When California’s signature climate change program was nearing its expiration date, there was serious debate about whether to extend it. This program, called cap-and-trade, reduces carbon emissions but it also increases the costs of gas, electricity, and numerous other necessities.
That’s a significant problem in a state known for high taxes, onerous regulations, and the worst small business climate in the country.
Fortunately, our elected representatives were able to work across party lines to craft reforms that would contain costs. With these safeguards in place, the Legislature voted last year to extend the life of cap-and-trade for another decade. This bipartisan legislation, AB 398, proves California can cost-effectively shrink our carbon footprint without shrinking our state’s economy.
The higher the cost for the state’s climate program, the more small businesses and their customers are impacted
But now the unelected bureaucrats tasked with implementing cap-and-trade are ignoring those reforms.
It appears they read the part of AB 398 about continuing cap-and-trade for another ten years, but missed the part about minimizing costs. This agency, the California Air Resources Board (CARB), is proposing regulations which open the door to unchecked cost increases on your gas, electricity, food, and other essentials.
CARB’s own experts have found cap-and-trade creates costs which impact the average Californian every time they fill their gas tank or pay the utility bill. But these costs also hit the businesses that grow their food, produce their products, and sign their paychecks. Altogether, these burdens add up to boost our state’s notoriously high cost of living and poor climate of business growth.
These burdens also disproportionately impact small businesses.
Cap-and-trade is sometimes considered a more business-friendly approach than other regulations because it gives regulated businesses options. Large industrial emitters can either lower their carbon emissions or purchase credits. But that flexibility only applies to the big businesses that are being directly regulated. Either way, they incur costs that are passed down to their vendors, contractors, and customers (i.e., small businesses), which are not afforded the same wiggle room.
The higher the cost for the state’s climate program, the more small businesses and their customers are impacted. We must simply pay the costs that are passed down to us. Small businesses also operate on tighter margins, making it more difficult to absorb sharp price increases while still sustaining good-paying jobs.
Lawsuits may rein them in years from now, but in the meantime, CARB’s proposal would decimate jobs and wages in California.
Heeding these important concerns, lawmakers wisely agreed to extend cap-and-trade only on the condition that CARB establish specific measures to contain the costs that would surely follow. Most importantly, lawmakers directed CARB to create a “price ceiling” to protect consumers and businesses from price shocks under the regulation.
AB 398 directs CARB, as their first priority, to consider “the need to avoid adverse impacts on resident households, businesses, and the state’s economy.”
But CARB is proposing a price ceiling that is so high, that it will not avoid adverse and severe impacts to small businesses through out the state in the form of higher electricity and fuels costs.
This is not the cost containment that elected officials bargained for when they agreed to the landmark bipartisan agreement to continue the cap-and-trade program.
But now CARB is throwing the direction from the Legislature aside and charging ahead with its own version. Lawsuits may rein them in years from now, but in the meantime, CARB’s proposal would decimate jobs and wages in California while driving small businesses over the brink.
Unlike our elected representatives, CARB’s bureaucrats are not accountable to the voters for the damage their proposal would do.
Rather than imposing this reckless proposal, CARB should follow the letter and the spirit of the law. Adopt sensible measures to contain costs. California can’t afford what’s being proposed now.
Editor’s Note: Ruben Guerra is chairman and CEO of the Latin Business Association.