Regulation vs. Innovation: What is the answer to climate change?

Blog post based on Cap ad Trade is Dead. Now What? by Brian Walsh published in Good Magazine, Winter 2011.

Copenhagen was overall disappointing for the environmentalists and the people hoping to obtain a binding treaty that could help the world reduce carbon emissions. According to Brian Walsh, writer for Time's environment, it failed just like cap and trade failed this year in the US. The following quote explains it:

“ The idea that- in order to respond to our very real climate and energy challenges, we should set a pollution limit and then ratchet that limit down to a politically safe level- was always doomed.”

The author explains that the major problem with the cap and trade system is that it always sets an economic loser. We can make goods more expensive to pay for the cap and trade system but we will be at an economic disadvantage to others that do not participate in the system and can thereby sell the same goods cheaper.

The idea behind cap and trade is to create an incentive for alternative energy. While I don’t want to assume that it’s totally unworthy, I can see how it might never work in a worldwide model.  The article mentions how difficult it is for poorer countries to invest in a system that reduces carbon emissions when they are still developing and don’t always have access to reliable sources of energy.

The important point that the author makes in the article is that it’s not regulation and policy that can now “manage” carbon emissions but innovation. He argues that the money should be spent on research to find better and cheaper forms of green energy.  I particularly like the author’s idea to put a small tax on carbon in order to finance research into green energy. So is the answer innovation with a small dose of regulation?