The Impacts Of Renewables, Climate Policies On ‘Economically Vulnerable’ Region

Posted by Betsy Lillian on January 23, 2017 No Comments
Categories : Featured, New & Noteworthy

Amid concerns about the economic and employment impacts of California’s ambitious climate policies, a new study on the effects of the carbon cap-and-trade program, the renewable portfolio standard (RPS) and energy efficiency programs in the San Joaquin Valley has found a total economic benefit of $13.4 billion.

The study, “The Economic Impacts of California’s Major Climate Programs on the San Joaquin Valley,” addresses compliance and investment costs, as well as the benefits across the “economically vulnerable” region. In the end, it finds a net boost – and the creation of tens of thousands of jobs – to the valley’s economy from the state’s major climate programs. The report was produced by nonprofit group Next 10, which commissioned University of California Berkeley researchers to collect data, run economic models and produce the report.

According to Next 10’s founder, F. Noel Perry, the San Joaquin Valley is “faced with unique challenges in terms of its environment and its economy” is thus a “bellwether for the state’s state’s climate policies.”

“But if climate and energy policies can work in the San Joaquin Valley,” says Perry, “they can work anywhere in California – and serve as models for states across the country and around the world.”

According to the report, the valley is especially vulnerable to air-quality problems that climate policies tend to alleviate. In addition, it faces more socioeconomic challenges than other parts of the state and is less equipped to take chances with its economy.

“The valley has a lot of carbon-intensive industries, so the economic costs of climate policies were quickly evident,” says Betony Jones, the report’s lead author and the associate chair of UC Berkeley’s Donald Vial Center on Employment in the Green Economy. “But we were surprised to find the economic benefits materialized quickly, too – kick-starting the region’s low-carbon economy.”

Cap-and-trade

After accounting for compliance and other costs, the UC researchers estimate the state’s cap-and-trade program – a market-based program to reduce greenhouse-gas emissions from designated entities – had a direct economic benefit of $119 million to the San Joaquin Valley through December 2016. In addition, including indirect and induced economic benefits, it boosted the economy by $200 million. If spending that has been allocated but not yet disbursed is included, those numbers rise to $1 billion in direct economic benefits and $1.5 billion when indirect economic benefits are included.

Proceeds from carbon auctions disbursed in the region so far have largely gone toward initial work on the state’s high-speed rail project, affordable housing, irrigation modernization and electric vehicle incentives. However, the study finds that industries benefiting from the investment of cap-and-trade revenue, such as construction, generate more economic activity in the region than those industries bearing the costs of cap-and-trade compliance.

RPS

A lot of attention is paid to the state’s carbon cap-and-trade program, but in terms of the San Joaquin Valley’s economy, the state’s RPS has had a bigger impact on the region so far, according to the report. The RPS calls for California to get 33% of its energy from renewable sources by 2020 and 50% by 2030.

In particular, construction on renewable energy projects has resulted in $11.6 billion in total economic activity in the valley.

According to the analysis, for wind power projects built from 2002 to 2015, the total economic output during construction reached $1.726 billion. During operation, the projects provided $57 million in economic output. On the other hand, solar projects built during this period provided $9.708 billion during construction and $47 million during operation, the report says.

The report notes that the San Joaquin Valley is home to 24% of the state’s solar generation and 54% of the state’s wind generation – thus providing significant employment opportunities in the region.

From 2002 to 2015, renewable programs created about 31,000 direct jobs in the San Joaquin Valley – for people building and operating renewable energy facilities, for example – and created another 57,000 indirect and induced jobs for suppliers, supporting businesses and the like, for a total of 88,000 jobs, the report says.

“Most of these direct jobs are the well-paid, local, career-track jobs the valley really needs,” Jones says.

Energy efficiency

According to the report authors’ analysis of data reported by the California Public Utilities Commission, investor-owned energy efficiency programs in the valley have provided net economic benefits of $248 million since 2010.

“Energy efficiency programs are job creators,” Jones says. “From 2006 to 2015, utility energy efficiency programs created 6,700 direct jobs – two-thirds of them in the construction industry and 10,700 indirect and induced jobs in the valley – for a total of 17,400 jobs.”

Policy recommendations

Given the economic benefits of California’s climate policies in the San Joaquin Valley, the researchers offer recommendations for maintaining and improving results as the state moves to further these policies.

These include removing uncertainty regarding key climate programs.

“The valley’s economy would benefit in particular from state leaders’ removing the legal uncertainty about the cap-and-trade program – especially the allowance auction mechanism – beyond 2020,” says Ethan Elkind, who coordinated the report for the Center for Law, Energy and the Environment at the UC Berkeley School of Law.

Other recommendations include ensuring that cap-and-trade auction proceeds are spent on valley programs that cut greenhouse-gas emissions and co-pollutants; expanding energy efficiency incentives in the valley, where they yield greater energy savings than in more temperate parts of the state; and developing transition programs for workers and communities affected by the decline of the region’s greenhouse-gas-emitting industries.

“Overall, given the region’s prime location for solar exposure (insolation) and wind resources (particularly in eastern Kern County), the low transmission costs from the region, the state’s ambitious renewable goals and the likely increasing need for electricity for the transportation sector, the valley is likely better positioned than any other part of the state to benefit economically from renewable deployment through 2030,” the report states. “The RPS-related jobs and economic benefits to-date are likely to continue to increase as the state deploys more renewable energy through 2030.”

The full report can be found here.

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