A Flawed Cost/Benefit Study of a Greener California

From the L.A. Times, a March 25 opinion piece by James L. Sweeney and Matthew E. Kahn.

The Varshney/Tootelian analysis, often cited by foes of AB 32, overestimates the law's costs by a factor of 10. It also excludes the value of energy savings and neglects the effects of innovation.

Matthew E. Kahn is a professor at the UCLA Institute of the Environment and the departments of economics and public policy; he is also a Scholar at the Luskin Center for Innovation. James L. Sweeney is a professor of management science and engineering at Stanford University and the director of Stanford's Precourt Energy Efficiency Center.

Flawed assumptions -- inflating costs and negating savings -- pervade the Varshney/Tootelian analysis. For cars, they agree that more fuel-efficient cars will save consumers $360 a year. But in an inexplicable twist of logic, they decide that because most people will not buy new cars, they count the fuel savings as a cost increase of $360 per year for every car owned in California. A saving for some becomes a cost for everyone in the Varshney/Tootelian analysis.

It is no surprise that no-benefits, costs-only, exaggerated-cost methodology guarantees high-cost results. We conservatively estimate that the Varshney/Tootelian analysis overestimates costs by at least a factor of 10. We say "conservatively" because there are additional market drivers that add to the benefits in a fair cost/benefit analysis that Varshney and Tootelian fail to acknowledge."

 

Read the complete opinion piece [4].