California's recent passage of climate accountability laws for businesses is raising questions about costs to consumers, the regional economy, and if such reporting means less climate change innovation.
The legislation, which requires companies to devote additional financial and human resources toward measuring and reporting on their emissions, exemplifies California's approach to global climate change:
To pass policies that are symbolic, costly, and ineffective at addressing the broader problem, said Wayne Winegarden, senior fellow in business and economics at the Pacific Research Institute (PRI), in an email response to the Southern California Record.
Winegarden
| https://pacificresearch.org
“These costs must be borne by someone – either (by) employees through lower pay, companies through lower profits, or consumers through higher prices. However these costs are divided, it is consumers (mostly in California but across the nation) who will ultimately bear some of these costs.
“Given the affordability issues families are already struggling to overcome, this legislation will worsen a problem already harming too many families.”
Perhaps even worse, Winegarden added, the costs will increase over time as businesses deemphasize fundamental business considerations, such as choosing the supplier that produces the right inputs, at the right price, that meet the necessary delivery schedule.
“Instead, suppliers will trade off efficiency for being able to report lower emissions,” Winegarden said. “The lost efficiencies will diminish prosperity growth going forward.”
The phrase "being able to report lower emissions" is very important, Winegarden said.
“Companies cannot accurately measure the emissions contained in the legislation – inaccurate proxies will ultimately be used, which undermines the value of the information this legislation is designed to create,” Winegarden said. “Consequently, there are no appreciable benefits from the legislation but a great deal of costs.”
It represents another attempt by the state of California to use the strength of its economy and its status as the largest U.S. state to impose its regulatory structure upon the rest of the country.
“It also attempts to regulate companies that may have minimal direct activity in the state – other than selling goods to a distributor that brings the product into the state,” Winegarden said.
Still, businesses in other states should take notice of this law, as questions persist about potential legal action, and whether businesses based in other states can challenge this law's applicability to them. For instance, is it constitutional for the state of California to demand to see the "climate impacts" that a business may be generating in Indiana?
Winegarden said it may be likely that businesses elsewhere are evaluating the legal merits of the new law and whether there are any interstate commerce issues raised.
“The idea that companies should be reporting their emissions is problematic," Winegarden said. “California's policies are often adopted by other states, particularly with respect to environmental issues where California receives special considerations.”
But Winegarden noted that residents will more likely suffer the costs of poor policy choices without receiving the intended benefits of helping address the problem of global climate change.