“Risky Business” in Climate Change Policy

Alicia Mundy writes in the Wall Street Journal of June 24, 2014, that a coalition of environmentalists and at least some of the many corporate cronies of the federal government are pressing a proposal to require private business entities to account for and to report to shareholders the risks to which they are exposed by looming “climate change”.

Never mind that the scientific evidence of “climate change” is debatable, not because average temperatures may or may not be rising globally, but because answers to questions about mankind’s contribution to that change are uncertain. After all, the hottest period on Planet Earth occurred during the Middle Ages, hardly a time of vigorous industrial activity.

The report released by the self-styled Risky Business coalition claims that its purpose is to depoliticize the climate change debate by transforming it into an economic issue focusing on the future consequences of not dealing now with the future (and speculative) financial costs imposed on private businesses by higher temperatures, rising sea levels, more violent weather events (hurricanes and tornadoes) and other dire straits into which America’s business sector could be plunged by the coming climate catastrophe. One estimate claims that the United States will lose $100 billion worth of coastal property if the worst of the climate-change scenarios materialize.

It turns out, however, that the Risky Business coalition is nothing but one more example – if one were needed – of ordinary special-interest politics at work. Fronted by former treasury secretary Henry Paulson (he of the treasury’s unholy alliance with Wall Street’s Goldman Sachs) and former New York City mayor Michael Bloomberg (he of the infamous “Big Gulp” tax), the lobbying group’s “bipartisan” committee counts among its most prominent members Tom Steyer, described in Ms. Mundy’s article as a “hedge-fund billionaire” as well as “a powerful voice on the environmental left and an increasingly important source of funds for Democrats.”

Mr. Steyer also heads an advocacy group, known as NextGen Climate, and has contributed funds to political campaigns in Pennsylvania, Florida, Michigan and Iowa to help secure the elections of sympathetic gubernatorial and U. S. Senate candidates. Not surprisingly, he “strongly opposes the Keystone XL pipeline from Canada and has said he wouldn’t help Democrats who support Keystone.” Steyer also is pushing California to impose a severance tax on oil and gas producers.

What should be made of Risky Business’s recommendations?

One important consideration is that regulatory requirements such as the coalition wants to impose almost always are crafted as “one size fits all”, meaning that large corporations thereby enjoy competitive advantages over their smaller rivals. Big companies such as the agribusiness giant Cargill, Inc. (a member of Risky Business) already have regulatory compliance departments in place and can spread those costs over large volumes of sales. Smaller companies will be driven out of business if forced to comply with the same rules.

And so we see here another way in which politically powerful corporations can exploit the political process for their own gain. No matter what you think about the scientific evidence supporting climate change, because they will be poorer shareholders of smaller corporations can take little comfort in the political forces promoting a policy agenda requiring recognition by accountants of ostensible environmental risks.

Risky Business helps prove that the recent Occupy Wall Street Movement and Tea Party activists have more in common than their members perhaps recognize. Corporate cronyism is a clear and present danger to ordinary Americans that swamps even the most conceivable future environmental catastrophe.

William F. Shughart II is Research Fellow and Senior Fellow at the Independent Institute, the J. Fish Smith Professor in Public Choice at Utah State University, past President of the Southern Economic Association, and editor of the Independent book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.
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