Carbon regulation will be unexpectedly complex — and business leaders will need to plan their approach accordingly.
Climate change is unlike any other environmental or public-health challenge that industrialized democracies have ever faced. The problem’s sheer scale over time and space, its protean and complex causes, the massive cost of addressing it (and the even more massive cost of ignoring it) all defy our intuition. And this immense complexity will confront executives as they begin to contemplate what the realities of climate policy will mean for their businesses.
Much of the current discussion among business and policy leaders involves details of how to apply a market-based “cap and trade” system. This is, of course, the scheme in which regulators prescribe emissions limits (the “caps”) and set up a system of fungible credits that allow businesses to comply with those limits (the “trade”) — thus creating an incentive to find the lowest-cost, most efficient ways to reduce emissions.
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