The Power Behind Kyoto

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Industry is against the Kyoto treaty, right? These guys hate regulations, particularly those that would limit how much they can produce, right? That’s what we are told. It’s half right, but half wrong, too.

Most American businesses depending on gas, oil and coal are right to think that a global treaty limiting consumption is nuts, particularly one justified by dubious science. What’s more, it may well cripple American standards of living. There’s even a coalition doing a good job opposing it.

But there are a few big corporations that favor some form of limits on so-called greenhouse gas emissions, and they are lobbying the Bush administration to be less implacable on the subject. The bad guy list includes Royal Dutch/Shell Group, BP, Cinergy, AEP, Entergy and Enron.

They say they aren’t ready to embrace the whole of Kyoto communism. But they do favor mandatory limits and impositions that would curtail production in the U.S. What’s more, some of them have connections to the Republican Party and are among the party’s biggest donors.

Have these guys lost their minds? Are they hopelessly confused? Neither. And neither are they willing to stick it to their stockholders or reduce the earning power of their companies. They are acting out of self-interest, in fact, but to understand why requires just a bit of thinking.

These companies will tell you that they are just being politically realistic. They want the rule of law and figure that dealing with other countries on the greenhouse-gas issue will produce the most favorable result. They will even say that their position is all about environmental responsibility.

Here’s what’s really going on. If there are mandatory limits on the emissions of carbon dioxide, the fashionable way to bring this about is through tradable emission permits: sort of like a centrally planned market (yes, it is a contradiction).

The companies who favor mandatory controls have spent the requisite resources and serve the kind of markets that limit the amount of CO2 that they emit relative to other companies.

The last phrase is the key. Think of it this way. Let’s say the government says that there are too many tires being made. There have to be limits, officials say. Only a certain amount should be produced every year. Which of these two groups are likely to favor the idea: carmakers or politically powerful motorcycle makers? Clearly, the carmakers have more to lose because they use more tires. If motorcycle tire companies believe that they could actually use these regulators to clobber their competitors, they might just do it.

Something similar is going on with the political jockeying about greenhouse emissions. Some companies have concluded that restrictions on emissions will hurt their competitors more than themselves. They have enlisted in the camp of the bad guys. They believe that some forms of central planning are better for them than the competitive marketplace.

This is far from unusual. Notice how the media are able to trot out some big executive to favor practically every bad idea now being batted around in Washington? It’s always been this way. Some big companies like the minimum wage, for example, because it imposes high costs on smaller companies. The general rule is that if your company can stand up to regulation better than your competitor, it is worth a shot.

Think of the Microsoft antitrust case. The initiative and energy behind that affair came entirely from Microsoft’s competitors. You don’t really believe that bureaucrats in Washington sit around dreaming up this stuff, do you? Some do, but to get them to act requires that some really big players pay the political bribes to the right politicians who are in touch with the right interest groups which control the agencies.

That’s the reality of how the regulatory state works. It’s all about some companies (usually big ones) clobbering other companies (other competitive big companies, but usually medium and small size ones) via the powers of government.

In fact, in that sentence you will find a nutshell history of most of the regulatory powers adopted by government since the turn of the century. Building on the work of Gabriel Kolko and Murray N. Rothbard, Butler Shaffer has documented this in his wonderful book, In Restraint of Trade: The Business Campaign Against Competition, 1918-1938” (Lewisburg: Bucknell University Press, 1997).

Another scandal is how unprincipled free-market economists have played a role in dreaming up the idea of tradable pollution permits. They were using the tools of economics to make central planning more efficient. But the result is just as bad as any restrictions on production, and just as corrupting. Anytime the state is involved, there are winners and losers, the looters and the looted.

The Kyoto treaty will probably never pass, and thank goodness. It’s completely nuts — an international treaty the aim of which is to curb our standard of living, buttressed by speculative computer models designed by people who can’t tell you with certainty whether it is going to be a cold winter.

But we may end up with some restrictions on greenhouse gas emissions. They will be small at first, but they will grow over time. The American people will be the losers, but a handful of big businesses may actually end up winning as a result.

Wouldn’t it be ironic if one of the most draconian and ambitious plans for world economic planning ended up squeaking through because of corporate backing? It wouldn’t be the first time.

Llewellyn H. Rockwell, Jr. [send him mail], is president of the Ludwig von Mises Institute in Auburn, Alabama.

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