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California to lose 18,000 jobs due to ‘hidden gas tax’

Hydrocarbon Engineering,

According to the California Drivers Alliance, the ‘hidden gas tax’ scheduled to hit California drivers on 1 January 2015 will result in a net reduction of nearly US$ 3 billion in economic output and 18 000 jobs in the first year alone.

According to analysis conducted by Dr. Justin L. Adams of Encina Advisors on behalf of the Alliance, there is also a nearly one in five chance that allowance prices in California’s cap-and-trade system could by 3000% higher than expected, meaning economic losses could skyrocket to US$ 10.8 billion and 66 000 jobs in 2015.

Dr. Adams commented: “The consensus among economists is that the costs to purchase emission allowances for gasoline and diesel starting next year will have a significant impact on consumers at the pump. As a result, placing fuels under the cap-and-trade system places an additional burden on California households, lowering their income and resulting in reduced economic activity and widespread job losses. The only question is how high will the allowance prices be next year and beyond”.

Figures from the US Bureau of Labor Statistics show that families making US$ 40 000/y or less spend up to 38% more of their income on gasoline compared to families making US$ 70 000/y or more. According to the analysis low income Californians would be hit doubly hard by the ‘hidden gas tax’ because many of these individuals work in the service industries where job losses will be most severe. Job losses would be widespread across multiple service industries that are dependent on consumer spending, but losses would be greatest for food and beverage services, health service practitioners, and retails establishments and their suppliers.

Adams said: “Although aggregate job losses will moderate over time as the government spends cap-and-trade revenue, the government spending will not return lost service sector jobs but instead favour industries like construction. So the workers in these service industries face permanent job losses”.

The analysis additionally suggests that the net job losses will be greatest in 2015 because spending by the State of California will not generate activity sufficient to offset economic losses. The study found that three quarters of state spending proposed for the billions of dollars that will be generated by bringing fuels under the cap-and-trade system will result in little or delayed economic activity, including spending on high speed rail, affordable housing and sustainable communities, low carbon transportation and transit and inner city rail.

John Kabateck, executive director of NFIB/California, said: “Consumer, small businesses and California’s economy are not prepared for this hit and they are unlikely to see any benefit from government spending of this hidden gas tax. Unemployment remains high in many parts of California, especially rural counties where commutes are longer an there are limited public transportation options. This program needs to be delayed so the public can be informed and we can determine how consumers and jobs can be protected”.

“The California Air Resources Board is advancing this vast expansion of cap-and-trade with no regard to its impact to our economy”, said Ruben Gonzalez, senior vice president for public policy and political affairs for the Los Angeles Area Chamber of Commerce. “We have time for an honest, public discussion about how best to balance the state’s environmental and economic interests”.

Adapted from a press release by Emma McAleavey.

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