Free enterprise can be the answer to solving climate change
April 12, 2021
Biden’s current approach to solving climate change is by thinking globally and acting locally. Local measures such as regulating emissions have limits as the effects of the regulations are bound within the regulating country, the US itself. The US is unable to directly regulate emissions in other countries but hopes that other nations follow the footsteps of the US. However, banking on other nations to follow suit is highly unlikely as other nations are seen to be not following the US’s footsteps in basic issues such as human rights. Hence, if the US were to regulate emissions and other countries do not regulate, firms would simply shift over to the non-regulating countries causing more overall damage to the climate.
Another measure of incentivizing new technology through tax expenditures such as credits, exemptions and deductions also face the similar problem of being bound within the incentivizing country itself. While incentives can lead to the development of new technologies, this is likely to happen for mass-market products but not for niche global energy market as innovative products that combat climate change would still be costly for global penetration due to the smaller market size.
By analyzing the measures, we can understand that President Biden’s climate infrastructure package is crucial, but these domestic policies have limitations and will not solve climate change on a global level. Hence to solve climate change, we need to act globally and think locally. There is a global economic problem as the cost of the burning of fossil fuels is not reflected in the price of consumer goods. Pricing in the cost of burning fossil fuels into the price of the respective consumer products can fix the global economic problem and be the answer to combating global climate change
The cost of the climate impact can be included in the price of the product by taxing carbon dioxide. This would cause non-renewable energy sources to lose traction as consumers would favor the cheaper clean energy alternatives. To ensure this policy doesn’t have detrimental effects on the poor, reduce income tax or redistribute the carbon tax revenue back to society. To ensure, this measure has a global impact, carbon dioxide tax should be levied on imports, influencing trade partners to follow the US lead.
A great deal of faith in free enterprise is needed for this to be successful. The development of the COVID-19 vaccine and the development of the internet was due to the successful partnering of the government and free enterprise. Let consumer-driven clean energy be the next successful example in combating climate change.