Schwarzenegger Orders Cut in Emissions:
Gov. Arnold Schwarzenegger said Tuesday that he would ask regulators to require the state’s petroleum refiners and gasoline sellers to cut by 10 percent the emissions of heat-trapping gases associated with the production and use of their products.
... Environmentalists expected the order to turbocharge the market demand for corn-based ethanol and biodiesel fuels, and for natural gas, and to jump-start the introduction of experimental fuels like cellulosic ethanol, which is made from plant waste or nonfood crops like switch grass or wood chips.
The contemporary environmental movement links clear air goals to potential profits, and Mr. Schwarzenegger’s order, with input and support from lobbyists from Environmental Defense, the Natural Resources Defense Council and the Hewlett Foundation, mirrors that approach. The companies or industries that stand to benefit financially from his plan include producers of corn-based ethanol, biodiesel and other, more experimental forms of renewable fuels.
In ECON 101 we'd say, an increase in the demand for corn increases the price of corn. Since corn is an input into the production of the corn chip (I hope), the price of corn chips will rise. This might lead to an increase in the price of potato chips (a substitute for corn chips) and a decrease in the price of salsa (a complement of corn chips). The price of beer might fall if beer consumers require a salty snack to go along with a bottle of cold refreshment. Or, maybe that's the tail wagging the dog?
And never, ever, let it be said that the environmental economics blog skimps on hard economic analysis.
