The California Manufacturers and Technology Association released a new report last week that suggests costs associated with AB 32 may be a lot higher than previously estimated. AB 32, otherwise known as the California Global Warming Solutions Act of 2006, was signed into law by Governor Arnold Schwarzenegger- propelling California to the forefront in the fight against global warming. Successful passage of the law effectively turned the state into one of the most stringent regulators of green house gas emissions in the nation and globally. Some would argue that the move all but eliminated California’s competitive edge in today’s market.

The California Air Resources Board, which has been charged with developing and implementing the state programs needed to reduce greenhouse gas emissions down to 1990 levels, hasn’t released an updated economic impact study since 2010.

Andrew Chang & Company, which conducted the latest fiscal and economic impact study on behalf of CMTA, found that the average California family will end up paying an additional $2,500 annually by 2020 when AB 32 is fully implemented. In addition, the state is expected to lose an additional 262,000 jobs, 5.6 percent of the gross state product, and a whopping $7.4 billion through decreased annual state and local tax revenues as a result. Figures from the study were based on more conservative estimates, suggesting that expected costs could actually range much higher.

This new information comes at a time when state government is already struggling to maintain funding for some of California’s most basic services, and economic recovery remains anemic- prompting calls for further consideration of the law.

"These policies will create a large but hidden tax on families and will add new burdens to a fragile state economy," said Jack Stewart, President of the California Manufacturers and Technology Association (CMTA). "This new tax is not what we need while Californians struggle to find jobs, meet mortgage payments and maintain a reasonable quality of life."

The consequences appear even more severe for California’s small business community.

According to John Kabateck, California Executive Director of the National Federation of Independent Business:

"This comprehensive report tells us that small business will get hit from all sides.  Consumers will have less money to buy our products, employers will be forced to purchase more affordable products outside of California, and our own energy costs will make it nearly impossible to stay in business.”

Republican lawmakers in California were also quick to underscore the importance of further review in light of today’s economy and the new study findings.

“Today’s report provides lawmakers and the public for the first time with a clear picture about the devastating impact AB 32 will have on California’s economy.  The findings underscore what Republicans have been saying all along about AB 32 – it is a costly mandate that will hurt the economy, put many employers out of business and kill thousands of jobs in our state.  This type of economic analysis has been sorely lacking to date in the debate over the implementation of AB 32 to date.  The Legislature must ensure that efforts to implement AB 32 are done in a way that is cost effective and does not cause any damage to our fragile economy,” stated Assembly Republican Leader Connie Conway in a prepared release.

In conclusion, authors of the study recommend further assessment of whether or not the current plan of implementation is truly cost-effective. All things considered- state policy makers should make it a priority to explore the issue and related impact in greater detail.