However, the advantage to a diverse group of corporate interests is less obvious. For some companies – especially the energy intensive businesses – they hope to profit by shaping the regulations to ensure they will be awarded carbon dioxide credits, which they can sell.
This veneer of profit seeking behavior provides insulation from Wall Street analysts, shareholders and free market activists that might otherwise be concerned about companies acting in favor of regulations. Unfortunately, so-called rent seeking behavior by corporations goes mostly unchallenged by free-market conservatives.
For other companies the profit motive is much less clear or totally absent. Take for example Caterpillar Inc. – the construction and mining equipment and engine company. Judging by statements made by CEO Jim Owens and the negative impact of cap-and-trade on the economy and its customers, Caterpillar’s participation in USCAP is not based on increasing profits.
Caterpillar’s business and future profitability depends on a growing economy and growth in the energy and mining industry. In fact, according to its 10-K filing – a detailed annual report filed with the Securities and Exchange Commission (SEC) – Caterpillar cites a decline in energy and mining industries as a business risk. “The energy and mining industries are major users of our machines and engines. Decisions to purchase our machines and engines are dependent upon performance of these industries. If demand of output in these industries increases, the demand for our products would likely increase and vice versa.”
Yet government studies found that cap-and-trade is both bad for the economy and harmful to Caterpillar’s customers in the coal mining industry. For example, the Energy Information Administration (EIA) – a research arm of the Department of Energy – conducted a study on cap-and-trade during the Clinton administration and found these regulations would significantly increase gasoline prices and energy prices as well as reduce economic growth by almost 2 percent. Construction, manufacturing and transportation industries would be negatively affected.
More recently, the Congressional Budget Office (CBO) released a study on cap-and- trade and concluded the cost of meeting carbon dioxide limits would be paid by the consumer via higher energy prices and that the poor would bear the greatest burden. More importantly from Caterpillar’s perspective, carbon dioxide caps would harm the coal industry and reduce coal production – a key customer for Caterpillar products – up to 40 percent.
Astonishingly, at Caterpillar’s 2007 shareholder meeting, Owens stated he did not conduct a cost benefit analysis on the impact of cap-and-trade on its business. He justified company participation in USCAP by saying he wanted a “seat at the table” – the CSR euphemism for engaging with stakeholders.
Caterpillar’s participation in USCAP is a case study illustrating the dangers posed by CSR to shareholders and limited government. In this instance, a major corporate power is acting as an agent for the environmental activist’s agenda while harming its business interest.
Unlike the mutually beneficial relationship promised by CSR, Caterpillar’s participation in USCAP is a parasitic relationship where the company is being manipulated by more savvy CEOs and activist organizations. For unsuspecting Owens, his seat is at Hannibal Lector’s table and he is the main course.