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Environment

AB 32 Cap on Carbon–Negligible Impact on Small Businesses–New UCS Study

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(From our friends at the Union of Concerned Scientists – promoted by Brian Leubitz)

First of its kind economic analysis shows significant cuts in global warming pollution will cost small businesses only pennies

Los Angeles County  –  As international climate treaty negotiations begin in Copenhagen amid controversy over economic impacts, a new report shows that the costs for small business operating under California’s landmark climate law (AB 32) can be measured in pennies. Conducted by leading economists and released by the Union of Concerned Scientists (UCS) today, the report finds that AB 32 policies will only increase the percent of small business revenue spent on energy by only 0.3 percentage points–from 1.4 to 1.7 percent–in 2020.  In a case study which examines a real world small business–Border Grill restaurant–the report finds AB 32 will cost diners a mere 3 cents extra per $20 meal in 2020.

The analysis, The Economic Impact of AB 32 on California Small Businesses ( www.ucsusa.org/small_business ), a peer-reviewed first-of-its-kind analysis, uses empirical data on the cost characteristics of small businesses to estimate the economic impacts of AB 32 and was commissioned by UCS and conducted by The Brattle Group, an international economic consulting firm.

“Our report finds that the incremental cost impact of AB 32 on the average California small business will be relatively small and definitely manageable,” said Jurgen Weiss of the Brattle Group, and co-author of the report.  “The AB 32 cost impact pales in comparison to the effect of inflation over ten years, and falls well within the range of historic cost variation most small businesses face everyday regardless of climate policy.”

The Brattle Group projected the likely changes in electricity, natural gas, and gasoline prices due to the major AB 32 policies: cap and trade (which puts a price on carbon), a 33% renewable energy standard, increased energy efficiency measures, and a low-carbon fuel standard.

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Report Highlights

~~ Most small businesses will not be directly regulated under AB 32, therefore AB 32 policies will only impact them indirectly to the extent that these policies cause energy prices (electricity, natural gas, transportation) to change.

~~ The average small business spends less than 1.5 percent of revenues on energy-related costs.  So any increase in the price of energy will have a modest financial impact.

~~ Increases projected in electricity, gas and transportation fuel costs due to AB 32 are lower than recent increases in the same rates caused by factors wholly unrelated to environmental regulations.

~~ Increased costs of intermediate products used by small business (food, supplies and services) that result from higher energy prices will also have only a modest impact on small business.

“Energy efficiency is one of the key ways businesses can save money on energy costs” said Jasmin Ansar, a climate economist with UCS.  “This report does not fully reflect the potential cost savings to small businesses from energy efficiency, so even the modest increases forecast by the study overstate the likely cost of AB 32 to small businesses.”

The report includes a case study of Border Grill, a Los Angeles-based Mexican restaurant, chosen because restaurants are more energy intensive than the average small business and represent the largest share of employment in any small business category – 10 percent of total statewide employment.  After auditing five years of the restaurant’s electricity and gas bills, The Brattle Group developed a 10-year business projection based on historical data, and used this projection, along with macro-economic assessment of change in energy prices, to develop the case study results.

The analysis found that by 2020, the cost of a typical dinner at the Border Grill would rise less than 0.1 percent-or less than three cents for every $20.

“Such a miniscule increase, even if noticed, would not cause our customers any heartburn,” commented Border Grill owners and head chefs Mary Sue Milliken and Susan Feniger. “We’re known as the ‘Too Hot Tamales,’ and we’re worried about a Too Hot Future. Our customers are just as worried as we are, and would be more than willing to pay an extra 3 cents to help avoid the most catastrophic impacts of global warming.”

According to the report, in 2020, Border Grill will be spending 2% of its revenue on energy.  By investing in a robust set of efficient appliances, vehicles, and other equipment, the restaurant will be able to use even less energy and improve its productivity and competitiveness.

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This report debunks the myth that some large businesses are spewing, claiming that AB 32–the state’s Global Warming Solutions Act–will hurt small businesses.  

For more info, go to  www.ucsusa.org/small_business

 

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California Air Board Releases Draft Blueprint to Reduce Global Warming Pollution

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CALIFORNIA TAKES ANOTHER GIANT LEAP ON GLOBAL WARMING POLICY

AIR BOARD RELEASES COMPREHENSIVE PLAN TO CUT POLLUTION

SACRAMENTO (June 26, 2008) – The California Air Resources Board (CARB) released the nation’s most comprehensive plan to date for reducing the pollution that causes global warming.  While the plan is still a proposal, it represents the furthest step forward any state has taken in the fight against global warming, according to the Union of Concerned Scientists (UCS).

Patricia Monahan, the director of UCS’s California office, said CARB’s plan would add more momentum to the fight against global warming. “California is showing the rest of the country how we can build a clean energy economy,” she said. “There’s no drilling our way out of energy problems.  As energy prices skyrocket, consumers need real alternatives that sip rather than guzzle, and that are homegrown instead of imported.”

The 75+ page plan includes a range of policy recommendations.  Chief among them is increasing the state’s renewable electricity standard.  The plan also contains provisions for a regional cap-and-trade program that could work in harmony with other more specific policies to reduce pollution economywide.  The plan also says CARB will consider a vehicle “feebate” program that would provide incentives to consumers to buy cleaner cars.

In addition, the proposal includes plans to reduce emissions from heavy-duty trucks with hybrid engine technology and better fuel economy.  Like many of CARB’s proposals, the heavy-duty truck provisions would improve public health by also reducing smog-forming pollution.  The plan also advocates for a high-speed train system in California.  

Christopher Busch, a UCS climate economist, pointed out that many of the draft plan’s policies would save consumers money and yield economic benefits, while the overall cost of implementing the plan would likely be negligible. “Fundamentally, we’re talking about making our economy more efficient, which will give us energy savings,” he said. “And investing in clean, renewable energy will make our electricity and fuel supplies more diverse, and insulate us from price swings in the fossil fuel market.”

Busch added that global warming pollution reduction strategies also would provide public health benefits by cleaning up the air as well as support the state’s growing clean technology industries. “California has proven time and again that we can clean our air and grow our economy,” he said. “Now the state is going to prove the same thing with global warming.”

The renewable electricity standard in the plan would require utilities to generate 33 percent of their electricity from clean, renewable sources, such as wind and solar power, by 2020.  Such a standard would reduce global warming pollution by an amount equivalent to avoiding the construction of 10 new large fossil fuel power plants or removing nearly 3 million cars from the road. And such a standard could save residents money on their electricity bills by displacing natural gas.  Additionally, it would reduce smog-forming pollution, create new green-collar jobs in the state, and bolster California’s growing clean technology sector.

“California has a wealth of renewable electricity potential we aren’t tapping into yet,” said Dan Kalb, UCS’s California policy coordinator. “Shifting to clean, safe sources of carbon-free electricity in a smart and well-planned manner is a win for the environment, the economy and consumers.”

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(For more about the benefits of boosting the state’s renewable electricity standard, go to: www.ucsusa.org/assets/documents/clean_energy/33_percent_RES.pdf )

CARB also identified a feebate program as one avenue for reducing vehicle pollution. S uch a program would establish one-time rebates and surcharges on new passenger cars and light trucks based on the amount of global warming pollution they emit.  This program would deliver benefits on its own, but also would complement California’s tailpipe standards if both were implemented.  According to a University of Michigan study, implementing a clean car discount program would deliver an additional 21 percent reduction in global warming pollution beyond the tailpipe standards.

More than 1.5 million new vehicles are sold in California each year, which represents about 10 percent of the new vehicle market in the United States. A quarter of California’s global warming pollution comes from cars.

“A feebate program is a great way to make cleaner cars more affordable for everyone,” said Spencer Quong, a UCS senior vehicles engineer. “Cleaner cars simply cost less to operate, so people will save money on gas with this program, too.  On top of that, this ‘clean car discount’ program would give automakers an added incentive to produce cleaner vehicles.”

The regional cap-and-trade market approach in CARB’s plan would work best IF California can strengthen the Western Climate Initiative (WCI) efforts, according to UCS.  The WCI is a partnership among several western states and Canadian provinces to reduce global warming pollution.

“CARB’s plan on cap-and-trade is a step in the right direction and draws on some lessons learned from other cap-and-trade systems,” said Busch.  “But until the details are filled in, the jury remains out on whether or not the program will be as well designed as it could be.”  UCS is VERY pleased to see that cap and trade accounts for only 20 percent of the needed emissions reductions, while the remaining 80 percent will come from direct regulations. “The plan  appropriately recognizes that cap and trade is not a silver bullet,” Bush said.

Busch cautioned that CARB’s plan implies that the agency is considering auctioning less than half of the pollution allowances under a cap-and-trade system initially.  He pointed out that cap-and-trade systems work best when as many pollution allowances as possible are auctioned and that giving them away can create unwarrented windfall profits for polluters. (On page 19 of the plan, CARB calls for the program to “quickly transition … to a system in which the majority of allowances are auctioned.”)

CARB also recommends limiting the number of “offsets,” or substitutes polluters could use to avoid making pollution reductions on their own.  But until those offset limits are specified, Busch said, it will not be possible to determine how effective a cap-and-trade program would be at reducing pollution, fostering innovation, creating jobs, or improving public health in California.  Ideally, in-state offsets would be emphasized more than out-of-state offsets.  UCS urges CARB to prohibit the use of offsets for compliance with direct regulations such as the renewable energy standard.

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