Why Climate Change Legislation Matters for Small Business

Cap-and-trade dies, but the search for alternative fuels goes on.

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So cap-and-trade legislation has died in the Senate. But it's going to be resurrected when a new administration moves into the White House. In the meantime, this is an issue of critical importance to small business and entrepreneurs.

1. There's no consensus on exactly how much a cap on emissions would cost the economy. But one thing is for sure: The bigger a firm is, the less that cost is going to hurt. Tim Carney—the best writer out there chronicling the ways that big business uses government regulation to encumber competitors—has written extensively about how Enron supported climate change legislation because its executives knew it would hurt smaller competitors' bottom lines much more than Enron's.

2. Environmentalists are concerned that the longer the government waits to do something about climate change, the harder it will become to avert catastrophic events down the road. But that concern presumes that only the government can do anything about the negative effects of climate change. That's far from the case. Entrepreneurs are taking advantage of the need for the planet to adapt to a warmer climate by developing commercial tools that will mitigate threats from global warming and create renewable energy sources. Here's one example. (Hat tip: Growthology blog.)

[Greg] Pal is a senior director of LS9, one of several companies in or near Silicon Valley that have spurned traditional high-tech activities such as software and networking and embarked instead on an extraordinary race to make $140-a-barrel oil...from Saudi Arabia obsolete. "All of us here—everyone in this company and in this industry, are aware of the urgency," Mr Pal says.

What is most remarkable about what they are doing is that instead of trying to reengineer the global economy—as is required, for example, for the use of hydrogen fuel—they are trying to make a product that is interchangeable with oil. The company claims that this "Oil 2.0" will not only be renewable but also carbon negative—meaning that the carbon it emits will be less than that sucked from the atmosphere by the raw materials from which it is made.

Who could ever have predicted that genetically modified bugs could be a solution to our energy crisis? Innovations aren't something we plan out in advance—they happen through the unplanned efforts of entrepreneurs dispersed throughout the world. Of course, these bacteria could end up being a bust as a real solution—the article points out that they haven't moved from the laboratory to a national or global scale. But if someone can find a way for them to work, it will most likely be the entrepreneurs.