The problem with government these days is that the people making policy seem to be completely unaware of the difficulty of operating a business and employing people. Policies that impose cost increases and regulatory mandates are designed in a vacuum and the potential for business failures and economic ramifications is ignored.
Even if an environmental policy has economic consequences, policymakers justify the “collateral damage” to California business because they’re hoping for a big gain in the new “green economy.” But that hope does nothing to protect the bottom line for small businesses that make up not only the membership of my group but create jobs throughout California.
When several big-name policymakers – from both the state and federal governments – came together recently at UCLA to talk about climate change policy, I heard little to give our state’s small businesses hope for survival. These lawmakers eagerly promoted the possibilities of energy efficiency and reducing carbon emissions, but there was a disturbing lack of discussion about how to achieve these changes without imposing heavy new burdens on small business owners or triggering major job losses.
If we pit the environment against the economy, we’re doomed. It’s not an either-or situation; it’s just one where lawmakers need to clearly acknowledge the economic impacts of their climate change proposals. With a strict climate change program in California and another being negotiated at the federal level, it’s critical that businesses and policymakers be clear on the costs of those programs and how they will interact.
Undoubtedly, the most cost-effective path means avoiding the creation of duplicative regulations – a scenario where California businesses would be hit hard by new costs from both the state and federal levels.
Cost increases
Small businesses statewide are already concerned about the cost increases likely to result from AB 32, California’s high-profile program to reduce greenhouse gas emissions. With a federal climate change plan now in the works, small businesses face the real possibility of being hit with double regulations and double costs. But even climate change experts have said that double costs do not equal double environmental benefits. It just means that California businesses will pay twice as much as their out-of-state competitors.
All of us will pay for California’s decision to move forward with its own climate change program that goes unreasonably above and beyond what the rest of the country is doing. This point became painfully clear to me after reading a recent study conducted by professors Sanjay Varshney and Dennis Tootelian of California State University, Sacramento. The professors found that AB 32 would result in billions of dollars of new costs for California.
When the program is fully implemented, the average annual loss in gross state output from small businesses alone would be $183 billion, or approximately 10 percent. There will be nearly 1.1 million lost jobs and an average of $50,000 in increased annual costs to each small business. Is this a good strategy when California already leads the nation with one of the highest unemployment levels and undeniably harsh impacts from the recession?
There have been many other analyses by experts from leading institutions such as Harvard University, UCLA, the Los Angeles County Economic Development Corp. and California’s nonpartisan Legislative Analyst’s Office, all questioning the costliness, effectiveness and efficiency of California’s climate change plan. That leading policymakers are determined to go forward with what is arguably the most ambitious and disruptive regulatory initiative in recent memory in the face of such criticism from independent, well-regarded institutions without taking a closer look at the true consequences is mind-boggling.
Small businesses are not abstract entities to be written off as “collateral damage” sacrificed to meet the greater goal. They represent real people who have worked hard to create jobs and economic opportunities, and the real employees and families they support.
The human impacts have been callously ignored in the name of quick action on climate change. Policymakers must step back and take the time to do the proper research and analysis so that implementation of climate change programs is effective and affordable. Without appropriate research to ensure costs are mitigated and duplicative regulation is avoided, the implementation of AB 32 will likely cause the entire program to collapse and will take California’s economy – and countless business owners, workers and families – down with it.
M.C. Townsend is the president and chief executive of the Regional Black Chamber of Commerce of Southern California, based in Encino.
