Public Policy Issue Briefs

Issue: Climate Change
Overview:The National Restaurant Association believes that the restaurant industry will benefit from energy conservation, but the proposed cap and trade legislation goes too far too fast and will hurt many small businesses.

Background

The issue of climate change is more politically visible now than at any time in U.S. history. Just five years ago, leaders were debating the validity of climate change and whether or not humans contributed to it. Today, regulatory and legislative approaches to the issue have moved beyond the debate stage and onto an action strategy, largely centered on two prevailing views about the best approach to regulating greenhouse gas emissions: a cap-and-trade system or a carbon tax.

A cap-and-trade system would establish a ceiling or “cap” on emissions, which would decline over time and help improve the environment immediately and in coming decades, proponents say. Companies and industries that emit greenhouse gases would, collectively, be required to reduce their emissions to levels prescribed by the cap, using government-issued emissions allowances to ensure compliance. Businesses that achieve emissions reductions would be able to sell any surplus reductions to companies that need allowances. These “trades” would be conducted in a regulated market subject to oversight. Because all are at liberty to create (or buy) the lowest cost emissions reductions, advocates say environmental protection will come at the lowest possible cost and with the most positive effect on the economy. Opponents say that a cap-and-trade system would be particularly burdensome for business in an already tough economy and potentially subject to abuse. The alternate approach, a carbon tax, is often likened to a pollution tax in that it would tax companies’ greenhouse gas emissions. Proponents of a carbon tax argue that, unlike a cap-and-trade system, a tax is more easily understood; it could be offset by reducing other taxes or funding environmental projects; and it is more transparent, allowing companies to know exactly what they pay for the carbon dioxide they emit.

Estimated Industry Impact

The greatest impact of potential legislation on National Restaurant Association (NRA) members is not direct regulation, but rather a tax increase or potential increases in utility bills – and cost estimates vary widely. As an example, the National Association of Manufactures estimates a 50 percent increase in electricity bills by 2030 and the Department of Energy’s Energy Information Agency estimates an increase of 20 percent over the same time period. Additionally, because the agricultural sector is the largest consumer of energy in the U.S., NRA suppliers could be impacted by climate change policies that force agricultural suppliers to raise prices or make changes in production. Consumers, who may see their purchasing power diminished as a result of climate policy changes, may also be impacted, thus impacting NRA members’ businesses.

State of Play

The Obama Administration has indicated that climate policy is a top priority, and has installed leaders at the Environmental Protection Agency and the Department of Energy who share this goal. While the U.S. House of Representatives narrowly passed its climate legislation, H.R. 2454, the American Clean Energy and Security Act of 2009 (a cap-and-trade measure) by a vote of 219-212, Sens. Barbara Boxer (D-CA) and John Kerry (D-MA) introduced their much anticipated climate change legislation at the end of September. The 821-page bill kicks off what is certain to be a lengthy and politically challenging Senate process directed around a key centerpiece of President Obama's domestic agenda. Similar to a measure that passed the House by a slim margin this summer, the Boxer/Kerry proposal is built around a cap and trade mandate that aims to reduce greenhouse gas (GHG) emissions. As currently drafted, the Senate proposal would set even more aggressive GHG reductions than passed the House or have been proposed by the Obama Administration.

However, the Boxer/Kerry bill is a long way from becoming law as both Republicans and Democrats are expressing concerns with the proposal. As occurred in the House, Democratic leadership and the Obama Administration will be forced to use significant political capital if they hope to move forward. On the heels of the health care debate this will prove challenging with Senators that are up for reelection next fall. The Boxer/Kerry legislation was considered in several Senate Committees this fall, but the real battle will likely come with the 60 votes needed for floor consideration that will likely be in 2010. The NRA will be working closely with Senate staff to make sure the industry's concerns are known and to prevent the passage of any bill that could have such a serious negative impact on our industry.

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