Will the Climate-Change Crisis be the Next Big Market Driver?

Author: Liwen Sun

The current climate-change crisis demands attention and the public is looking to policy makers to make a move. With a variety of advantages and disadvantages to consider, the debate for policy tools has run long. Three popular policies include carbon tax, cap and trade, and investment in green technology.

The case for carbon tax is that if there is a tax on carbon emissions, there will be more incentive for people and corporations to reduce their carbon footprint. However, with a carbon tax, the government will be earning more revenue, and U.S carbon-intensive firms will be incurring more expenses. This could put carbon-intensive firms at an economic disadvantage.

An alternative policy tool is cap and trade. This is the idea of limiting the amount of pollutants by granting a certain number of pollution permits. Companies that pollute less than what their permits allow them can exchange their remaining balance with another company. The downside to this is that this policy will result in giving revenue to regulated entities, which is not very equitable. 

The last policy tool is the  government offering support to companies developing green technology in hope of replacing carbon. Although this sounds like the perfect idea, there are a lot of challenges to executing this plan. Fuel prices are already pretty cheap, it will be extremely difficult to come up with a cheaper alternative. 

Although it is important to carefully consider what the right move is, time is also an important factor in preventing the climate-crises. While policy makers are deciding on a plan of action, the SEC has also taken on the responsibility of preventing climate-change. The SEC recently released a proposal requiring public companies to report emissions to address climate-change risks.  

With all these changes almost ready to be implemented, if any one of the proposals pass, the stock market would witness changes. The companies that benefit from these changes are likely ones that do less damage to the environment.

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