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Business Climate Change

May 21, 2009

Read Bjorn Lomborg’s story in the Wall Street Journal on how climate-change regulations for industries are nothing but a scheme to divert tax money to rent-seeking companies. Here’s an excerpt:

The world’s largest wind-turbine manufacturer, Copenhagen Climate Council member Vestas, urges governments to invest heavily in the wind market. It sponsors CNN’s “Climate in Peril” segment, increasing support for policies that would increase Vestas’s earnings. A fellow council member, Mr. Gore’s green investment firm Generation Investment Management, warns of a significant risk to the U.S. economy unless a price is quickly placed on carbon.

Even companies that are not heavily engaged in green business stand to gain. European energy companies made tens of billions of euros in the first years of the European Trading System when they received free carbon emission allocations.

American electricity utility Duke Energy, a member of the Copenhagen Climate Council, has long promoted a U.S. cap-and-trade scheme. Yet the company bitterly opposed the Warner-Lieberman bill in the U.S. Senate that would have created such a scheme because it did not include European-style handouts to coal companies. The Waxman-Markey bill in the House of Representatives promises to bring back the free lunch.

U.S. companies and interest groups involved with climate change hired 2,430 lobbyists just last year, up 300% from five years ago. Fifty of the biggest U.S. electric utilities — including Duke — spent $51 million on lobbyists in just six months.

The massive transfer of wealth that many businesses seek is not necessarily good for the rest of the economy. Spain has been proclaimed a global example in providing financial aid to renewable energy companies to create green jobs. But research shows that each new job cost Spain 571,138 euros, with subsidies of more than one million euros required to create each new job in the uncompetitive wind industry. Moreover, the programs resulted in the destruction of nearly 110,000 jobs elsewhere in the economy, or 2.2 jobs for every job created.

Where’s the anti-business crowd when you need them? It is unlikely that taxpayers approve of their money being distributed among politically well-connected companies on the basis of bogus arguments about ‘saving the planet’. Those who stand to gain from this are companies that are given undeserved subsidies because they are politically favoured. The undue tax-financed help from governments allows them to elbow out businesses that try to succeed through good products and management rather than lobbying efforts.

Aside from profit-seeking companies (rather than rent-seeking ones) the losers of those deals are consumers. When businesses depend more on politicians’ goodwill than on consumers’ power of the purse they have no need to stay on their heels with good products for reasonable prices. Politicians sticking their heads together with industry leaders and a selection of  political activists, concocting an accord on ‘standards’ products offered on the marketplace will have to meet is just as much collusion as is an oligopoly setting price agreements.

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