CITYWIDE — As California works to implement the state climate change law known as AB 32 — aimed at reducing carbon emissions to 1990 levels by 2020 — some small business owners have complained they’ll bear the brunt of the new regulations and the state’s economy will pay the price.
But a new study that analyzed the energy expenditures of Santa Monica restaurant The Border Grill suggests small business may be left relatively unscathed by increasing energy costs caused by state carbon-cutting measures.
The average small business spends just 1.4 percent of revenues on energy costs, according to the authors of the study, so even assuming large increases in energy costs in the next decade, small businesses won’t experience significant hardship. In 2020, the average small business will have to increase its energy costs to just 1.7 percent of revenues, the report said.
“We don’t see (AB 32) as something that will have a substantial, or possibly even a noticeable, effect on most small businesses,” said Mark Sarro, principal of The Brattle Group, an economic consulting firm that conducted the study.
The study, which was commissioned by the nonprofit Union of Concerned Scientists, contradicts the results of a study released earlier this year by professors at California State University Sacramento and touted by the California Small Business Association. That study, released in July, argued the implementation of AB 32 would cost small businesses nearly $50,000 per year, resulting in a $182.6 billion hit to the state economy and a loss of 1.1 million jobs.
Specifically, AB 32 requires the state to create renewable energy standards, lower transportation fuel emissions, create higher efficiency rules for buildings and establish a cap-and-trade program to limit emissions from large factories.
Jasmin Ansar, a climate economist with the Union of Concerned Scientists, said there has been “rumor and speculation and a lot of uncertainty” surrounding the projected costs of AB 32, so her group decided to sponsor a study that focused on an actual business’ expenses.
“The impetus was to say, ‘Well, what are the facts? What is the reality?’” Ansar said.
“This is the first study that actually looks at the real data of small businesses … that is something that the previous studies have not done,” she said.
Betty Jo Toccoli, president of the California Small Business Association, said it’s difficult for business owners to know what to expect from the implementation of AB 32 since the California Air Resources Board is yet to release a report on the projected impacts on small businesses.
As far as independent studies on the issue, she said, “I’m not really interested in getting into a war on whose study is right.”
She also questioned the Union of Concerned Scientists’ report for determining that the “average” small business spends relatively little on energy. The sector is too diverse for generalizations, she said, adding that business costs besides direct spending on energy will be affected by AB 32.
“Anything that affects big business is passed along to small business and in the end it’s passed along to the consumer,” she said. “It isn’t going to just stay with energy companies and oil companies and the big guys.”
The group that studied The Border Grill decided to analyze the projected impacts of AB 32 on a restaurant because restaurants employ more people than any other small business sector. Restaurants also spend about 2.8 percent of revenues on fuel and energy — about twice as much as an average small business, according to the authors.
At The Border Grill, chef and co-owner Mary Sue Milliken said participating in the study was an easy decision.
“We have … long been concerned members of the community and wanted to do the right thing — serve the best food we could that was sustainable and mindful of our environment,” she said.
Milliken, who also operates Ciudad in Downtown Los Angeles and another Border Grill location in Las Vegas, said she’s been devoted to incorporating environmentally friendly practices into her business since she learned about sustainable seafood about 10 years ago.
Today, The Border Grill uses bio-degradable containers for takeout orders, has a special environmentally friendly section of the menu and will soon start operating a food truck that can run on used kitchen oil.
Milliken said even if meeting AB 32’s requirements means a higher cost to businesses, it’s a small price to pay for a healthier environment.
The study, however, determined that The Border Grill would only have to increase the price of a $20 meal by about 3 cents in 2020 to cover its increased energy costs incurred because of AB 32.
While Milliken said she’s not afraid to sacrifice to meet tougher environmental standards — she didn’t hesitate, for example, to nix the best selling tuna ceviche from the menu when she found out it wasn’t sustainably produced — she said she hopes the study will help other business owners who are less environmentally inclined to embrace sustainable business practices.
“I think everybody can agree that doing studies like this is really important so we can understand what the impact of these kinds of initiatives could be,” she said.