Climate change regulation: implications for business executives

Abstract

PurposeThe purpose of this paper is to provide an overarching conceptual decision model that delineates the major issues and decisions associated with carbon regulations that will allow executives to better understand the potential regulatory schemes and implications that may be imposed in the near future.Design/methodology/approachThe authors use the extant literature as the foundation to develop a conceptual model of the decisions pertaining to climate change regulation that face business executives today.FindingsThis paper suggests four major categories of issues that must be addressed in any climate change regulatory scheme. These include: “scope” – will carbon emission management systems be global or regional; “who pays” – will the consumer or will the supply chain be responsible for the cost of their emissions; “market or compliance‐based mechanisms” – will the CO2 emissions system be market‐based or a compliance‐based regulatory system; and “criteria” – how can credence of the remedy be established – what is necessary for a business initiative to qualify for as a creditable carbon offset?Research limitations/implicationsThis paper offers a framework that categories the fundamental decisions that must be made in any climate change regulation. This framework may be useful in advancing research into any of the four categories of decisions and their implications on commerce and the environment. This paper is designed to be managerially useful and in that way does limit its ability to specifically advance many dimensions of research.Practical implicationsThe paper offers executives for a simple model of the decisions that must be made to craft an effective climate change regulatory scheme. In addition, it suggests how these decisions may create exploitable economic opportunities for innovative and proactive firms.Originality/valueThis paper adds value to the debate by clarifying the decisions that must be addressed in any climate change regulation scheme.