PARIS – Most people hate finance, viewing it as the epitome of irresponsibility and greed. But, even after causing a once-in-a-century recession and unemployment for millions, finance looks indispensable for preventing an even worse catastrophe: climate change.
Action is urgently needed to contain global warming and prevent a disaster for humanity; yet the global community is desperately short of tools. There is not much support for the most desirable solutions advocated by economists, such as a global cap on greenhouse-gas emissions, coupled with a trading system, or the enforcement of a worldwide carbon price through a global tax on CO2 emissions.
Instead, negotiations for the United Nations Climate Change Conference in Paris in December are being conducted on the basis of voluntary, unilateral pledges called Intended Nationally Determined Contributions. Although the inclusion of voluntary targets has the merit of creating global momentum, this approach is unlikely to result in commitments that are both binding and commensurate to the challenge.
That is why climate advocates are increasingly looking for other means of triggering action. Finance is at the top of their list.