Environmental Issues & International BusinessCarbon dioxide
Since 160 years ago, years of 2000 to 2010 was recorded as the world’s warmest decade - Environmental Issues & International BusinessCarbon dioxide introduction. This is supported by Cavanagh (2004 as cited in Brown, 2001) that global warming will cause calamitous trouble created around the world. The major contributor to global warming is caused by a greenhouse effect due to massive carbon dioxide emission. According to Shelley (2002), EPA has stated that the major contributor into the rising of greenhouse gases level is due to industrial and transportation activities involving the burning of fossil fuels as well as the deforestation.
Therefore, government intervention seems to be tremendously essential to combat with global warming issues. However, this essay will focus more on how the government policies regarding on global warming specifically on fossil fuels combustion (oil, coal and gas) issue affect the international business including the arguments. The positive and negative sides it could also be the opportunities and challenges. According to Dinica (2002), energy policy is one of the government packages to reduce fossil fuels combustion.
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Supply and demand side areas of interventions are being used since supply and demand are the nature side of business sector. However, that will be the complex one to elucidate. The simpler way to explain is to discuss policies that affect several sectors or industries such as transportation and oil sectors. According to Dinica (2002), these sectors are highly involved with the policies of carbon taxes and voluntary agreements as well as increase in oil price.
The European Environment Agency (EEA) declared that airline carbon emissions increased by 86% in the European Union between 1990 and 2004 and thus the European Community now are imposing the carbon-trading scheme to any airline that travel within the area where those airlines have to buy permits for exceeding carbon threshold as well as imposition of carbon taxes (Boyd, 2007). As a result, passengers have to bear with the increase of airline’s carbon-offset payment for instance, Scandinavian Airlines planning increase in contribution to $82 per passenger for the return flight from Copenhagen to Bangkok.
According to Willie Waish, the chief executive of British Airways, the idea is that, the increment in taxes will attract fewer travelers thus Boyd (2007) claimed that Asia’s US$100 billion international tourism industry is in jeopardy by a campaign by European environmentalists. From real illustration here, it can be expected that businesses that is using the air (freight) transportation facing the same situation and it might be even worse as they have to account charges for every items that they bring into a country. In contrast, looking at shipping of goods, according to World Shipping Council (2009), transporting the 2008 volume of 1. billion metric tons of cargo via containership generated around 13 billion grams of CO2 per kilometer. If that same volume had been transported by airfreight instead, carbon dioxide emissions would have increased by 4,700% to some 611 billion grams of CO2 per kilometer. In addition, with the utilization of larger vessels, it had been 75% improvement in carbon efficiency in 30 years result (World Shipping Council, 2009). Thus, from here, it can be seen that, shipping of goods is expected to expand with enhancement of technology and plus, the policy for airlines has becoming tighter.
As for the oil industry, for example, America, since President Bush governed the country in 2001, oil prices have increased for more than 260% and just the first six months of 2006, the five largest oil companies in America recorded profit of $59. 4 (Slocum, 2006). The price increment in oil does not just affect America but affect the whole world. The oil expertise, T. Boone Pickens expected that the oil price will further increase by $4 per gallon this 21 May 2011 and John Hofmeister, previous president of Shell Oil Company said it will be even higher up to $5 in 2012 (King, 2011).
Therefore, Shell Oil Company has taken several measures to response to the alarm of reducing the oil consumption especially in research and development. In June 2006, Shell planned to $200 million wind farm on the island of Maui to eliminate the need for a coal-generating there and investing in producing ethanol from straw and Grass by contracts have been signed with the involvement of Idaho farmers as well as German company respectively. This has further increased other business opportunities which are environmentally good in moving towards competitive business era. However, good is not always good enough.
Slocum (2006) however claimed that, increase in oil price leads more to price manipulation those big American Oil Companies. Since 1993 until 2005, there are tremendous increases in the control in oil refining which this will make those companies easier to manipulate gasoline by withholding the supplies for further increment. According to Ball (2006), ExxonMobil’s new CEO, he mentioned in ‘The Wall Street Journal’ that his company has no plans to build new refineries even though American fuel consumption will continue growing for the next decade with a reason this will be bad for its long-term industry.
Again, Slocum (2006) emphasized that ExxonMobil refused to build new refineries because for its self-interest profit as when the refineries margin is becoming tighter, this will transform into a bigger profit. From all the above, global warming has triggered international business in many ways. It can be seen that there are pro and cons for every policy set up by government although they are initially made up to fix the situation. International business could not run anywhere except get involved and give cooperation to combat the global warming issues.
Regarding on the impact of policies to international business, it can be argued, it is not necessarily for international to be more oriented to delivery of services as shipping of goods around the world is expected to be more expandable in the future. Besides that, increase in oil prices has driven oil companies to invest more on research and development for renewable energy which will open up more job opportunity (domestic and international). However, they are potentially having more incentives to manipulate the oil prices which will further affect the international business.