The Quest- Chapter 24: Making a Market

Chapter 22 is an overview of the emergence of climate change concerns and carbon emissions trying to play a role in global policy and markets. The intent was to use international treaties to manage and control emissions. Whereas this is a noble cause- it proved to be unrealistic and impractical. On the policy side, requiring emission reductions but exempting high emissions countries undermine the intent. Also, depending on regulatory command and control is the lowest common denominator approach that is inefficient.

Fortunately, in the chapter we learn that market innovation provided a very workable solution. By developing a cap and trade system, the free-market mechanism and economics can be used to drive innovation. We learned that this business model, originally started for acid rain concerns, led to better reductions than the regulatory model would have, at a more affordable cost. Trading markets incentivize emitters to reduce, which proved to be more effective than forcing them through regulation. The success of the market mechanisms, especially when compared to the less-than-ideal outcome of the Kyoto Protocols, proved to be a positive harbinger of the approach needed for carbon.