Patchwork rules and industry strategy

2008-01-17

in Economics, Law, Politics, The environment

In many states, a disjoint can be seen between action being taken on climate change at the state or provincial level and inaction at the federal level. Some people argue that such approaches are fundamentally inefficient because they increase uncertainty and the cost of compliance. While this is true in a static sense, it ignores an important element of game theory. Generally, the moment at which it becomes possible to effectively regulate an environmental problem is the moment when industry decides that some form of regulation is inevitable. It then switches its attention from lobbying for total inaction to lobbying for the kind of regulatory regime that suits business best: something as large-scale as possible, with long enough time horizons to guide investment decisions.

This is certainly the pattern that was observed with ozone depletion. Industry went from saying: “There’s no problem” to saying: “There’ a bit of a problem, but it would bankrupt us to fix” to realizing that regulation was inevitable, lobbying for a kind that suited them, and developing superior alternatives to CFCs within a year.

As such, it is entirely possible that grumbling about a “patchwork of regional approaches” signals the approach of an inflection point, beyond which effective regulation and large-scale industry and consumer adaptation occurs.

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{ 2 comments… read them below or add one }

R.K. January 18, 2008 at 2:07 pm

The big difference here is that replacing CFCs wasn’t all that expensive and didn’t require big changes in how society works.

Climate change is a different matter entirely. That said, this kind of watershed may still occur.

. October 4, 2010 at 3:42 pm

“The patchwork of climate change regulatory initiatives in each of the five provinces, where cement is produced, is the most significant threat to the competitiveness of the nation’s cement industry, says the Cement Association of Canada (CAC).

Michael McSweeney, president and CEO of Ottawa-based CAC, said the legislative and regulatory regimes in the five jurisdictions – British Columbia, Alberta, Ontario, Quebec and Nova Scotia – need to be harmonized if Canada’s cement industry is to be competitive and attract and retain investment.

“Our hope is that governments will get together and harmonize their programs so there’s only one, because multiple systems make us uncompetitive,” he said.

The climate change programs in the five provinces in question all have different rules and targets.

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