Put a Price on Carbon to Help Small Business

As the Obama Administration pushes a small business jobs bill in the Senate, the centerpiece of which is a $30 billion small business lending fund, a much larger economic opportunity for small business is being lost as the Administration acquiesces in the Senate's decision to put a comprehensive energy and climate bill on the shelf.

Putting a price on carbon would create new resources and incentives needed for utilities to invest in energy efficiency programs. Existing energy efficiency technology can be rapidly deployed to reduce small business energy consumption by 20 percent to 30 percent. Small businesses stand to benefit the most from the savings that energy efficiency can provide, and they deserve some special attention because they already pay the highest prices for electricity and natural gas—in the commercial and industrial sectors, small businesses face electricity prices that are as much as 30 percent to 52 percent higher than the prices paid by the largest entities.

In a report last year endorsing the on-bill financing (OBF) of small business energy efficiency, the National Small Business Assn., a trade group, found that a small business matching the national average could save nearly $5,000 annually on natural gas and electricity by improving energy efficiency 25 percent. Simple and creative financing like OBF can make a huge impact because it eliminates the need for small business up-front capital; instead the utility pays the up-front costs for energy efficiency improvements and repayment is based on the estimated monthly energy savings. In essence, the small business shares the savings with the utility until the loan is repaid.

Multiply $5,000 by 29.6 million small businesses in the U.S. and you have $148 billion in potential savings. Even Wall Street pays attention to that kind of number.

Savings Lost

Why are our leaders failing to even take a hard look at the opportunity in energy efficiency for small businesses? This is $148 billion in direct savings—not loans—that could be invested in small business growth and American job creation instead of being spent on wasted energy. This is the kind of economic boost we really need.

And since small businesses consume about half of all the energy used for commercial and industrial purposes, this low-risk, high-reward strategy will have a dramatic impact on reducing America's dependence on foreign sources of energy.

Entrepreneurs are smart people who hate waste. Provided with the smart technical and financial help that would be made possible by putting a price on carbon, small businesses will quickly wring out the waste and the 20 percent to 30 percent overspending that exists on their utility bills.

We're losing small business opportunities on other fronts as well. Without action on energy and climate legislation, the investment community is reluctant to put money behind the cleantech entrepreneurs who can give us the energy and environmental innovations we need. There is simply too much risk in not knowing whether future legislation could pick technology winners and losers.

Martin Lagod, a Republican who is a managing director and co-founder of Firelake Capital Management, and Jason Scott, a Democrat who is managing partner and co-founder of EKO Asset Management Partners, recently wrote a piece on Politico urging the U.S. to set a market-based price for carbon. Their two companies, together with their investment partners, have more than $10 billion to invest in clean energy technologies and projects that would create American jobs. Without putting a price on carbon, however, investment money will instead flow to places like China, Europe, and India. According to Lagod and Scott, China is investing $95 million each day in clean energy. Why are our elected leaders allowing us to fall so far behind?

Business Support

Whether small businesses will throw their support behind a comprehensive energy and climate bill depends on what the final language looks like. As we know, the devil is in the details.

But the results of a bipartisan poll released in June by Small Business Majority, another trade group, found that 50 percent of small business owners support clean energy and climate legislation that "put[s] a price on carbon emissions" and 62 percent of small businesses said they would be more likely to support the bill if it included interest-free loans for energy efficiency upgrades and making the switch to clean energy.

By not bringing an energy and climate bill to the floor of the Senate for discussion and debate, it's the same old story of what could have been. And that, to be sure, is one big lost opportunity.

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