Saturday, June 27, 2009

Helping Small Business Accept US Cap-and-Trade

Small businesses need help if they are to support proposed cap-and-trade legislation. Although the climate change bill passed in the US House of Representatives on Friday, it was by the thinest of margins (219 versus 212). Predictably Republicans were almost unanimous in their rejection of the legislation (only eight Republicans voted for it), but even more worrisome is the fact that 44 Democrats voted against it.

The real showdown will occur in the Senate later this year or in 2010. At the present time the small businesses community is not supporting the legislation. Here is a review of some important facts small businesses need to know if they are to make informed decisions regarding cap-and-trade legislation.

Proposals from the White House, are making it easier for some to offer their support for the bill. Part of the resistance to cap-and-trade comes from Americans who are insistent that China and other developing nations carry their share of the CO2 reduction burden. The Chinese and other developing nations have responded by pointing out the hypocrisy of industrialized countries whose emissions are largely responsible for current levels of CO2.

The Obama administration appears to understand the potential of this issue to derail the agreement. The new US administration has proposed a legally binding treaty requiring all developed countries to make significant and substantial reductions in their emissions, while large developing countries must make more substantial changes. Although all countries must take action, China and other developing countries no longer need to make net reductions in their GHG emissions. According to the proposal, the US and other developed countries will take "additional action in line with their historical responsibility and capacity."

California has shown real leadership on CO2 reduction and small business played a vital role in the passage of the state's cap-and-trade legislation in 2006. This experience offers some insight as to how the small business community may be enticed to support national cap-and-trade legislation before the pivotal vote in the Senate. The president of Small Business California, Scott Hogue helped to pass the cap-and-trade legislation in that state. According to Mr Hogue, "big business was not aligned, by small business stepping up to give the voice to our position, we were heard."

"[Small businesses] love green jobs," said Byron Kennard executive director of the Pew Charitable Trust,"But" he continued, "[if] cap-and-trade smacks of regulation. They get up and walk out of the room."

Lawmakers must address small businesses concerns about regulation and businesses must be made aware of the facts and learn from existing cap-and-trade programs. In California small business owners were encouraged to overcome their resistance with the help of a toolkit designed to assist small businesses with their energy efficiency.

Perhaps the gravest reservation expressed by small business concerns cost increases. As reported in Green Ink, cap-and-trade has been criticized by manufacturers, utilities and other energy-intensive businesses who argue that utility rates will increase and this will raise the cost of doing business across the board. However these claims are countered by recent research including a study from Oregon. The joint study by economic consultants ECONorthwest and the University of Oregon’s Climate Leadership Initiative, indicates that "a business-as-usual approach to climate change would cost Oregonians $3.3 billion a year, or $1,930 per household. The consultants also produced reports for Washington and New Mexico that show similar losses in economic output if no climate change mitigation measures are adopted."

Another study by ECONorthwest leaked to The Statesman Journal "calculates that a cap-and-trade system would lead to long-term job creation. It foresees $3.9 billion in economic output and 33,135 jobs in Oregon by 2020 — but only after a shift from manufacturing to service jobs and a shorter-term loss of $273 million in economic output and a loss of 708 jobs."

Taken together these studies indicate that cap-and-trade is feasible and associated costs are considerably less than a business as usual approach. Further, cap-and-trade auctions will generate revenue that will help to mitigate increased energy costs.

While these studies support cap-and-trade, others contradict these results. A study, produced by the Cascade Policy Institute, a conservative think tank, argues that "Oregon’s economic output would be cut in half by 2020" as a result of adopting cap-and-trade.

As reported in a Greenwire article in E & E News, the small business community is not alone in its reticence to support the Markey-Waxman bill. A strategy memo from a prominent Democratic Party polling firm, Greenberg Quinlan Rosner and the think tank Third Way, warns that efforts to sell climate change legislation is not resonating with the American public.

The memo advises that the best way to sell the Democrats' energy and climate change agenda is to avoid terms like "cap-and-trade," "Green jobs" and even "global warming." According to the memo, Americans will respond better to tag lines like "Get America running on clean energy."

"The problem with 'cap-and-trade' isn't only that it lacks meaning for voters, it actually focuses on the wrong things," the memo says. "Cap" connotes limits while people want to see economic expansion, not limit it. "By focusing on capping something, rather than creating something," the memo warns, "we steer the debate down a dead end.

The memo also recommends that advocates broaden the message to overall domestic economic growth. The strategy memo indicates that the message should be that energy will come from a variety of sources and clean energy should be emphasized as a means of reducing dependence on foreign oil. Voters want change, opposing a clean-energy agenda is the business as usual approach.

In addition, the memo argues that advocates need to refute allegations that cap-and-trade legislation will dramatically increase prices. Republicans charge that Democrats' energy plans will cost families an average of $3,000 a year and despite being untrue, this has "resonance and is memorable," the memo warns. The the best way to counter that claim is to provide voters with a more accurate dollar figure which is less than 10% of the number put forth by opponents.

Although conservatives are quick to offer a long list of reason's why they reject efforts to manage climate change, we have real world precedents that refute their ideologically driven conclusions. There are already functioning regional cap-and-trade programs in the US and the national program proposed by the climate change bill would level the playing field and provide common standards.

In a recent Huffington Post article, Josh Dorner Deputy Press Secretary for the Sierra Club states the conservative minority "is out of ideas and beholden to Big Oil, Dirty Coal, and other polluters."

A collaborative report from leading researchers at UC Berkeley, MIT, University of Michigan, Stanford, Drexel University, and clean tech leaders known as the "Gigaton Throwdown," revealed an assessment of the nation's clean energy potential. They identified seven industries capable of creating 5 million clean energy jobs and reducing CO2 emissions by 5-7 gigatons by 2020.

"This study is a loud, clear message about the importance of acting now to create a vibrant clean energy economy," said U.S. Senator John Kerry. "By passing strong legislation, we can grow our economy and end our dependence on foreign oil. We can ensure that the United States takes back the lead in creating the clean energy technologies of the future -- wind turbines, solar panels and energy efficiency products -- and that American companies benefit. This will help rebuild our manufacturing base, jump-start our economy and create millions of clean energy jobs that can't be shipped overseas."

The report recommended several changes the US should undertake to spur investment. These changes include establishing a price on carbon that will level the playing field and stand above political influence or pressure.

Perhaps the greatest motivation to support cap-and-trade comes from consumer preferences. A recent report indicates that four out of five US consumers support clean energy and majority want companies to increase their use of renewable energy and reduce greenhouse gas emissions. Further the study indicated that consumers are more likely to purchase products bearing a seal that proves corporate sustainability commitments, like buying renewable energy.

The results of cap-and-trade analysis may appear mixed, however on balance, once you sift through the reams of conservative bias, there is ample evidence to support cap-and-trade and good reason to come to the conclusion that small business simply cannot afford to be silent on this issue.

World leaders will try to hammer out a new international treaty on climate change this December in Copenhagen. Whether the US can pass cap-and-trade legislation in the coming six months will heavily influence the likelihood of a meaningful post Kyoto CO2 agreement. The US small business community's support for cap-and-trade legislation could make all the difference.

Contact your Senator and tell them to support cap-and-trade.

Related Articles:
Cap-and-Trade Implications for Business
Small Business Can Save Cap-and-Trade Legislation
Small Business' Silence on US Cap-and-trade Legislation
US Cap-and-Trade: Business
US Cap-and-Trade: What and Why
US Cap-and-Trade: Solutions
COP 15 Implications for Business
COP 15 Timetable
Primer on CO2 and other GHGs
The Effects of Global Warming
CO2 Myths and the Science of Climate Change
China-US Cooperation
Green Stimulus and Opposition
US Green Legislation
Environmental Politics
Market Based Social Change
Cap-and-trade in Ontario and Quebec
Green Capitalism
Green Blueprint


Tom the Redhunter said...

Interesting post, Richard. It's thoughtful and you avoid both namecalling and ranting, something I see all too often in blogs all across the political spectrum. You raise good points and do so in a non-confrontational way and as such are worthy of consideration.

I still don't buy your arguments, but you knew I'd say that ;-)

Truth is I've got a zillion things to do today to get ready for tomorrow and haven't the time for a debate. Hope you understand.

Thank you also for stopping by my blog.

Anonymous said...

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