Whether or not the science of climate change is valid, financial markets still need ways to assess the risk of carbon liability, says a Financial Times op-ed. One solution is emissions trading markets. A carbon "cap and trade" system puts limits on emissions while pushing green investment, because market forces will pick the best clean technology.
The ideal trading market will have low volatility and high liquidity, as well as a derivatives market and contracts that can be traded anywhere in the world, no matter where clean technology is used. That will keep the cost of green capital low and the investment rate elevated.
There is nothing surprising about approaching global warming from a financial perspective. But ignoring climate change could result in serious consequences.