chichilnisky1_Yuji Sakai Getty Images_plantmoneysustainability Yuji Sakai/Getty Images

Green Markets for Equitable Growth

The only realistic solution to the climate crisis is to replace fossil-fuel-based energy with renewables quickly and cost-effectively enough to keep the engines of economic growth running. A global carbon market would do just that.

NEW YORK – The climate crisis and the 2008 financial crisis are two sides of the same coin. Both were born of the same toxic feature of the world’s prevailing economic model: the practice of discounting the future. It leads to extremely risky financial practices – including Ponzi schemes. It causes neglect of the natural resources on which our survival depends. Protecting humanity from both environmental and financial ruin requires an entirely new approach to growth – one that does not sacrifice tomorrow at the altar of today.

In a sense, both crises can be traced back to the same event: the creation of a new international order after World War II. The Bretton Woods institutions that underpinned the order – the World Bank and the International Monetary Fund – encouraged rapid globalization, characterized by a sharp increase in resource exports from the Global South to the Global North. The revival of neoliberal economic policies – including the removal of trade barriers, wide-ranging deregulation, and the elimination of capital-account controls – in the late 1970s accelerated this process.

While this system spurred unprecedented economic growth, it had serious downsides. Financial innovations outpaced – or simply escaped – regulation, enabling the finance industry to expand its influence over the economy, assuming massive amounts of risk and reaping huge rewards, ignoring future risks. That eventually led to the 2008 crisis, which brought the global financial system to the brink of collapse. With the system having undergone little meaningful reform, acute systemic risks persist to this day.

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