A new report from University of California researchers examines the economic impacts of delaying Gov. Arnold Schwarzenegger's climate program. ‘Energy Prices and California's Economic Security,’ a project sponsored by Next 10, a nonpartisan, nonprofit organization, finds that if California remains primarily dependent on fossil fuels, private electricity costs could escalate by as much as 33%.
Using price forecasts from the Department of Energy's Annual Energy Outlook (AEO), the study estimates that without diversifying California's energy
portfolio toward more renewable fuels and energy efficiency, the state risks a loss of over $80 billion in gross state product (GSP) and more than a half a million jobs by 2020.
Implementing a 33% renewable portfolio standard, combined with a 1% annual improvement in energy efficiency, on the other hand, shields the economy from higher energy prices and yields a growth dividend, increasing the GSP by $20 billion and generating 112,000 jobs, according to the report.
‘The current decline in demand in global energy markets is temporary and risks lulling policy-makers and the public into a state of denial about long-term fossil fuel price trends,’ says the report's author, UC Berkeley professor David Roland-Holst. ‘Even using conservative official estimates, we find that California risks far greater economic peril by remaining heavily dependent upon fossil fuels. Energy efficiency and renewables offer a valuable hedge against the risks of higher energy prices.’
The study assesses the impact on California's economic growth prospects of three primary drivers: the course of fossil fuel energy prices, energy efficiency trends and renewable energy development.
Without changing the state energy mix, under official fossil fuel energy price trends as projected in the AEO, private electricity costs in California would be up to $100 per person higher in 2020, making electricity up to 33% more expensive, the report says.
The report goes on to say that if fossil fuels follow the AEO trend, and the state does not implement its climate policies, California's economy will shrink by $84 billion and over a half a million jobs in 2020.