Thursday, March 5, 2015

Global Warming? Capitalism to the Rescue!

In a very interesting article in Nature (1) Nathan Fabian discusses the role of global investors in the transition from a high carbon to a low carbon economy.  He points out that capital investments are trending toward lower emission energy sources such as solar and away from high emission sources such as coal. This is happening not because of the investor’s altruism but because of cold calculation about risk/reward ratios. Basically green energy may be a safer bet than coal for the long run.

However, the capitalist calculations are inevitably based on government policies. As the article admits, the expectation of political actions such as instituting carbon taxes, removing subsidies to oil and coal industries, and providing subsidies to green energy development are part of the investor’s calculus. Thus, as usual, it is up to governments to channel the behavior of capitalists into socially productive pathways.


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