How - and why - markets will take over the U.S. climate battle

Even without strong government climate policies, progress can be made.

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(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest. His Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — The Trump administration’s rollback of green energy subsidies may not have as detrimental an impact on the climate as it appears at first blush.

That’s because, according to a new study, even large firms who are solely motivated by maximizing profits have strong incentives to invest in green energy innovation and thereby reduce or eliminate their carbon footprints. The study is titled “Strategic Commitments to Decarbonize: The Role of Large Firms, Common Ownership, and Governments” and was conducted by three professors at NYU’s Stern School of Business: Viral Acharya, Robert Engle III, and Olivier Wang. Engle won the 2003 Nobel laureate in economics.

The conventional wisdom is that companies won’t invest in green technologies, and will avoid making a commitment to decarbonize, because their incentives are to be a so-called “free rider.” That is, they can enjoy the benefits of green innovation without having to bear the cost.

The professors argue that this conventional wisdom is likely wrong, based on an elaborate model of the decarbonization incentives that firms operate under.