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California's law on emissions tests reputation for innovation
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Business English: California's law on emissions tests reputation for innovation
The new law limits the amount of greenhouse gases companies are allowed to pump into the atmosphere each year. Companies will be issued with permits to produce a certain amount of carbon dioxide and, if they want to produce more, they have to buy them from cleaner companies with spares.James Inhofe, the Oklahoma senator and prominent global warming sceptic, condemns California's approval of a law to cap emissions of greenhouse gases. "Pure and simple, this bill is a job-killer for California," he said. "Passage of this bill means pink slips for thousands of workers and even higher prices for consumers."
The new law limits the amount of greenhouse gases companies are allowed to pump into the atmosphere each year. Companies will be issued with permits to produce a certain amount of carbon dioxide and, if they want to produce more, they have to buy them from cleaner companies with spares.
Mr Inhofe's prediction of thousands of lost jobs taps into a well of scepticism about emissions trading schemes. Many who oppose them argue that, because they force companies to take the cost of their emissions into account when making business decisions, they must necessarily result in higher costs for companies and, ultimately, job losses.
However, David Roland-Holst, an expert in emissions trading, says concerns that market-based emissions trading schemes will result in massive unemployment are unfounded. Rather than punish the economy of the most populous US state, the new California law might be just the thing needed to kick investment in green technologies into high gear.
"It's actually doing business a favour," says Mr Roland-Holst. "The right kind of [emissions] system can stimulate the California economy."
The state's technology companies have long argued that stricter emissions controls could represent an opportunity, rather than a threat, to business. Mr Roland-Holst says companies may see two broad benefits. First, by investing in energy efficiency, companies will reduce their vulnerability to energy costs. "Clearly we know that energy costs are pretty much going only in one direction," he says. "To some extent the government is doing business a favour by promoting early adoption [of energy saving technologies]."
Second, California has the opportunity to establish itself as a world leader in the growing energy efficiency industry if the emissions cap and permit trading scheme encourage companies to invest in innovation. Companies that take the lead in developing technologies to promote energy efficiency have the opportunity to set standards that could make California a world leader in the field.
"If the state puts a price on carbon it will trigger hundreds of millions of dollars of investment," says Mr Roland-Holst. "But companies are clearly not going to make that commitment until they get a clear signal from the market."
In spite of California's reputation as a high-tech hub, the state remains home to large numbers of brick and mortar manufacturers. And while the high-tech sector is poised to reap the rewards of a shift towards energy efficiency, economists acknowledge that some of the state's heavy industries, such as power plants, oil refineries and cement factories, remain exposed. Depending on how many sectors eventually fall under California's emissions policy, such companies may be required to reduce emissions by up to 4 per cent a year over the next 15 years to meet the state's long-term goals.
Christopher Thornberg, an economist at the University of California says that, in spite of the increased cost of complying with a new emissions trading regime, businesses are unlikely to leave the state. Years of economic research indicate that it is consumers, not businesses, who will bear the brunt of any increased costs resulting from a new permit trading system. "In the long run, a business doesn't get up and leave. It raises the price of products and reduces the wage it pays workers," he says.
Mr Roland-Holst says that, by focusing on opportunities rather than costs, California can set the stage for green energy to join information technology at the top of the state's economic food chain.
"Innovation has been the primary source of California's growth," he says, "and it's where we need to look for future opportunities."
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FTD.de, 06.09.2006
© 2006 Financial Times Deutschland,
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