SB 222 Will Weaken California’s Economy and Reduce State Revenues
Wayne Winegarden and Nikhil Agarwal
March 2025
The destructiveness of the Eaton and Palisades fires were unprecedented. According to the Anderson School of Management at UCLA, the recent Los Angeles wildfires caused up to $164 billion in property and capital losses, residents lost $297 million in wages, and the county’s total economic activity will be approximately $4.6 billion smaller. The wildfires also exacerbated the already large housing affordability problems afflicting the Los Angeles area.
Rather than embracing reforms that could lessen the frequency and destructiveness of wildfires, lawmakers in Sacramento are considering legislation that would empower lawyers – SB 222.[1] Introduced by Sen. Scott Wiener (D-San Francisco) the bill would authorize lawsuits against energy companies for damages attributable to climate change. These companies are supposedly responsible because they allegedly provided misinformation about the connection between fossil fuel products and climate change.
More litigation is not the answer, and Californians would pay a high price if this ill-conceived policy were implemented. Inappropriately exposing energy companies to potentially large judgements for this and other natural disasters would ultimately result in higher energy costs for consumers. In effect, SB 222 would force California’s families to cover the costs of natural disasters without legislators taking responsibility for the state’s poor policy choices that exacerbated these crises.
To get a sense of the potential economic harm, we evaluated the economic consequences that would result if SB 222 allowed litigators to successfully recoup the $164 billion in losses associated with the wildfires including an estimate for the punitive damages that the lawyers would likely seek. To estimate these punitive damages, this analysis assumes the punitive damages will equal the average of the punitive damage ratios that the California Business Roundtable evaluated when assessing the impact of SB 222, which was a ratio of 1:1 and 4:1 (punitive to actual damages).[2]
Applying SB 222 to the L.A. Wildfire Reduces Households’ Purchasing Power by $2,915
KEY TAKEAWAYS
SB 222 would authorize individuals to file lawsuits against energy companies for damages attributable to climate change. Applied to the damages of the recent Los Angeles wildfires, this bill would
-
- Increase the average household energy costs by $2,176.
- Including the $739 reduction in household income, reduce the purchasing power of families by $2,915.
- Compared to the economic baseline, reduce California’s economic growth by 1.2 percent, create nearly 140,000 fewer jobs, and reduce total government revenues by $8.3 billion.
Covering the costs of the lawsuits will, by necessity, raise the costs of energy in California. Based on the latest Energy Information Administration (EIA) data on state energy expenditures, California’s per capita expenditures were $5,123 or around $14,600 per household in 2022 (the latest data breakdown available). Based on the punitive damage assumption and capitalizing the judgement over 30 years, total energy costs per household could increase by $2,176, which is approximately a 15 percent cost increase.
Historically, higher energy prices have a significant and negative impact on overall economic growth.[3] Applying this historical relationship to the 15 percent increase in energy costs illustrates the negative impacts the proposed legislation would have on residents.
First, the higher energy costs would reduce the growth in the median household’s income. Based on PRI’s Tax and Budget Model, the reduction in economic growth caused by higher energy costs will cause the median household’s income to be $739 smaller in five years relative to its expected growth. The impact on households is even worse, however. Not only would they be poorer, but they would also have to devote a larger portion of their income toward buying the same amount of energy. Accounting for both the additional $2,176 in energy costs and the $739 reduction in household income growth illustrates that the purchasing power of families across the state will be $2,915 less compared to the current five-year baseline.[4]
It’s not just less purchasing power either. Compared to the baseline, California’s economy will be 1.2 percent smaller, there will be nearly 140,000 fewer jobs created, and total government revenues will be $8.3 billion smaller than otherwise.
It is important to emphasize two additional points. First, the adverse consequences estimated here are based on the losses associated with just the recent Los Angeles wildfires. SB 222 would enable lawsuits from both historical incidents and future disasters. Consequently, the actual economic consequences from the bill will be significantly higher than just the costs documented here.
Second, the assumption that responsibility for global climate change can be assigned to any one entity is dubious. Global climate change, by definition, is a global phenomenon. It does not matter whether the emissions come from India, China, or California.
Additionally, as noted by the World Economic Forum, “in 1965, scientists warned U.S. President Lyndon Johnson about the growing climate risk.”[5] In other words, going as far back as the 1960s, the federal government had the same knowledge about global climate change as the private energy companies. As we note here, Californians have been aware of the dangers associated with greenhouse gas emissions for many decades as well. These realities undermine the justification used to implement SB 222.
Conclusion
Proponents argue that SB 222 is a convenient way to recoup the costs from natural disasters, but this is inaccurate. As this Spending Watch analysis shows, the legislation would increase the cost of energy at the expense of overall prosperity in the state. Making this legislation even more troubling, implementing SB 222 would not help minimize the likelihood and damage potential of future natural disasters. Accounting for the reality that the foundational premises of the legislation are wrong, it is clear that SB 222 will impose net costs on Californians.
Endnotes
[1]https://legiscan.com/CA/text/SB222/id/3084711#:~:text=This%20bill%20would%20authorize%20a,and%20deceptive%20practices%20or%20the.
[2] “Consumer & Fiscal Impacts of SB 222 Preliminary Analysis” California Business Roundtable, February 2025, https://centerforjobs.org/wp-content/uploads/SB-222-Consumer-Impact-Report-Final.pdf.
[3] Huntington H and Liddle B “How energy prices shape OECD economic growth: Panel evidence from multiple decades” Energy Economics Volume 111, July 2022, 106082.
[4] This value also includes the higher energy costs for producing goods and services.
[5] Dee SG “This 19th century woman was one of the first scientists to understand climate change” World Economic Forum, Jul 29, 2021, https://www.weforum.org/stories/2021/07/scientists-physics-climate-change-eunice-foote/#:~:text=Initially%2C%20scientists%20thought%20a%20possible,and%20acidification%20of%20ocean%20waters.
