cascading unemployment, unbalanced budgets, and the housing-market collapse, would be wise not to follow California's lead.  Green policies have a tendency to push states into the red, says Moore.

Source: Stephen Moore, "California's 'Green Jobs' Experiment Isn't Going Well," Wall Street Journal, January 31, 2008.

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