June 24, 2015 Categories: California Climate Change

Markets are Amoral. Whether their Rules are Moral or Immoral is Up to Us.

Laudato Si, Pope Francis’ profound and inspirational call to action on ecology and climate change, has elevated the moral dimension of a debate that is too often limited to basic science or to whether fossil fuels or clean energy investments create more jobs (spoiler alert: it’s clean energy).

Pope Francis challenges this discourse by asserting a moral obligation to care for creation because of its intrinsic value, rather than solely based on its value to humans. Moreover, he emphasized that the poor will be most affected by climate change and recognizes our obligation to confront climate change as part of our obligation to address poverty.

Despite the Pope’s call for “intense dialog” among all people of good will, some vested interests and political ideologues were quick to dismiss the encyclical as naïve or caricature its message.

Let’s start with some of the truly outrageous responses.

The coal industry suggested that it is more concerned about the poor than the Pope. These talking points are hard to take seriously when, after more than a century of coal mining, the life expectancy of women in Appalachia is almost five years below the national average, and the life expectancy of men is more than seven years lower. Nor does it help the industry’s credibility when executives are convicted of conspiracy to thwart enforcement of mine safety rules in connection with an explosion that killed 29 miners.

Meanwhile the climate change deniers at the Heartland Institute claimed that Pope Francis was misled by “bureaucrats at the United Nations who have been bearing false witness about the causes and consequences of climate change for decades.” Never mind that the Pope consulted with some of the world’s top climate scientists who are members of the Pontifical Academy of Sciences and that his statements on climate science align with 97 percent of climate scientists, who are convinced, based upon the evidence, that human-caused climate change is happening.

More mainstream critiques of the encyclical have focused on the Pope’s comments on carbon credit trading, and on the role of markets more generally.

For example, some economists and philosophers argue that the Pope is wrong to reject market-based policy instruments, such as carbon taxes or cap-and-trade systems, which hold polluters accountable for their emissions.

A careful reading of the encyclical, however, shows that the Pope’s comments are more nuanced. Here is the much-discussed paragraph in its entirety.

171. The strategy of buying and selling “carbon credits” can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide. This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require. Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.

This is hardly a wholesale rejection of market-based policy instruments. Rather it is a caution that such measures could lead to speculation and may not achieve the deep carbon pollution reductions that are needed in every major economy around the world.

The Pope may well be reflecting on the first phase of the European Emissions Trading System, which led to windfall profits for utilities and minimal emission reductions due to flaws in the way it was set up. California’s policymakers had the benefit of learning from the EU’s mistakes, and included provisions in California’s cap-and-trade market rules to set a credit price floor and to distribute credits by auction and other means that avoid creating windfalls. The EU has subsequently made improvements to its system as well.

The bottom line is that market rules matter.

The mere existence of a carbon credit market is no guarantee that its benefits will be shared equitably or that emissions will be reduced enough to avoid widespread suffering. Conversely, a well designed and regulated carbon credit market can be an effective tool for cutting emissions, as California is demonstrating.

The same logic applies to all markets. Pope Francis never asserts that markets are inherently evil. Rather, his point is that the mere existence of markets does not guarantee a moral outcome:

Yet by itself the market cannot guarantee integral human development and social inclusion.

And he decries the fiction that the pursuit of self-interest is a sufficient guiding principle:

Once more, we need to reject a magical conception of the market, which would suggest that problems can be solved simply by an increase in the profits of companies or individuals.

This may be viewed as a radical notion among some conservative ideologues, but it is well grounded in the social and environmental reality that Pope Francis calls on all people of good will to confront.


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