Summer 2013

State Business Taking Huge Hit Under New Global Warming Laws

In recent years, we have seen our elected officials speak about the importance of streamlining government regulations to help foster a pro-jobs climate in California.  Despite their talk, regulations have gone into place, such as the Global Warming Solutions Act of 2006 (AB 32), which has devastating impacts on jobs and our economy.

Nowhere is this more evident than the efforts by the California Air Resources Board and the California Environmental Protection Agency to implement these overreaching efforts to reduce greenhouse gas emissions in the state.  The regulations that they are implementing right now will have a devastating impact on employers and hurt our efforts to make the Golden State more competitive for job creation.

Consider the impact that AB 32 will have on the trucking industry in California.  According to the most recent figures from the American Transportation Research Institute, more than 860,000 Californians were employed in the trucking industry in California, with an average annual salary of nearly $58,000. 

While some of California’s estimated 25,000 trucking companies are large corporations, many truckers in our state are locally-owned, small businesses.  For many manufacturers, growers and retailers in our state, shipping by truck is the only way by which these California-made products are shipped to customers around the world. 

Two measures being implemented right now will have a negative effect on California’s truckers. 
For starters, the state is in the process of mandating a so-called Low Carbon Fuel Standard for California as part of an effort to reduce carbon emissions in fuel by 10 percent by the year 2020.  This is another California-only requirement that will make it more expensive to purchase fuel for consumers and businesses alike.

Taken as a whole, the state’s global warming efforts will likely result in significant increases in the cost of fuel for truckers.  A study conducted last year for the California Trucking Association found that the price of diesel fuel could increase by $2.22 per gallon by 2020.  This represents more than a 50 percent hike in diesel prices!  Between 2015 and 2020, this could result in a loss of nearly 617,000 jobs in affected industries and $5.3 billion in lost state and local tax revenue.

At the same time, state officials are also in the process of imposing strict emission standards on commercial trucks with diesel engines, including large trucks for hauling goods and construction-related trucks.  Over time, these new regulations will result in truck owners having to retrofit and eventually replace older vehicles, at a significant cost.  It is estimated that it could cost as much as $150,000 per vehicle to purchase a new truck that complies with the new regulations.

These mom-and-pop businesses cannot afford to spend tens of thousands of dollars to buy new trucks or retrofit existing ones.  Nor can they afford the added burden of the projected $6 per gallon diesel fuel costs that will force them to raise their prices and make them uncompetitive with trucking companies in other states and other countries. 

If we continue down this path, there could be a day sometime soon where there is a levee break and no local trucking companies available to haul the raw materials needed to fix it.  We could also see a time when our farmers and manufacturers aren’t able to ship their goods to customers around the world because there are no local shipping companies.

In April, attorneys with Pacific Legal Foundation filed a lawsuit challenging California’s “cap and trade” auction regulation. The regulation creates a quarterly auction program requiring many California employers to bid significant amounts of money for the privilege of continuing to emit carbon dioxide — or be faced with closing their doors in California, laying off their employees, and moving their businesses to other states.
Filed on behalf of a broad spectrum of California businesses, trade associations, and individuals harmed by the regulation, including Morning Star Packing Company headquartered in Woodland, the lawsuit challenges the auction process as an unconstitutional state tax because it was not enacted by two-thirds majorities in both chambers of the Legislature, as required for new taxes by the California Constitution (Proposition 13 and Proposition 26).
California may well achieve its goal of reduced greenhouse gas emissions, but it will come as a result of fewer people working and less economic activity in our state.  State bureaucrats would be well served to remember the impact their actions will have on our economy before pushing through job-killing regulations that will push more employers out of business and more people out of work.

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