The Pacific Research Institute latest study (released 5/13/2020) entitled, “Legislating Energy Prosperity: Californians Could Save More Than $2,000 Annually if Lawmakers Enacted Free-Market Energy Policies,” is a must read for all Californians. The study takes a fair shot at California’s deployment of energy policies absent market principles given the COVID-19 pandemic that is stacking up economic losses on California households.
The study finds that states that have embraced market-based energy policies have been more effective than California in reducing emissions. Since 2007, emissions have fallen 14 percent nationwide versus 9.3 percent in California.
If policymakers acted to reduce the unique energy burdens they have imposed on families and businesses, Californians could see:
Lower Gas Prices: Before the COVID-19 pandemic, California drivers paid a 37 percent premium for gasoline versus the national average. With the collapse in gas prices, state drivers paid 55 percent more versus the national average (as of April 24). Easing these mandates could, over time and depending on consumption, save Californians up to $9.6 billion annually (based on 2019 prices) or up to $11 billion (based on April 24 prices).
Lower Electricity Prices: California energy mandates have, as of 2018, driven up residential electricity prices by 46 percent versus the national average, and business electricity prices by 69 percent. Eliminating inefficiencies could generate annual average savings between $5.3 billion and $15.7 billion, depending on the scenario.
Increased Economic Growth: Lower energy prices could bring a badly-needed boost to the economy and generate new job opportunities and tax revenues amidst a deep recession and severe state and local budget crises. Eliminating these excessive costs could increase average annual real state GDP growth by up to 3.3 percent. Over 10 years, this could increase the size of California’s economy, adjusted for inflation, by up to $223.4 billion.
From the study: “Treating the total potential gasoline and electricity cost reductions (between $14.8 billion and $26.8 billion) as the equivalent of a major tax cut, eliminating these excessive costs would increase average annual real state GDP growth between 3.1 percent and 3.3 percent.”
How will the environmental community react? They will definitely push back. But, the idea isn’t totally out of reach because California is going to have to do something radical to help the State economy recover, even if it is a temporary suspension of energy taxes and tax-like measures.