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Cutting AZ Carbon Emissions Will be Costly

by Gary M. Yaquinto , Commentary
to read this article in the East Valley Tribune, click here.
September 12, 2009 - 5:25PM

Since the Industrial Revolution, the world’s economic engine has been fueled by fossil fuels. Some scientists have been warning, however, that if we don’t restrict our carbon-belching ways now, Earth’s polar ice caps will shrink, weather patterns will become ever more extreme, and coastal cities like New York City will become swampland.

Other scientists doubt this theory and point to evidence showing the Earth’s natural biorhythms have warmed and cooled the planet repeatedly over millennia and human activities have little effect on climate.

Whether or not you believe the climatologists’ doomsday predictions or ascribe to Al Gore’s “inconvenient truth,” the potential risk of Phoenix reaching temperatures approaching 130 degrees in the summer by the year 2100 is enough to at least motivate thinking about ways to mitigate such consequences.

As we move forward, we want to know: One, if we break our current fossil chain-smoking habit, how much will global warming be constrained, and two, at what cost to the economy?

The first question is difficult to answer because it would take the concerted actions of all industrialized nations to totally eliminate emissions to have any noticeable effect.

This does not mean we should do nothing. If, by acting in concert with some but not all, we can somewhat reduce the environmental risks without seriously damaging our economic well-being, then we should take action.

However, we should do so with our eyes wide open and with the best information and data available.

In answering the second question — how much are we willing to pay — the Arizona Investment Council commissioned economists from Arizona State University to examine how limiting CO2 emissions would affect the Arizona economy.

Whether through a cap-and-trade system in which emission permits are traded in the open market or through a specific tax imposed on emissions, the effect is to raise energy costs throughout the economy.

The study finds that taxing CO2 emissions produces negative economic consequences even when virtually all of the proceeds are recycled back into the economy through investment in renewable energy technologies. Reinvesting in “green” technology and “green” jobs helps dampen the negative impacts of a carbon tax, but this investment comes at a higher cost and a lower productivity than current energy technologies.

Looking at the best- and worst-case results, the study concludes that in the year 2020, we can expect gross state product to be lowered by $3.3 billion to $14.7 billion; jobs lowered between 17,000 and 124,000; personal income lowered from between $1.4 billion and $8.9 billion, and cumulative household income between 2012 and 2020 could be lower by as much as $18,000.

The study also finds that those sectors of the Arizona economy such as construction and mining that are heavily dependent on energy as a production input would be the most severely affected through lower production, lost income and reduced employment. A copy of the study can be downloaded at www.ArizonaIC.org.

The implicit message is that the manner in which government seeks to intervene in reducing greenhouse gas emissions matters. Policymakers must examine the potential risks of climate change, as science credibly understands them, together with the economic trade-offs that will result.

A policy designed to gradually and realistically curb emissions combined with appropriate economic safety nets is what is needed.

Gary M. Yaquinto is president of the Phoenix-based Arizona Investment Council, a private group that lobbies state and local agencies on behalf of people and businesses who invest in various state-regulated utilities.