Tuesday, January 23, 2007

surprise, surprise

Did you ever think you would see this on the cover of the Wall Street Journal . The global warming debate is shifting from science to economics, so says Jeffrey Ball at the WSJ. Why do you think this is happening?

19 comments:

Mackenzie Hutton said...

I believe companies are pushing for an emissions cap because they are beginning to see the future cost of continuing to use fossil fuels the way we are right now. The finite nature and the volatility of the market for fossil fuels causes them to be more costly than alternate sources of energy in the long run. The companies have realized that switching to alternate sources of energy will be more efficient and less costly in the long run but no company wants to reduce its emissions and suffer the short term losses if the other companies are not doing the same. I think that the companies are pushing for an emissions cap because they want to gain the long term benefits of reduced emissions but they do not want to suffer the short term losses that would make the price of their good rise if other similar companies are not doing the same.

Sam said...

The Gordon Gekko's of Wall Street are finally able to see the future value of the environment. Ten years ago, worrying about cutting emissions could cost their company millions of dollars. Now ignoring emmissions could cost the company billions of dollars in the future. If the major companies can get a head start in reducing emmissions today, the long term benefits can keep them from hiring the Charlie Sheens of the world to do blow in the back of limos with an EPA strategist.

Kris Brake said...

Scientists have already determined that Global Warming is a problem and that doing blow is not healthy. Now it is up to the economists to use their knowledge of costs, benefits, and models to develop proper strategies to help with the problems. The interesting thing is that we have finally reached a point where the companies themselves see the benefits of reducing emissions.

Drew Martin said...

Companies are beginning to see the benefits of being "green". I do not think it has as much to do with their concern over the environment as it does with their bottom lines. An article in Business Week, "Beyond The Green Corporation" shows why companies are now trying to become more environmentally friendly. Wal-Mart for example has lost an estimated $16 Billion in stocks because of its bad reputation in labor and environmental practices as compared to Target. I know my parents refuse to shop at Wal-Mart because of their labor practices. On the other hand Toyota has benifited from its good environmental reputation from the hybrid Prius. Consumers assume all Toyota cars are better for the environment than their competitors. Companies are discovering that their impact on the environment and their public image seriously affects their income.

bruce said...

Although cutting emissions will prove to be very costly in the short run, it has become evident in recent times that a transition to more environment friendly capital will prove to be less expensive in the future. This is because of the inevitable introduction of emission caps by the government. At some point in the future (a time that is not known today) it will become imperitive that this switch is made as fossil fuels become increasingly scarce and as the environment becomes more polluted. This is also exciting as we will continue to see Al Gore in the media. We all need to be weary about the return of MANBEARPIG!!!!!!!!!!

kirk jones said...

It will be very interesting to see if and to what extent the environmentally friendly substitutes for fossil fuels prove to be more cost-efficient. Alternatives such as corn-based ethanol are receiving loads of attention right now based on the probability of environmentally friendly political action and a rise in the price of oil. The development, research, and market of alternative energy is only going to increase in the future . I'm also interested to hear what Bush has to say in his State of the Union Address concerning the "20/10" plan where gasoline use in the US would decrease 20 percent in the next 10 years (I think its actually taking place as I’m writing this).

Wesley said...

Interesting that George Bush just uttered the words "Global Climate Change" for the first time in his presidency. I wonder how this will affect the debate over global warming in general.

Anonymous said...

It is exciting to know that major climate change skeptics are now coming to appreciate the existence of climate change. This should serve as a good platform for environmentalists to push for the formulation and implementation of policies that will protect the environment. I look forward to see the needed political will and leadership for an environmental revolution.

Felix

Martha said...

Obviously driven by self interest, these companies are finally seeing that it is going to be less costly for them to fix/prevent the problem now than wait it out and try to clean up (if it even could be cleaned up) the problem in the future. Regardless of whatever finally got this conversation rolling, it's nice to hear them talk/argue about what kind of cap and trade system to use and not about if we should or should not implement one in the first place..

Hartley said...

I think that emission levels have gotten to a point where they have caught the attention of big companies. Luckily, their are environment aware workers at these companies that see the major problems that fossil fuels (and other emmissions) are creating. I do agree that one day there will be a cap on the amount of emmissions each company is allowed to emit, hopefully sooner rather than later. Companies fighting for this will definitely speed up the process.

Melyse said...

US has a lot of companies that a big part of their productive structure are in third world countries (like general electric), will they count with these industries emissions? and also I'm still trying to figure out how these emissions cap would work on the developing countries (after all according to your president one of the reasons he didn’t sing the Kyoto protocol was because it didn’t establish a limit for the development countries), if US approves an emission cap there will be more pressure for the others countries to approve as well, will the companies be able to internalize higher costs and still be competitive internationally?

Whitney Dickson said...

I think the transition of global warming gab from science to economics is exactly the result of what everyone has been saying. We've found the cause, now we have to deal with it.
In addition to merely acknowledging the problem scientifically, we are experiencing its effects economically. The two are not mutually exclusive. We are feeling the short run costs of dealing with our emmissions in hopes to recover the long term benefits of continuing production. Science has handled the 'what', now economics is revealing the 'when', and politics will determine the 'how' to fix this global crisis.

Jordan Anderson said...

It seems to me that this is actually more of a merger between economics, science, and politics. With the Bush Administration's popularity at an all time low, a new more liberal administration is very possible in the future. With that, it is likely that an emissions cap and a formal recognition of global climate change will come. Firms are much more likely now, it would seem, similir to other businesses in the past, to cap their emissions on their own rather than wait for a government mandate and have to scramble, potentially effecting profits, etc.

Kyle Wichser said...

Its fascinating to see that some large industrial corporations are becoming increasingly interested in being involved in the global warming debate. As the article cites, many of these companies are beginning to see the positive weight that cleaner technologies carry. Also, their interest in being activey involved in this decision process is key. As Kahn points out, the the impact of resource utilization will be worse if environmental regulation is depended upon. Rather, if these firms have a participatory role curbing fossil fuel emissions and implementing cleaner technologies, then these firms will have the ability to choose options for pollution reduction that are cost effective and best suited for a particular firm. Great article.

adamk said...

The question I have now is what will be the difference between these industries' proposed cap and one that can be expected to come from the government in the next few years. Perhaps the firms are voluntarily doing this so that someone will not implement a cap that is more costly to them. Like is said many times in class it is a cost benefit analysis for these firms. Do they want to voluntarily reduce emissions now in hopes of fewer mandatory costs down the road? I find it hard to believe that every major industry in America all of the sudden discovered their conscience in one fell swoop. I believe that the almight dollar, as is the case almost always, is the reason for these self proposed caps. They'd rather implement their own at a cheaper cost than have someone give them a a more costly, mandatory one in the future.

John said...
This comment has been removed by the author.
John said...

As lighthearted as Kris’ comment might be, I tend to think of the global warming “debate” in nearly the same terms: it is much like science versus the tobacco lobby; except the enemy here is obviously a host of big businesses. However, the mainstream economic debate over the merits of reducing emissions is one that should have started several years ago.

Bush’s recognition of the climate problem and call for increased alternative fuels production and greater fuel efficiency is obviously a political ploy—and one that Prof. Casey predicted last week. I see it primarily as punting this single issue to the Democrats to appease the majority and gaining leverage as he continues to fight his questionable war in Iraq.

I was not aware until just a few days ago about the huge problem associated with power plants and other utilities, which account for 40% of carbon emissions, according to today’s NYT. Bush’s failure to address this well-documented cause of climate change, though, reinforces my argument that it’s entirely political; I even wonder if his willingness to back auto efficiency is a stab at the Democrats, whose Rep. John D. Dingell (Michigan) chairs the House Committee on Energy and Commerce. Dingell is “a longtime champion of Detroit automakers and who has consistently resisted forcing them to boost the fuel economy of their vehicles.”

(http://www.boston.com/news/nation/washington/articles/2007/01/19/markey_caught_in_wrangling_on_global_warming/)

Seriously, nice comment Kris. Sorry if I repeated much of what your class has already said.

John Bovay

Anonymous said...

This might prove that the solution to enviormental problems are not solved in the streets. This new revolution of the twenty first century is solved by an analysis of the market forces that govern most other aspects of our lives. Adolfo

gusej said...

The Econ 101 model of firm behaviour explains the WSJ article. Its about profit. Government policy has a tendency to cater to "stake-holders" and so delaring oneself a stakeholder or framing the policy discussion in some other way can be quite lucrative.

More specifically, limiting carbon emissions will come down how rights are allocated. We face a spectrtum of choices between these two extremes. (1) Allocate them fairly - say across the entire population. This would be represented by a simple carbon tax or AUCTIONED permits. with revenue use to reduce payroll taxes. (2) Allocate them to "stakeholders". This means giving away emission permits to those already emmitting.

Beware of phrases like "we need to get private sector involved".


Good Site Jim.
Joseph Guse