California's aggressive climate change policy is likely to lead to modest job losses in the near term due to higher energy costs and other factors, the state's independent budget watchdog said.

The Legislative Analyst's Office was responding to a request by Republican state Senator Dave Cogdill to study the effects of California's 2006 climate change law, which mandates changes to cut greenhouse gas emissions to 1990 levels by 2020.

California's approach to the environment is being hotly debated ahead of a November gubernatorial race. The global economic downturn pushed unemployment to a recent record.

Governor Arnold Schwarzenegger, a Republican, has staunchly defended the climate moves as key to building a green economy, and many other states and the federal government are watching closely.

We believe that the aggregate net jobs impact in the near term is likely to be negative, said the report, dated March 4.

Reasons for this include the various economic dislocations, behavioral adjustments, investment requirements, and certain other factors, it said.

The total effects on the economy near- and long-term are likely to be modest, since energy costs are a relatively small share of expenses for most people living and doing business in California, it said.

Schwarzenegger jobs adviser David Crane said studies from the University of California, Berkeley, and others that suggested green policies would create a vibrant economy and had already helped California outdo other states in that field.

The reality is that pursuing green policies is the solution to our economic woes, not the cause, Crane said.

The state agency responsible for implementing the law is working on a revised economic analysis after a first draft met widespread criticism. That revision is expected this month. The Legislative Analyst's Office based its comments on the original version.

(Reporting by Peter Henderson; Editing by Gary Hill and Neil Fullick)

California Climate