A think piece by The Wallstreet Journal explores capitalism's role in climate change.
Is capitalism a driving force behind climate change or a possible solution to this global problem? A new opinion piece by The Wallstreet Journal explores this idea. While "climate change is a byproduct of the prosperity created by" capitalism's market economy, the article argues that the same "market...can be an engine to generate cost-effective solutions" as well.
As Fred Krupp explains, "The best available research confirms the existence of human-driven climate change." Most climate models' early predictions of what the beginning of the 21st century would be like have been right, and "the results aren't surprising, given that they are based on many independent data sets." Even the insurance industry, "with trillions [of dollars] in liability at stake," uses this environmental research to determine its financial models. As the planet continues to get warmer due to the "billions of tons of carbon dioxide and methane" that are being released into the atmosphere, most businesses can't afford to deny climate change. As the article points out, "Citigroup estimates the cost of unchecked climate change to be in the tens of trillions," and this will surely affect the global GDP and economy.
This brings us back to capitalism and how economists can grapple with these future predictions. Krupp argues that "public policy that puts a price on carbon emissions would speed the adoption of clean energy by exposing the market to the costs this pollution puts on society." Green energy technologies such as wind, solar, and hydro can be encouraged through market-based policies, which will accelerate their adoption. Such policies will also encourage private investment in environmentally friendly technologies. Krupp explains, "Market-based policies can unleash innovation from investors, inventors and entrepreneurs, who will work to build a more prosperous and safer future." By employing our knowledge of the free market's capabilities and trends, we can use capitalism to restructure our global energy trends and start to reverse climate change's environmental effects.