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Want To Address Climate Change? Look To Business, Not Government

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POST WRITTEN BY
M. Todd Henderson
This article is more than 6 years old.

Earlier this year, President Trump reneged on America's promise to voluntarily reduce carbon emissions under the Paris Agreement. Although no one believes Paris was the silver bullet to address global warming, many believe it was a necessary first step. Walking away was easy, however, because the Agreement was never approved by the Senate, and therefore was not a legally binding treaty. Yet again, government has failed to address a pressing problem.

Thankfully, there are other ways in which people concerned about climate change can address the problem. And they don’t need to convince President Trump or any other politician that the problem is real or that their solution will work.

Instead of relying on government to compel carbon emitters to reduce their output, individuals worried about climate change should simply demand that the emitters do so directly. Buy an electric car, install solar panels, shop only for goods made in a carbon-neutral manner, and stop flying around so much. And then go further. Work at company committed to no environmental impact; donate your money to NGOs dedicated to addressing climate change.

While these may seem small individually, collectively American consumers, investors, and workers are responsible for our entire share of global emissions. It would be easier for government to simply command us to all be better, but since government action relies on coercion, uses a one-size-fits-all approach, and can have large negative effects when it gets things wrong, it is designed to be costly to mobilize. And, as the Trump decision illustrates, is subject to the vagaries of winner-take-all elections.

The broader point is that when it comes to doing good, we are not limited to acting collectively through government. Government is one way in which we produce so-called public goods, like a clean environment. But businesses and non-profit organizations can create these too. In fact, these three types of actors compete with each other in what my University of Chicago Law School colleague Anup Malani and I have called the “market for altruism.”

Everyone wants to help others, but to have an impact on the world, we have to act together and at scale. Government, business, and NGOs enable us to do this. We can give them money, volunteer our time to them, work for them at a discount, invest in them, or buy goods and services from these providers. Each of these is a way of acting altruistically. Each of these is a way of helping our fellow man.

Consider a simple example—you want to help poor farmers in Ethiopia. You could: pay taxes to the government, who could then give foreign aid to the Ethiopian government, which you would then hope got the money or help to the farmer; alternatively, you could donate money to or work for an NGO that helps Ethiopian farmers; or, you could buy products from companies that are committed to helping Ethiopian farmers. You should do the one (or more) of these, depending on which you think is the most efficient at doing good.

Viewed in this way, buying “fair trade” coffee is simply buying a bundle of regular coffee and a donation to help the poor Ethiopian farmers. If you want to save the climate instead, buy products with carbon offsets bundled instead.

There are reasons to believe that in some instances altruism intermediated by businesses is more effective than government or NGO altruism. Most obviously, your ability to help the environment in this way does not depend on who the president is or whether the Senate ratifies a treaty. Each of us has the power to contribute our proportional share without bureaucrats in Washington making us do it. Businesses also allow individuals to choose what to support and what not to support.

Even if we do not need government to do good, government can still get in the way. It can subsidize production that harms the environment, as it does for many crops and fossil fuels. It also regulates the market for altruism, thus potentially biasing individuals’ choices about how to do good. For instance, through the tax code, the government determines what contributions to the environment or other public goods are deductible, thus influencing prices in the market for altruism. A cash donation to an environmental charity is tax deductible, but the purchase of a good that is bundled with a donation is not.

While government action—such as a carbon tax with cap and trade—might be a simpler way to address climate change, the fact that the government has failed to act should not prevent all of us from acting together to achieve the same ends. In our information age, it is easy to find out and manage your carbon footprint. So instead of railing against Mr. Trump, put your wallet to work.