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 / Summer 2008 / Issue 51(originally published by Booz & Company)


The Making of a Market-Minded Environmentalist

One alternative to cap and trade is a tax, but a tax doesn’t set a legal limit. Instead it requires government to guess just how high to set the tax to achieve the necessary reductions — another kind of prescience in which success is unlikely. Nowhere in the world has a tax actually solved an air pollution problem. In this case, the risk in guessing wrong is that the planet will go past the dangerous tipping point where disaster becomes im­possible to reverse.

The other alternative to cap and trade is having laws and regulations that micromanage exactly how corporations will achieve environmental results. Corporations have long been aware of the limits of hierarchical micromanagement and have been moving for some time toward lean management, which radically decentralizes authority, conferring it on employees at all levels, and re­wards incremental contributions that together are transformative. It’s reasonable to think that as government agencies, companies, and groups like the Environmental De­fense Fund continue to work to­gether, all of these groups will become leaner, and thus much more capable, in dealing with the complexities of reducing waste, toxins, and greenhouse gases.

Encouragingly, as I write this, all three of the major contenders in the U.S. presidential election strongly support using cap and trade to rein in global warming pollution. The end game will play out in Washington, D.C., and in 2009 in Copenhagen (where the inter­na­tional treaty that will replace Kyoto will be negotiated). At the Environmental Defense Fund, we are more convinced than ever that the United States and the rest of the world should opt for an effective market system, unleashing a cascade of capital to solve the climate problem and providing a context for the lowest-cost solutions to emerge. The sooner that happens, the sooner the Keeling curve will show a downturn in the atmospheric levels of carbon dioxide — promising a safer future for the planet.

Reprint No. 08201

Author Profile:

Fred Krupp has been president of the Environmental Defense Fund, a national nonprofit organization that links science, economics, and law to solve environmental problems, since 1984. He was also a founding member of the United States Climate Action Partnership. He is the author, with Miriam Horn, of Earth: The Sequel — The Race to Reinvent Energy and Stop Global Warming (W.W. Norton, 2008).
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