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Business and the Environment (not necessarily in conflict)

March 1, 2008

I believe that climate change is happening and it poses a great threat to modern life. I also believe that markets are the best solution to effect positive change to the environment. Two articles have come out recently detailing what a market based solution may look like. The New Yorker looks at a variety of options such as a carbon market. Richard Sandor created the sulfur-dioxide market in the early 1990’s that curbed emissions so sharply that it’s byproduct, acid rain, has been virtually eliminated. Sandor, in 2003, created the Chicago Climate Exchange. This new market trades in carbon. Sandor explains his belief in markets with the following quote:

People tell me, well, these are bad guys, and corporate guys who just want to buy the right to pollute are bad, too, and we should not be giving them incentives to stop. But we need to address the problems that exist, not drown in fear or lose ourselves in morality. Behavior changes when you offer incentives. If you want to punish people for being bad corporate citizens, you should go to your local church or synagogue and tell God to punish them. Because that is not our problem. Our problem is global warming, and my job is to reduce greenhouse gases at the lowest possible cost. I say solve the problem and deal with the bad guys somewhere else.

That is my belief as well. I come from the Realist school. We need to focus on outcomes; especially with a challenge as big as the future of our planet.

The second article I found recently was in Wired. Fred Krupp of the Environmental Defense Fund is a private enterprise focused on environmental causes. He is willing to work with companies to gain positive environmental outcomes. One minor qualm with this assessment by Mr. Krupp:

Wired: But won’t our economy get hammered by China and India?

Krupp: It’s inevitable that those countries will adopt caps, too. We will gain a competitive advantage by going first. The real question is, do we want to import clean tech from Germany, Japan, and China or export it to the rest of the world?

I guess I do not see cap adoption inevitable in India and China, but the first mover advantage may ensure a thriving American business sector for the foreseeable future. The Environmental Defense Funds motto is “Finding the Ways that Work”. That is certainly something that I agree with.

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