How Climate Change Legislation Helps (and Hurts) Small BusinessesThe white house

How Climate Change Legislation Helps (and Hurts) Small Businesses

Climate change is starting to rear its ugly head worldwide. Heatwaves, droughts, flooding are cropping up everywhere; resulting in increased energy bills and disaster recovery costs. At this new higher rate of advancement, climate change will continue to make things worse as time goes on. At least until we find one way or another to slow things down or reverse it.

As a result, consumers are starting to become more environmentally conscious and fighting back in numerous ways - including pushing legislation and buying more eco-friendly products.

So how does climate change legislation affect small businesses?

Price increases, energy decreases, stock changes, and modified growth, for starters. However, with the right preparation, small businesses can adapt to climate trends and even continue to grow and thrive in this environment. Read on to learn all about the most important side effects that might affect how small businesses need to operate to succeed! 

Cap and Trade Compensates Sustainability 

Cap and trade ideas have been around for a long time. Now, these policies make it so that it is more expensive to produce pollution above a certain level. On the other hand, companies can earn tax breaks by reducing waste.

That means that many companies can benefit from such policies. By decreasing emissions and waste enough, small businesses can earn credits and trade them to other companies. Companies that find it more difficult to decrease carbon emissions buy these credits to pay for their emissions.

The end result is that total emissions across the entire economy go down. On top of that, businesses that create higher amounts of pollution will pay for doing so. Businesses that create less pollution will receive payment for doing so.

In other words, this has mixed effects on the world of small businesses. Some may find it more difficult to succeed. But others may find that such policies increase their profits rather than decrease them.

Climate Change Bills Require New Investments

Plenty of people have been working on climate change problems and passing new legislation to meet them. Although the primary effects of these bills are to fight climate change, every piece of legislation ripples through the economy. In this case, especially small businesses.

Recently, the Biden Administration instituted a "Build Back Better" plan called the "Inflation Reduction Act of 2022" with a portion dedicated towards climate change Incentives for individuals and businesses. It aims at a variety of targets, including decreasing carbon emissions. Also relevant to business interests, it provides incentives for people to invest in clean energy.

So what does this mean for you? First, you may need to spend more on emission control systems.

No business creates greenhouse gases for its own sake. However, many productive processes create greenhouse gases as an unfortunate side effect. Finding ways to decrease carbon emissions means having to update production processes.

That means investing in emission control systems which may be expensive and cut into profits. However, it is easy to know whether or not this dynamic will affect your business.

Does your business generate greenhouse gases during its routine processes? For many businesses in the energy industry, the answer is yes. However, most other small businesses will have other concerns to pay attention to.

Track Incentives to Eco-Friendly Alternatives 

Some of the least environmentally friendly products are becoming illegal. Others are legal, but there are incentives against using them. These incentives exist at both the official and the unofficial level.

As new climate change bills pass, more and more people are starting to value the actions that small businesses take to voluntarily decrease their contribution to climate change and pollution.

As a result, more companies are finding it profitable to invest in alternative products that do not harm the environment. For example, companies are replacing standard containers. Molded fiber containers are alternatives made from natural ingredients.

Companies are also navigating this by converting to eco-friendly supplies. Other businesses buy it to do their parts to fight climate change. There is also a growing market for molded fiber plates and compostable cups.

These are the kinds of investments that a growing proportion of the consumer market cares about. They are a great way for companies to show that they are looking for ways to fight climate change.

New Regulations Could Increase Prices

As we discussed, the primary effects of new legislation are to fight climate change. However, one of the side effects of these bills may be to raise prices on a wide variety of goods.

After all, many of our most important industries generate greenhouse gases. Most kinds of production and transportation will continue to generate carbon emissions for many more years.

If these companies pay more so that they can generate these emissions, they may have to pass on those increased costs to their customers. That means that many small businesses will need to keep a lookout for higher prices on a wide variety of goods.

Climate Change Bills Could Lower Energy Costs

On the other hand, climate change bills can also benefit small businesses. Decreasing climate change benefits businesses as much as it does individuals.

In recent history, individuals and businesses alike have been paying higher energy prices. One reason for this is that energy consumption is going up. Rising temperatures mean spending more on air conditioning.

However, decreasing global warming can decrease demand for energy to run air conditioners. That can lower energy bills for everyone and free up money to invest in business growth!

Getting Started

The more that you pay attention to recent climate change legislation, the better prepared you will be for the shifting business and regulatory landscapes. As a small business, you're used to embracing change and making whatever changes are necessary to get the job done.

To give you a head start on which products are an easy pivot for you and your customers, take a look right here: