Wednesday, March 21, 2007

Businesses call for environmental regulation

One of the most common critiques of raw capitalism is that it doesn't adequate deal with some of the environmental externalities from products and services. For example, you are not charged the cost of disposing of your Coke bottle or your blue jeans when you purchase them. Often times, when these items are produced in 3rd world countries, the producer didn't have to pay for disposing any of the products required to make them because he could just dump them back onto the land, river, air, etc. Therefore the producer can provide a product/service to you cheaper than the actual cost of producing it.

Many people that rail against environmental regulations say that it adds additional costs to businesses that make them less competitive. To some extent that is true. Government regulation that tries to deal with these unpriced externalities does add costs to producers for the environmental damage they do. I don't necessarily think that is a bad thing.

However, it does come with some surprise to hear several powerful investment leaders call on Congress to mandate limits on carbon dioxide emissions and establish penalties for any company that exceeds those limits. These titans of industry (European insurance giant Allianz, Merrill Lynch & Co., BP America, Chief Executive Robert Malone of Exelon Corp., Chief Executive John W. Rowe of Consolidated Edison, Chief Executive Kevin Burke, as well as other chiefs, including Alain J. Belda of Alcoa Inc., Chad Holliday of DuPont and Jonathan Schwartz of Sun Microsystems Inc) are all trying to do what is morally right, but not go out of business simultaneously.

They understand that if their companies (or companies they invest in) start to price for the externalities of creating their goods or services, they won't be able to compete with other foreign or domestic producers who choose to pass the buck onto Mother Earth. These leaders see that a level playing field must be created by Congress. And many of them see $$$ if Congress does just that.