Markets Not the Only Answer to Climate Change

Conferences and reports about such tools multiply, academics pen countless articles and international discussions never stray too far from the core theme of harnessing market forces to provide incentives to reduce greenhouse gases.

But what if the seemingly conventional orthodoxy of relying on the market to address climate change is in fact not the only option?

In responding to at least four earlier problems relating to energy and the environment - fuel scarcity during World Wars I and II, pesticide pollution, the energy crisis of the 1970s, and ozone depletion - US and international regulators did not rely on market-based solutions to achieve their desired policy goals.

For instance, during World War I, President Woodrow Wilson created the United States Fuel Administration (USFA) in 1917, to give the government control over the distribution of oil and coal. The USFA was assigned their task only after the nationalisation of railroads, price fixing and other strategies failed to move fuels expeditiously from the trans-Mississippi West to the industrial areas on the Atlantic East. Part of the USFA, the Federal Fuel Distributor, continued to forcefully manage the distribution of fuels until 1923.

Moreover, when the American biologist Rachel Carson identified the environmental hazards of the synthetic pesticide (and persistent organic pollutant) dichlorodiphenyltrichloroethane (DDT) in her book Silent Spring in 1962, the government responded by restricting its use in 1969. Just three years later, in 1972, William Ruckelshaus, the Administrator of the US Environmental Protection Agency, completely banned the use of DDT, an act that was later codified into international law at the Stockholm Convention.

Furthermore, on the eve of the Organisation of Petroleum Exporting Countries (OPEC) oil embargo of April 1973, President Richard Nixon created the Federal Energy Office (FEO) to strictly ration energy fuels. The FEO was given broad powers to implement a mandatory fuel-rationing programme to reduce daily consumption of oil.

Finally, when scientists determined that chlorofluorocarbons (CFCs) were damaging the Earth's ozone layer in the mid-1980s, the international community did not rely on caps, credits or trading. They responded with the Montreal Protocol in 1987, which mandated a phase-out of CFCs for all industrialised countries by 1996.

These four historical examples tell us two things about the current climate-change debate.

First, they suggest that government intervention can respond quickly, and sometimes comprehensively, to environmental problems. When past policymakers got serious about responding to fuel shortages, pollution, and the destruction of the ozone layer, they didn't rely on market-based mechanisms to get the job done. They used direct government intervention, mandatory controls and complete phase-outs.

Second, the examples remind us just how far climate-change policy has been captured by the language of markets and economics. The international community seems locked into an artificially narrow discussion about which types of market-based mechanisms will work best. The popular and even intellectual discourse on global warming has been prematurely foreclosed.

In the coming decades, when the impacts of climate change become all the more real, we must remember that market tools are not the only sensible public policy options. Supreme Court Justice Oliver Wendell Holmes once remarked: "A page of history is worth a volume of logic." In the case of previous environmental challenges, history tells us that phase-outs and government intervention can also be just as effective.

dr Benjamin K Sovacool is a research fellow at the Centre on Asia and Globalisation, National University of Singapore.