Legislating Energy Poverty: A Case Study of How California’s and New York’s Climate Change Policies Are Increasing Energy Costs and Hurting the Economy

Summary of Study

Bottom Line: Widespread adoption of the CA-NY approach to climate change will impose large economic costs on the country while not necessarily leading to larger reductions in greenhouse gas (GHG) emissions. Embracing the fracking revolution and increasing the use of natural gas has been able to achieve what California and New York have not: lowering GHG emissions while also promoting strong economic growth.

Broadly speaking, the CA-NY approach to global climate change is designed to achieve one of two goals: increase the costs of disfavored energy sources or reduce the costs of favored energy sources. Since the resources to subsidize favored energy sources must come from somewhere, these policies impose additional costs on California’s and New York’s economies.

Despite this clear economic logic, there is a growing belief that global climate change policies will not harm economic growth. In fact, growing numbers of people believe that these policies will actually promote economic growth. Due to the growing concerns surrounding global climate change, this misnomer encourages other states to adopt the CA-NY approach. When the full impacts from the policies are considered, it is clear that the CA-NY climate policies are imposing net economic hardships on Californians and New Yorkers.

The CA-NY approach does not reduce emissions more effectively than other approaches, such as greater use of natural gas in lieu of coal. In addition, emissions produced in California and New York should be lower than the U.S. average based on the structure of their economies. 

The CA-NY approach raises energy costs, imposes costly burdens on lower-income families, and discourages economic activity. These consequences fall into several categories including:

  • Higher costs of living caused by higher electricity and gasoline prices. As a result, energy expenditures are $21.2 billion and $6.3 billion higher in California and New York, respectively, relative to the average U.S. costs per Btu.
  • Less economic activity due to the higher residential, commercial, and industrial electricity costs, which is exemplified by the exodus of businesses out of both states.
  • Increased costs on families, which contribute to California’s and New York’s highest and 7th highest poverty rates in the nation, respectively (based on the supplemental poverty rates that adjust for factors such as differences in the cost of living).
  • Increased cronyism due to the politicization of the economy.

The greatest economic value is created when a state’s energy sources provide the highest quality, most reliable energy services at the lowest possible cost. Judged against these metrics, both California’s and New York approaches fail.

Read the full study here
Feature Charticle

CO2 Emissions Relative to 2007 in CA, NY, and Rest of U.S., 2007-2015

Pacific Research Institute

Findings: 

  • Widespread adoption of the CA-NY approach to climate change will impose large economic costs on the country while not necessarily leading to larger reductions in GHG emissions.
  • The CA-NY regulatory approach to climate change does not reduce emissions more effectively than other approaches, such as greater use of natural gas in lieu of coal.
  • Embracing the fracking revolution and increasing the use of natural gas has been able to achieve what California and New York have not: lowering GHG emissions while also promoting strong economic growth.

Read the full study here