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California's global warming law could cause businesses to flee state, report says

The Legislative Analyst's Office says 'economic leakage' could occur as firms move to states with lower regulatory costs. But a boost in green jobs could offset some of the damage.

May 19, 2010|By Tiffany Hsu, Los Angeles Times

A state law that requires power plants, factories and other businesses to cut greenhouse gas emissions could cause energy prices to rise and prompt businesses to delay expansion or flee California, according to a study by the state Legislative Analyst's Office.

The landmark global warming law, which is being enforced in phases, could put the state's businesses at a competitive disadvantage unless other states and the federal government come up with similar plans, the study by the nonpartisan agency said.

"Economic leakage" could occur as businesses move to states with lower regulatory costs, the report said. Industries that rely heavily on energy use and trade, such as aluminum, chemical or steel producers, could be disproportionately vulnerable.

The California Jobs Initiative said Tuesday that the state's "go-it-alone approach" would destroy as many as 1.1 million jobs. The coalition, which includes trade groups, politicians and advocacy groups, has a proposition planned for the November ballot that would delay implementation of the law until the state's 12.6% unemployment rate declines.

Some proponents of the law bashed the report, saying that the study did not weigh the economic benefits of the Global Warming Solutions Act, known as AB 32. It has helped generate thousands of jobs and attracted billions of dollars in clean technology investments, according to an advocacy group, Californians for Clean Energy and Jobs.

"As other states and the federal government waffle about their commitment to renewable energy and technologies, California has become and remains the cradle of this fast-growing industry," said Tom Soto, managing partner of Los Angeles-based Craton Equity Partners, which invests in clean technology companies.

The boost in green jobs created by focusing on environmentally friendly practices could offset some of the economic damage, according to the report, which was prepared at the request of Assemblyman Dan Logue (R-Marysville).

Although the state's economy could take a hit in the short term, it is so large that the "adverse impacts likely will be relatively modest" in the long run, the report said.

AB 32 requires that California reduce its greenhouse gas emissions by 25% by 2020.

tiffany.hsu@latimes.com

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