Climate Change is Proven, Here Isn't the Solution

For the sake of argument, let's assume that climate change exists, and it is a man-made problem. Let's also assume that politicians have no ill-intentions or corporate sponsors in their desire to create environmental regulations.

Is it still a good idea?

In other words, would increased government regulation on private industry help or hinder the quest for solving global climate change?

Throw your love of government out the window. Throw your love for private industry out the window. Let's be analytic and unbiased on this issue.

Let's imagine up a very possible scenario. In order to limit pollution, the government creates a regulation on the automobile industry that cars must have 54.5 mpg fuel efficiency. In the short-term, cars produce less pollution on average which seems to be a good thing.

Yet imagine any start-up company wanting to enter into the automobile industry. They have awesome ideas for a futuristic vehicle design, with amazing innovations, but can only produce the vehicle after they manage to generate some funds.

What if they don't have the research and development budget initially to produce an engine with that sort of efficiency? Maybe their first model is a gas-guzzler, but it generates the income necessary to increase their research and development budget.

They have a really unique idea for a car design, and a really cool long-term plan to produce efficient cars but cannot do so until they establish themselves in the market place. Unfortunately, they will never get the chance to prove themselves because they are in violation of government regulation. They will never succeed as a company, because regulation prohibits them from modest but profitable beginnings.

It's pretty obvious in this scenario that a fuel efficiency regulation would create a massive barrier to entry into the automobile industry. In other words, there would be far less companies competing to produce the best product.

The best thing about competition is that it produces an incentive to evolve and create the best product possible. In a limited competition industry, such as the regulated automobile industry, there is far less incentive to evolve because people will buy whatever cars are available regardless of their environmental efficiency or cost effectiveness. In a competitive industry, car companies have a reason to improve, evolve, and diversify because the amount of choices consumers have to choose from allows them to be picky about things like environmental efficiency.

In the history of the automobile industry, fuel efficiency has drastically improved purely because of the advancement of engine technology caused by competition in the market place.

Simple Conclusion

MPG regulation = Less competition = Less technological advancement = Less environmentally friendly cars in the long run.

No MPG regulation = More competition = More technological advancement = More environmentally friendly cars in the long run.

The same scenario can be replicated for almost any environmental regulation, including those outside the automobile industry. Whenever the government creates a barrier to entry to the marketplace, the incentive of the private industry to be more efficient is lost in the long run.