Climate change

Harnessing the power of free markets to fight climate change

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Saving our environment is one of the greatest, if not the greatest, challenge we face. From rising sea levels to the large-scale extinction of different animals; climate change will affect us all. The impact of damaging our environment will have both on our generation and future generations is a list as long as it is worrying.

Even plastic waste which is often simply seen as an eye sore creates issues that go so much further. For example, plastics get into the food chain eventually harming humans, directly killing ocean life reducing a large food source and polluting the air we breathe when plastics are burnt.

However, when talking about the environment, the power of free markets is often underestimated. Large scale spending and government involvement is often seen as the main solution but its not the only way. After all, rather than trying to change the economy with heavy government intervention we could use an existing tool, taxes.

Free markets left completely to their own devices are unlikely to deal with this issue but we can harness their enormous power to fight climate change. Tax based regulation makes it more profitable for businesses to produce more environmentally friendly products and less profitable for them to produce less environmentally friendly products.

It does this by taxing, for example, carbon and using the revenue from this to give tax breaks to those using renewable energy sources. This tax can also be used for any switch whether it’s from petrol or diesel cars to electric cars or from plastics to biodegradable materials. It shifts businesses to see environmentally friendly products and practices as both good for the environment and a way to receive the best tax rates.

An example of how this policy could be implemented in the UK is the plastic bag charge. This is a charge on each plastic bag and the money is often used as a donation to charities. Whilst this charges consumers for the product, it doesn’t actually incentivise consumers to use other products other than making one product more expensive. A full version of tax based regulation would help to counteract any increased cost for the consumer by reducing the prices for other products.

For plastic bags, the ‘tax’ is withdrawn when consumers purchase the product but is not returned to them through reductions in other more environmentally friendly products.

Whilst individuals are mostly protected from any negative impact, businesses themselves are seen to be the largest losers from this policy. There are however a large number of benefits for businesses. Moving to environmentally friendly products can help businesses to become more attractive to customers that are concerned about the environment. It also lifts some of the burden from businesses already producing environmentally friendly products.

If we implement tax based regulation on a large scale it will be a large step towards cleaning up the air we breathe, saving our seas, cleaning up our beaches, protecting our marine ecosystems, saving our environment and fighting climate change.

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