The Price Is Not Right
Columnist and Pulitzer Prize winning author Thomas Friedman makes an compelling connection between our failure to rein in global warming and our failure to prevent the recent financial crash. An excerpt:
[It’s] now obvious that the reason we’re experiencing a simultaneous meltdown in the financial system and the climate system is because we have been mispricing risk in both arenas — producing a huge excess of both toxic assets and toxic air that now threatens the stability of the whole planet.
Just as A.I.G. sold insurance derivatives at prices that did not reflect the real costs and the real risks of massive defaults (for which we the taxpayers ended up paying the difference), oil companies, coal companies and electric utilities today are selling energy products at prices that do not reflect the real costs to the environment and real risks of disruptive climate change (so future taxpayers will end up paying the difference).
Whenever products are mispriced and do not reflect the real costs and risks associated with their usage, people go to excess. And that is exactly what happened in the financial marketplace and in the energy/environmental marketplace during the credit bubble.
…“Destructive creation” has wounded both the Market and Mother Nature. Smart regulation and carbon taxation can heal both.
Read the rest of the article.
