Capitalism To The Rescue

I am an unabashed capitalist. I believe in the power of free markets. There are times when markets can fail us, but I think they are few and far between.

The subject of global warming is on everyone’s minds these days and it should be. It’s hard to argue with the facts concering the impact of greenhouse gases on climate change in the past 80 years.  This chart from Wikipedia gives us a pretty clear view of what is going on.

Our political system may get its act in gear at some point, but unfortunately our electorate has not been particularly interested in the inconvenient truths told by some of our candidates and have favored the convenient lies in recent years.

On the other hand our capital markets may well be up to the job. This morning I read about two large energy companies who are significant players in the coal powered energy business. One is investing heavily in the technology to reduce carbon dioxide emissions. The other is not.

That story reminded me of another story that I read last week about the creation of a "carbon beta basket". That is a basket of stocks that features companies that burn a lot of carbon based fuels and I would assume produce a lot of greenhouse gases.

Investors who want to own economically sustainable companies and short companies that harm the environment can use these baskets to wager on the climate change game.

Many people might find that distateful, but I find it very encouraging.  If the CEO of the coal powered energy company who is investing heavily in new technologies to reduce carbon dioxide emission finds his stock rising as a result, he will continue to invest.  If the CEO of the coal powered energy company who is ignoring the issue finds his stock’s short position growing, he may decide its time to change his strategy.

I welcome the development of easy ways to trade the global warming issue.  Because I think capitalism can help us find a way out of this mess just as it got us into it.