Climate Change Is the Result of a Historic Failure
Climate change is the result of the greatest market failure the world has ever seen.
So said Professor Nicholas Stern, the British economist who more than ten years ago wrote the first comprehensive report on the impact a warming planet would have on the world’s economies.
Stern’s thesis was that for years industrial concerns – big and small – had been allowed to pollute the atmosphere with climate-changing greenhouse gases. They had not been charged for the damage they had done.
“The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay,” said Stern.
More than a decade on from Stern’s report, there has been only limited progress on the implementation of a charging system for carbon emissions.
Regulations on polluting activities, new technologies and international agreements – in particular the 2015 Paris Agreement on climate – have been the main drivers in meeting the challenge posed by a warming world.
The European Union’s emissions trading system, the world’s first cross-border carbon market, has so far failed to set a carbon price high enough to deter most industrial concerns from their polluting activities.
Carbon markets in various US states have had only limited success and are viewed with disdain by an administration in Washington that is deeply sceptical on the whole issue of climate change.
Hopes now rest on a countrywide carbon market being set up in China, with Chinese officials predicting that high carbon prices will result in a sharp reduction in greenhouse gas emissions.
But, in general, market mechanisms have done little to bolster the fight against climate change.
Meanwhile other market failures are threatening the environment – and it’s only now that governments seem to be waking up to the mounting dangers.
In the UK concern has recently been focussed on the scale of the environmental problem caused by plastic waste. Mainly in response to a BBC TV series on the world’s oceans, detailing how plastics are killing sea life and entering the marine food chain, politicians are suddenly talking of the dangers of a planet choking on plastic.
Yet, as with action on climate change, this all comes late in the day. The market – until it is pushed and shoved by either public opinion or by government regulation – chooses to ignore the problems it is causing.
The world’s plastic problem has been evident for years. For several decades, scientists have been expressing concern about what’s known as the great Pacific garbage patch – a large stretch of once pristine sea where ocean currents have built up vast amounts of plastic rubbish.
Other market-related environmental failures are already evident. Over the last 30 years, the use of computers, mobile phones and other electronic devices has exploded.
Technology companies like Apple, Microsoft and Huawei make billions of dollars in profits. Apple’s revenues each year – nearly US$230 billion in 2017 – exceed the gross domestic products of many countries.
Electronic waste is a growing problem worldwide, with piles of computers and millions of mobile phones and other devices ending up on toxin-ridden waste dumps in the developing world.
Companies – whether plastic producers or the giants of the technology sector – should be charged for the waste they generate. The Paris Agreement acknowledged that the world cannot go on pouring waste products like greenhouse gas emissions into the atmosphere. If there is not effective action, the consequences will be catastrophic.
Wide-ranging regulations on limiting emissions – and on other wastes we generate – have to be put in place. Ultimately, the polluter has to pay.