Nature’s Remedy

The scientific debate over global warming may largely be over, but the ethical debate rages on. Some NGOs and their political sympathizers insist that climate change is the fault of the affluent who must atone for the sin of industrialization. No unnecessary travel, thermostats turned down, no luxury homes or supersized SUVs. This call for penance is combined with fantasies of sudden, miraculous technological change. Many too easily accept the argument that only by limiting economic growth can we achieve real solutions. This thinking is deeply misguided. First, the technological quick fix simply isn’t coming, and second, it defies human nature, which responds better to incentives than to moralistic exhortation.

Environmental innovation holds great promise. But it will take decades for clean-energy technologies to be distributed on a global scale. In the meantime, the global population will increase by 3 billion, the demand for higher standards of living will not abate, and carbon dioxide will be emitted at an increasing pace. Even if we were to stop all carbon emissions tomorrow, the world will still continue to warm up for at least another 30 years.

That doesn’t mean we are powerless. There are steps we can take now: adopting combined heat-and-power systems; switching from coal to natural gas; embracing renewable and nuclear energy; and favoring more fuel-efficient and hybrid vehicles. In addition, we can reduce and offset up to 20% of our emissions by conserving and restoring the world’s forests. Forests not only store twice as much carbon as there is in the atmosphere, but constantly reabsorb it through photosynthesis. Nature’s carbon-storage technology is extraordinarily efficient and can mitigate climate change better over the next 50 years than, say, the enlightened efforts of the energy or transportation sectors.

As the recent report of the Intergovernmental Panel on Climate Change (IPCC) makes clear, the effects of climate change will be felt most significantly in the developing world. Fortunately, forest carbon storage is most efficient in the tropics and subtropics. Tropical forests also harbor more than half of life on earth, generate rainfall and provide shelter, food, medicine and energy to 1.6 billion of the people most vulnerable to climate change.

One way for them to benefit is through carbon-trading systems that include offset payments. These are payments made by those who want to reduce their emissions to others whose efforts, like planting trees, will do it for them. These offsets can now be bought and sold in a global market that seeks out the lowest cost and most efficient ways of reducing CO2 in the atmosphere. In the absence of such payments, the poor of the developing world will have no choice but to exhaust the land and become environmental migrants.

The implications of this, combined with desertification, species extinction and accelerated climate change from the release of carbon stored in forests, are all too clear. Unfortunately, the E.U. and the Kyoto CO2 trading systems effectively exclude forest carbon offsets because regulators and politicians became captives of the anticapitalist NGO community and their own native suspicion of free markets. This is both perverse, as it makes it harder and more expensive to mitigate climate change, and immoral — because it denies the resources required by the poorest to adapt to it.

Human nature, offered incentives, will turn practical opportunities into pragmatic solutions to climate change and will stimulate economic growth at the same time. In the last year over $100 billion in new investment in green technologies has been announced by banks, investors and private equity alone. Markets respond to policy changes more swiftly, more efficiently and with far greater resources than the public sector. Take the successful efforts to create a market to help mitigate acid rain. The SO2 market in Chicago, the precursor to the CO2 market, illustrates that business responds better than predicted in legislative committee rooms.

It’s ironic that it was President George H.W. Bush who endorsed the amendments to the Clean Air Act in 1990 that allowed the market to demonstrate its efficiency in dealing with air pollution, and yet it’s the current President Bush who fights against applying that proven model to tackling climate change. Markets can and do solve public-sector problems. They have raised more people out of poverty than all the aid ever given. Yet anticapitalist climate cultists and the current White House persist in their condemnation of market-driven, business-based solutions to global warming.

It’s time for the E.U. and the Kyoto systems to recognize the need for repeal of their restrictive rules. It is also time for the U.S. Congress to adopt legislation for a broadly based national carbon-trading market with a minimum of regulatory and political interference. The time for breast-beating and fantasizing is over; it is time to allow the private sector and the financial markets to get on with the job of dealing with climate change.

Eric Bettelheim is executive chairman of Sustainable Forestry Management Limited, an ethical investor in forests