AP: The CEOs of Alcoa, BP, DuPont, Caterpillar, General Electric, and PG&E have all signed a letter to President Bush and Congress demanding that they “establish a coordinated, economy-wide market-driven approach to climate protection” in order to fight global climate change.
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I wonder what’s in it for them? They aren’t doing this out of the goodness of their hearts.
PG&E won’t get any points from me for this- they were a part of Enron price fixing/gouging during the Davis administration. When a court ordered them to issue consumer refunds for overcharging they filed bankruptcy.
When I was working as a legislative assistant, something very peculiar came across my desk during the buildup to the ban on smoking in restaurants. We received a lot of support as well as threats from voters in the district, but what got me was a number of restaurant owners. Some were owners of a single dining place, while others were from CEOs of major chains. While even in this batch there were some positive and negatives, the vast majority were positive.
So why didn’t they just self-enforce?
They wrote that they wanted this law because they agreed that it was unhealthy for non-smoking patrons, and especially harmful for the waiters and waitresses that had to take in that smog during their entire work shift. However, due to the nature of the market, no one chain was willing to be the first to risk losing part of their base. If a government regulation came in on the other hand, all restaurants would make that move together.
Until that point, I was fiercely outspoken against excessive government regulation of the marketplace. Nowadays, I prefer to wait until I get more of an honest answer from the patrons and owners of the businesses affected.
Although its obvious, I guess I should note the first sentence should read, “…during the buildup to the failed ban on smoking in restaurants.”
Joe,
Bingo! The CEOs of the really big companies are not stupid. They can see the scientific evidence of global warming and it’s becoming painfully clear that it’s effects will have a harmful effect on the bottom lines of those companies. Just looking at corporate assets that would be swamped by oceans rising by 12 inches tells quite a story. The pros of reducing emissions now potentially outweigh the cons in terms of costs. But only *if* they are not put at a competetive disadvantage by doing so.
If 10 companies are in a marketplace and a fixed reduction in their emissions is needed to have a real impact against global warming, then you could simplify things by saying that 5 companies can reduce emissions by 100% or all 10 companies could reduce emissions by 50%. If only 5 companies reduce emissions then there would be disruption in the marketplace as those 5 increase their overhead while the other 5 could take the opportunity to cut prices and drive the first 5 out of business. Which would both damage the marketplace and leave the remaining members of the industry with the consequences of the emissions that they faced in the first place. Hence the logic of uniform, collective action.
In the first place, it would probably be unlawful for all members of a given industry to get together and agree to reduce their emissions in a uniform way (Sherman Antitrust Act). In the second place, a voluntary combination of action risks someone being the spoiler and deciding to cheat by not really reducing emissions in order to realize a competetive advantage. The answer is for the industry leaders to use government to enforce the collective action that they want. This way the legality is unquestionable, there will be uniformity in the marketplace and anyone who tried to be a spoiler will be swiftly punished.
In this way, the involvement of government regulation can (as it ususally does) serve the economic interests of an industry and contribute to the long-term health of a free market rather than allowing circumstances to develop which might destroy a portion of it.