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Posts Tagged ‘politics and pollution’

Cap and Trade or Cap and Close?

Posted by Larry Doyle on June 30th, 2009 8:18 AM |

Politics is a dirty business, as is pollution.  Mixing the two is a very dirty and potentially explosive proposition. Let’s try to shed some light on this corner of our economic landscape.

For evidence of this ‘dark and dirty’ enterprise, we need look no further than the energy bill recently passed by the House and on its way to the Senate. This legislation, formally known as the Waxman-Markey Climate Bill but commonly referred to as ‘cap and trade,’ was recently highlighted by Bloomberg reporting Big Oil’s Answer to Carbon Law May Be Fuel Imports.

Whenever I assess an industry, I initially think of a few basic factors, including:
1. product
2. cost of sourcing product
3. cost of developing or refining product
4. targeted market for product
5. potential profit margin
6. ability to scale the business (i.e.  grow the enterprise)
7. barriers to entry for competition

These basic business principles apply to virtually every business enterprise in the world. Any good businessman is always looking to cut costs, increase profit margins, and increase market share.

The goal of cap and trade, minimizing greenhouse gas emissions, is worthy. All other things being equal (our age old economic term, ceteris paribus), who would not be supportive of minimizing these emissions? As we know, though, all other things are NEVER equal. Let’s review our basic business principles. (more…)






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