Perspective: Colorado’s costly climate fight

Too often in Colorado, the public discourse around energy, natural resources or transportation, is really a conversation about the environment, which is arguably one of the state’s biggest assets.

Yet, while we work toward a cleaner environment, we must not ignore the costs of the state’s policies and how it impacts our economy and competitiveness. As previous Common Sense Institute research has explored, the state’s economic competitiveness is slipping. Other reports, chiefly from the University of Colorado Leeds School of Business, have agreed with Common Sense Institute’s result in their analyses.

Colorado’s policymakers have committed the state to aggressive emission reduction targets and environmental laws, but until now, no one had comprehensively examined the economic cost of those decisions.

Our most recent report estimates that between 2009 and 2023, environmental and emissions policies cost Colorado $18.3 billion in GDP, $13.8 billion in personal income, and $32 billion in economic output. In 2023, these policies cost the state about 1% of its GDP and employment — an economic hit larger than Colorado’s agricultural sector.

Each sector was analyzed closely in the report. Impacts to oil and gas production were noteworthy. Reviewing 15 years of policy, we found that despite high proven reserves, Colorado fell off the national pace of oil/gas production in 2021, when many of the most restrictive drilling regulations came into force.

Between 2019 and 2023, Colorado’s crude oil and natural gas production fell by 13.3% and 8.3%, respectively. The productive decline is most evident in Weld County, one of the most urban of the producing counties, most likely because of how much of its territory was rendered inaccessible to drilling by new setback rules. Because Colorado’s oil-and-gas operations are cleaner than the national and global averages, these policies might have caused a slight rise in global emissions.

For each sector impacted, our report focuses on the concrete; not the speculative or the qualitative. Only by looking at the data and facts can we assess the real-time impacts to the state’s economy and citizens’ ability to pay their bills.

Utilities, once a point of pride for their affordability, have seen prices rise sharply since 2021, erasing past gains and burdening consumers with higher costs. Our report shows that Colorado’s average electricity price is now half a cent higher than the regional average, after years of enjoying a slight price advantage.

According to a Common Sense Institute study from January, the biggest impacts of Colorado’s electricity policy have yet to impact consumers, but it’s coming. The electric capacity and generation changes required of utilities to meet HB19-1261’s and its successors’ standards, Common Sense Institute estimated, will cause consumer electricity prices to rise through the next decades at unprecedented speeds.

Driven by state policy mandates to reduce greenhouse gas emissions, electricity prices are projected to grow at more than three times the rate of inflation and nearly 13 times the growth rate from 2010 to 2020.

By 2030, the average household will be spending $390 to $504 more annually due to rates outpacing inflation and historic trends. Colorado households combined will spend between $970 million and $1.25 billion more.

In terms of looking to 2040, electricity rates that outpace inflation and historical trends will have even larger costs for consumers. Common Sense Institute’s January study showed a cost of $16 billion to $23 billion or between $6,400 and $9,280 more per household.

As we examine our growing costs to meet these energy goals, we should understand how our efforts compare with other states and regions.

Our most recent study found that other states are reaching their greenhouse gas emission targets in a less costly fashion. Colorado’s costs are significantly higher than other states’. Our analysis shows that it is possible that carbon abatement through the policies enacted in Colorado has been upwards of 10 times more expensive than other policies throughout the United States that pursue the same end.

The California Low Carbon Fuel Standard, for example, which incentivizes transportation decarbonization, requires refiners to trade credits that each represent one ton of carbon abated. After peaking at just above $200 per ton in 2020, the average cost of these credits since January 2023 has been about $70. The California cap-and-trade program has averaged a per-ton cost of about $35 since January 2023.

Another example, is the price of credits in the Regional Greenhouse Gas Initiative, a cap-and-trade program in the northeastern United States, which has averaged about $15 per ton since 2023.

Even under the most generous attribution of carbon abatement to Colorado policy, under our analysis, its price per ton of carbon emissions is still higher than other policies throughout the United States that pursue the same ends.

In short, it is possible that carbon abatement through the policies enacted in Colorado has been upwards of 10 times more expensive. This should inform the consideration of future environmental policy if Colorado continues to pursue its emissions-reduction goals.

It’s not just about comparing Colorado to other states. It’s about educating Colorado households about the significant costs we’ve been asked to pay.

Transportation policies, building code mandates, and other regulations have layered on even more costs for Colorado’s families and businesses. Senate Bill 21-260, a sprawling transportation funding bill from a few years ago, imposed hundreds of millions of dollars in new fees annually. Building owners, tenants, and developers are facing new expenses from aggressive energy efficiency mandates that increase up-front costs, even as the promised long-term savings remain speculative.

The reality is that Colorado’s path is undermining its economic foundations. It is making energy less affordable, jobs less plentiful and prosperity less attainable for the average Coloradan.

I want to be clear our report focused on the costs; additional studies on the benefits of the environmental policies over the past 15 years are certainly welcome. Only then can policymakers and the public decide for themselves whether these costs are justified and make informed decisions about the next 15 years.

Data and facts should also guide the conversation about whether Colorado’s policies are actually making a difference in terms of reducing global greenhouse gas emissions.

Colorado accounts for a tiny fraction of global greenhouse gas emissions. Even if the state achieved its most ambitious targets, the impact on global climate change would be small. Meanwhile, major emitters such as China and India continue to build coal plants and expand fossil fuel use.

At Common Sense Institute, we believe in protecting the environment. Conservation, innovation and stewardship are vital values. But good intentions do not exempt policymakers from accountability. Policies must be judged by their costs and benefits. Policies should also contribute to our competitiveness and not lessen it.

This is not a call to abandon environmental responsibility. It is a call to return to a model that has long made Colorado strong: innovation over regulation, opportunity over mandates, resilience over dependence.

The state’s economy would benefit from thinking about energy broadly, including natural gas, advanced nuclear, carbon capture, and yes, renewables.

Most of all, we need policymakers who are focused on the data and facts. Progress requires trade-offs, and Coloradans deserve to know the full cost of the policies being pursued in their name. The state has spent significant dollars and yet Colorado is still projected to miss the 26% emission reduction target for 2025.

These policies have imposed costs on the Colorado economy, and consumers that should be considered in the context of future policymaking.

More analysis can continue to inform the trade-offs inherent in Colorado’s climate change policy, to ensure that benefits and costs are taken into account.

These economic impacts should be closely examined and openly debated. Only then can policymakers and the public decide for themselves whether these costs are justified and make informed decisions about the next 15 years.

The future of Colorado’s economy depends on it.

Kelly Caufield is the executive director of the free enterprise think tank, Common Sense Institute, based in Greenwood Village.