Date of Award
MS in Economic Theory and Policy
Jan Kregel, Ph.D.
The response to climate change is one of the most pressing policy issues of our time. Carbon trading is worth more than $100 billion today and is expected to reach $3 trillion by 2020. In Stabilizing an Unstable Economy Hyman Minsky notes that the markets for financial assets are inherently unstable, leading to the cyclical behavior of the economic system. This thesis builds on this insight to raise two questions about the efficacy of market-based solutions to the problem of climate change. The first, and most obvious is the possibility that the market mechanisms may also be unstable, and lead to more rather than less carbon-based pollution. The second is that the introduction of a new asset class in the form of carbon permits may aggravate the instability of financial markets. This opens the possibility that the proposals may not reduce environmental instability and may increase financial instability of the entire economic system.
Tadesse, Mariamawit Fantahun, "Carbon Trading, Sustainable Development and Financial Fragility" (2016). Masters of Science in Economic Theory and Policy. 1.