How Global Warming Threatens U.S. Businesses

One of the greatest threats to suburban America, and potentially to thousands of American companies, is global warming — or at least the potential governmental reaction to it.

The European Union and other countries have begun programs to limit greenhouse gases, using carbon permits and regulations that will ultimately lead to even higher energy prices in Europe. If America were to follow suit, this country, too, would have even higher energy prices.

Companies as varied as General Motors, NVR, Wal-Mart, and Weyerhauser have at least one element in common: They offer products and services that help support suburban America. Threats to suburban America imperil these companies as well.

No one really knows the costs of combating global warming. Higher energy prices would likely alter much of suburban America. Unlike most Europeans, most Americans live in large houses, commute by car, and have lifestyles premised on relatively low energy prices. Those patterns would ultimately change with higher taxes on greenhouse gases. The result would weigh heavily on the many companies that support a suburban American lifestyle.

To some Americans, much higher energy prices are worth the effort because global warming is seen as the greatest ever threat to humanity. To others, global warming is a quaint fairy tale with Chicken Little and Henny Penny as protagonists. To most in this country, though, global warming is little more than a frequent sound bite on television news. We do not know the subtleties of either the apocalyptic forecasts of global climate change or the economic consequences of government intervention.

Global warming is not merely a metaphysical debate relegated to college campuses. It is discussed in boardrooms, in the halls of Congress, and, last week, even in the Supreme Court. If you have doubts about the capabilities of these venues evaluating science, you are not alone. Some justices of the Supreme Court were clearly uncomfortable in reviewing science last week in the case Massachusetts v. EPA.

The oral argument in that case was largely about whether the EPA has the authority to regulate greenhouse gases and about whether Massachusetts and 12 other states should be allowed to sue the EPA to institute greenhouse gas standards for carbon dioxide emissions from automobiles. The threshold is whether, even if the court were to grant everything the states ask, EPA action would remedy the alleged harms to the states from global warming.

Ultimately, implementation of global warming regulations in America is much more a political than either a scientific or a legal issue. As a society, we regulate many types of behavior because of political judgments, not because scientific evidence (or the lack thereof) compels our government to a certain form of regulation. In the same way, global warming will (or will not) be regulated as the result of political decisions.

Some, but certainly not all, congressional candidates elected to office in November mentioned "global warming" in their campaign materials. It is a growing but still secondary issue in American politics. Perhaps it will be an even more visible topic in 2008.

Even if a Congress and an administration committed to regulating global warming were elected, however, our country is a decade or more away from having the necessary legal institutions in place to have predictable and defensible forms of such regulation. The very issue of whether the EPA even has the authority to regulate greenhouse gas emissions is subject to some judicial skepticism. Administrations and Congresses may change, but legal challenges and judicial skepticism will not.

The European Union, where regulation is more easily changed and where courts are less protective of property rights, has been at the forefront of global warming regulations. France has even proposed carbon taxes on imports from countries that have not implemented the Kyoto treaty on global warming, presumably including the U.S.

America is different not merely because we have lifestyles and businesses more reliant on energy. Our governmental institutions are slow to change laws and often suspicious of international coordination that imposes direct costs on the country. We have courts that can protect property owners from the overzealous limitations of government. These are not the circumstances that favor rapid adoption of new internationally mandated global warming regulations, even with the urging of elected officials.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.