Outer space potato man
- Feb 6, 2010
- Reaction score
- Political Leaning
If the company gains a larger benefit from running at whatever capacity they need in order to meet market demands, the financial incentive is a moot point, unless the price of carbon credits becomes so cost ineffective that they are forced to scale back output, thereby paying financially in lost profits.
How's your free market looking now?
The word "if" at the beginning of your post should tell you all that you need to know. If you think industry will simply not react and just eat the cost, I don't know what to tell you. A company with an inefficient operation (carbon-wise) will have a higher cost of operating than an efficient one, and this will likely be passed on in the price of their product or service. This makes them less competititve and will reduce the market's demand for their product. Conversely, an efficient company will have a lower operating cost and probably be able to offer a lower priced product, thereby getting a larger market share or demand.
It's best not to look at these things narrowly, because you almost always end up missing something. Financial pressure to reduce emissions will result in reduced emissions, that's just how the market works. What remains to be seen is how fast and how much. Like I said before, carbon trading just creates some competitive pressure but doesn't fundamentally change the way we operate.