December 14th, 2009

From Green Right Now Reports

As international climate treaty negotiations continue in Copenhagen amid debate over the potential economic impact of new standards, a new report shows that the costs for small business operating under California’s landmark climate law (AB 32) can be measured in pennies.

Border Gill in Santa Monica

Conducted by leading economists and released by the Union of Concerned Scientists, the report found 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 of one small business — Border Grill restaurant — the report fond AB 32 will cost diners 3 cents extra per $20 meal in 2020.

The peer reviewed analysis, The Economic Impact of AB 32 on California Small Businesses, used 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,” Jurgen Weiss of The Brattle Group and co-author of the report, said in a statement. “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 percent renewable energy standard, increased energy efficiency measures, and a low-carbon fuel standard.

Others report highlights included:

• 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 for electricity, natural gas and 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 other products used by small business — such as food, supplies and services — that result from higher energy prices also will have only a modest impact on small business.

The report, released last week, includes a case study of Border Grill, a Santa Monica-based Mexican restaurant. The report’s authors said 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.

According to the report, in 2020, Border Grill will be spending 2 percent 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.

Border Grill is known for serving only sustainable seafood, as part of the Monterey Bay Aquarium Seafood Watch Program. It also uses organic long-grain rice, beans, and coffee, and developed a program called “Good for the Planet, Good for You,” that gives guests the opportunity to choose dishes made with at least 80 percent plant-based ingredients.