Current events have brought out starkly the question: is society fit to deal with global threats, from coronavirus to climate change? For over two decades, the UN, IMF, numerous governments and businesses have tried to agree on market-based solutions to global warming, like carbon pricing. But, asks MARTIN POWELL-DAVIES, can the capitalist system really solve the climate crisis?
In 1997, the Kyoto protocol established the setting of a price for carbon as capitalism’s solution for reducing atmospheric greenhouse gases, chiefly carbon dioxide, in order to prevent a critical increase in global temperatures. The treaty was meant to establish a global market for trading carbon permits that, through the magic of the market, would incentivise individual nations and companies to cut their greenhouse gas emissions and invest in low-carbon alternatives.
The preferred market model at the outset was an international cap-and-trade system. The idea was that countries would be set a limit on emissions totalling an overall global cap. If one nation – or a business given its own limit by a government – wanted to exceed its cap, it would have to buy additional emission rights from the carbon market. If it managed to reduce emissions beneath the cap, it could sell the unused allocations on the market as well.
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