The argument we hear time and again against efforts to aggressively reduce greenhouse gas emissions is simple: doing so is costly, will slow the economy, and will throw people out of work. Supporters of such efforts counter that the process would actually be beneficial to the economy, because of investments in new technologies and reductions of waste. Now a major study from the University of California, Berkeley, has come out in strong support of this latter argument, detailing precisely how the relatively aggressive California plan to cut greenhouse gases will boost the state's economy in surprisingly short order.

The California Climate Change Center at UC Berkeley is a cross-disciplinary institute including researchers in areas as diverse as public policy, resource economics, city and regional planning, environmental engineering, and the environmental energy technologies division at the Lawrence Berkeley National Laboratory. In short, this is a group of researchers and analysts well-versed in both the policy and scientific issues around climate change. Their most recent report, Managing Greenhouse Gas Emissions in California, lays out the technological, economic and policy options involved in meeting the goals of returning California to 2000-level emissions by 2010, 1990-level emissions by 2020, and 80% below 1990 by 2050. The researchers determined that pursuing a subset of these policies could achieve at least half of the California plan's goals while increasing the gross state product by $5 billion and creating 8,300 new jobs by 2010, and upwards of $60 billion and 20,000 new jobs by 2020:

"Our study demonstrates that taking action to reduce global warming emissions in California is good for the California economy," said Michael Hanemann, UC Berkeley professor of agricultural and resource economics and co-author of the report. "Our research indicates that not only does climate action pay, but early climate action pays more." [...]

The report also analyzed the economic impacts of taking the lead in adopting policies to reduce GHG emissions. It concludes that "just as Silicon Valley gained economically from being the leader in the Internet revolution, so, too, will California gain an economic advantage from being the leader in the new technologies and the new industries that will come into existence worldwide around the common goal of reducing GHG emissions."

"Our analysis reveals the power and promise of taking early initiative," concluded Alex Farrell, assistant professor at UC Berkeley's Energy and Resources Group and co-author of the report. "By acting sooner, California benefits more quickly from faster economic growth and improves its competitive position in a global market increasingly focused on climate action."

The report identifies eight key policies that would have the dual value of cutting greenhouse gases and boosting economic growth. Regular WorldChanging readers will find much of the list familiar: building efficiency; vehicle greenhouse gas standards; afforestation; landfill management; management of hydrofluorocarbons (often used in refrigerants); manure management; improvements to semiconductor manufacturing; and changes to the production of cement. This list accounts for fewer than a third of the potential policies and actions under consideration by the California Climate Change Center, which has yet to perform the same detailed analysis on some 22 additional approaches, including the recently-passed solar power initiative, efforts to expand urban forestry, improvements to water use efficiency, and wider adoption of biodiesel. See table ES-1 in the Executive Summary (PDF) for the full list.

Unsurprisingly, the greatest reductions of greenhouse emissions come from improvements to vehicle and building efficiency; these two areas also provide the greatest gains in both economic output and jobs. See the chapters Transportation and The Role of Energy Efficiency for details. The final chapter, Synthesis (PDF), brings the full set of issues together in order to examine the combined effect -- one of the signal strengths of this project is the way it doesn't isolate different approaches, but instead considers them as an overlapping, interdependent whole.

California's plan matters for a couple of reasons. California has the tenth largest economy in the world -- and is the 12th largest producer of greenhouse gases. An aggressive push by California to reduce greenhouse emissions would have a global impact. In addition, decisions in California can affect other states in the US, whether because other states choose to adopt California-style policies, or because businesses, responding to the economic weight of the state, produce goods nationwide that meet California standards.

The full report, although freely available from the CalClimate website, will likely be tough going for most readers. It's an intensely academic guide (sample chapter title: "Representing Endogenous Technological Change in Economic Models" (PDF)), one very much aimed at policy makers (or, more likely, their aides). That said, of all of the chapters, I most enjoyed Technologies for Managing Greenhouse Gases (PDF), an overview of the economics of applying green technologies to the electricity supply, transportation, and manufacturing, as well as looking at prospects for reducing non-CO2 greenhouse gases and for sequestration of carbon. For me, what makes this chapter particularly interesting is the section showing the results of a combination of increased efficiency of use and increased use of renewable energy (something I've covered here and here). The combination of a "moderate" move to renewable power coupled with a historically conservative push to 2% annual improvement of use efficiency would bring the California electricity supply to a zero-carbon-emission state by 2037, well ahead of the 2050 goal; combining an "aggressive" push to renewables and a historically moderate 3% annual improvement in use efficiency brings California to zero carbon electricity by 2026 or even sooner.

Ultimately, what makes this report so interesting isn't just the demonstration that California could meet its targets, or even that the California economy would benefit. This report provides ample evidence that, as many of us have long argued, driving hard to reduce greenhouse gas emissions has a significant, rapid economic benefit. The argument that cutting carbon will hurt the economy is wrong -- and here's a lengthy, serious piece of research showing exactly why it's wrong.

Nice input, Jamais. To me, the lowest hanging fruit is in building efficiency. The economics are too compelling. Every nickel in energy costs reduced is a nickel increase in operating profit. Since commercial real estate trades on a cap-rate (a multiple of operating profit, similar to a stock PE), every nickel increase in operating profit translates into many times that in owner's equity. Banks fall over themselves to loan to properties when the improvements result in higher operating profits. Thus, the money is there to take if only landlords will take it.

In the real world, of course, borrowing against equity to finance energy improvements must compete with other investments that may or may not increase cash flow, including using the equity to purchase another building. That is why the consulting, engineering and product industries need to come together to make the economics compelling.

Mark Brandon
Sustainable Log - News and Views for Socially Responsible Investors
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Posted by: Mark Brandon on January 30, 2006 5:53 PM

One problem, Mark. During its "move into retail" phase, ENRON used to promise efficiency improvements over the lifetime of the contract and even that the customer could book them upfront as income..all the projects were hopeless, essentially, as they didn't have the engineering or customer service chops to do a decent job. So that could be a little tough to sell to people who 'Ron screwed in the 1990s.

More broadly, this reminds me of something I was thinking this morning. The aim of 60% by 2050 sounds huge and daunting, and the British government is currently having a fit of infighting about it. Solution: Reframe. A 1.36% per annum cut (60% over 44 years) sounds a lot better, no?

Posted by: Alex on January 31, 2006 2:37 AM

I just can't help but think that people who think more of the economy than they do of the environment seem very short sighted indeed. Sure, we may put some people out of work for a while, but would we rather do that or put ourselves out of the safety of this earth long term? Resources will run out eventually and the global warming problem may be slow to build...but eventually, if we are not willing to face the facts, the problem will be too big for us to handle, because it will be too late.

Posted by: business babe on January 31, 2006 12:16 PM

business babe: yes, however govts claim that cutting emissions would damage the economy and lose jobs, hence it's an excuse not to act. Showing business benefits helps to get support, particularly from the masses who are more concerned with putting bread on the table (or gas i teh SUV) tomorrow then they are with a bit of warming in the unknown future.

Posted by: Flannel Flower on February 1, 2006 1:09 AM

The problem is we know what happens to the environment when an econ crumbles. The world cant afford to have america or by chain reaction india and china crumble into depression.

And right NOW america is fragile. In 20-30 years enough retired and pentioned and health cared people will die off and enough change will happen to HOPEFULY bring us back from this brink. But add too much more stress to it and it will snap. Waiting just 6 or so uears before we pushed ahead may have been the only thing that kept these titanic forces from colliding and toppling us.

Posted by: wintermane on February 1, 2006 10:14 AM

Nice post. Just the sort of thing that the UK Treasury's Stern Review into the economics of climate change (www.sternreview.org.uk) needs to hear! Re Alex's recasting of the 60% cut as a year-on-year decrease: five UK political parties (Conservative, Liberal Democrat, Scottish Nationalist, Plaid Cymru and Democratic Unionist) recently came together to demand exactly that (see www.libdems.org.uk/news/parties-join-forces-on-climate-change.html). Tony Blair called it a "slightly dodgy policy". So much for Mr Statesmanlike World Leader.

Posted by: Doctor Edge on February 1, 2006 2:32 PM

Ya and the chance of europe actauly managing to make it to 2020 much less 2030 without tanking big time is zilch.

Posted by: wintermane on February 2, 2006 6:47 PM

Global Warming can be a very good thing if you live in Siberia. The last Ice Age ended something like 10,000 years ago and since then the planet has warmed up and the sea levels have gone up as well. If mankind is responsible for Global Warming during the last 200 years or so, what’s the cause of Earth warming up the other 9,800 years before that? The planet is either warming up over time or it’s cooling down over time.

With Europe’s low birth rate and America’s higher birth rate, European’s may not like the things America due in this world, but they will not be around in the future to complain about it. Cultural societies that don’t reproduce die off!

Posted by: Jag on February 5, 2006 11:43 PM

Actually, Jag, that's a bad example. you'll find that the folks in Siberia aren't too happy about global warming, as its effects have been to turn permafrost into swamp, not farmland. There may be a few spots around the globe that, on average, do better, but they are already far and away exceeded by the number of places in trouble.

Since you seem stuck on the notion that, since the planet has warmed naturally in the past, that's the only way it can get warmer, here are some basics:

* There's a natural cycle of warming and cooling, corresponding with a natural cycle of atmospheric CO2.
* The whole cycle takes very roughly 50,000 years, and the CO2 goes between roughly 200 parts per million and roughly 280 ppm.
* We've seen an increase in atmospheric CO2 over the past 150 years pushing the concentration to over 380 ppm.
* We have ice core samples from Antarctica showing us the atmospheric conditions from the past 850,000 years, and the current concentrations of CO2 have no precedent.

In one sentence: we've seen in the past 150 years a jump in CO2 in the atmosphere equivalent to the more than the entire 50,000 year natural cycle, and it's pushed us to a level that was not seen on Earth over nearly a million years.

There's a natural cycle. What is happening on Earth bears no resemblence to the natural cycle.

As for your last paragraph... I think I'll let that stand on its own as a testament to your character.

Posted by: Jamais Cascio on February 6, 2006 8:30 AM