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Economic impact of CO2 May 24, 2007

Posted by solarpundit in Finance, Government.

Ken Silverstein, of the EnergyBiz Insider published an article recently that I feel is of major importance to the changing economic and environmental landscape of the energy industry.   The article discusses the resistance that corporate America has toward adopting more conservative CO2 production goals, and their argument about the impact that new initiatives and legislation will have on their bottom line.   

From my perspective, there are a massive industrial changes that are inevitable that will impact the way the world does business.  The most dramatic of which is that the general population of consumers, and for the US, the constituents of political leaders, are now making global warming a priority.  Because of this, laws will be enacted, and policies will change.  Even though businesses are resistant to these new changes, and implementing them will significantly impact their economics, the changes will come, and businesses will adapt.

Uncertainty dramatically affects the ability for businesses to run smoothly, and most people fear change.  In addition, many of the developing technologies to control emissions are still un-tested on a large commercial scale.  Therefore, it is no surprise that many corporations are arguing that lower ceilings on emissions and implementing tighter regulations will negatively impact economic growth.   These organizations feel founded in their arguments.


I however would rather point to history and explain that every time a government has put legislations in place to protect the people or environment, businesses have adapted and remained profitable while whole new industries and millions of jobs have grown out of these new regulations.    The development of the EPA and tighter pollution controls hit the power and chemical industries over forty years ago, and the result of the new regulations was the development of an entirely new field of engineering.  In addition, those companies that were affected adapted and became more efficient while remaining profitable.


The article mentions the basis for the economic argument for improved regulation:

“S&P points a study by the U.S. Department of Treasury saying that the eventual impact on gross domestic product would be 5 percent while the cost of remediation would be one percent. Other predictions say that capital that would flow into the new technologies could increase world output by 5 percent.”

My argument is a little broad when I ask what is the impact on the GDP when we have a natural disaster like Katrina?  The immediate impact of increased global temperature is not the extinction of the human race, but the acceleration of devastating weather patterns.  What is the impact of the gross domestic product on multiple annual devastation; increased hurricanes in coastal areas, increased tornados in farm land, non-existent water stores in mountain areas and massive drought?  Personally, I think that the impact on doing nothing will be a lot greater than negative 5% economic growth.

Tags:  EnergyBiz Insider, Ken Silverstein, GDP, Carbon Credits, Natural Disaster,  U.S. Department of Treasury, business argument, CO2 legislation, fear change, Global Warming



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