The Economics of Climate Change: How Markets Shape Emissions and Solutions
Economic Growth and Emissions: A Complex Relationship
Modern economies are heavily intertwined with the use of fossil fuels, which has made economic growth one of the primary drivers of greenhouse gas (GHG) emissions. As industries expand and consumer demand increases, so does the energy required to power production, transport goods, and build infrastructure. Countries with higher GDPs often have larger carbon footprints, unless active decarbonization policies are in place. Understanding this relationship is essential to designing effective climate strategies that support sustainable economic development.
Market Signals and Climate Externalities
One of the core economic challenges in addressing climate change is the failure to account for negative externalities—the hidden social and environmental costs of carbon emissions. Without proper pricing mechanisms, the market undervalues clean energy and overuses fossil fuels. Tools like carbon pricing, emissions trading systems, and subsidies for renewables are key policy levers that aim to correct these imbalances. By integrating the true cost of emissions into economic decisions, we can shift both producers and consumers toward climate-friendly choices.
Jobs, Investments, and the Low-Carbon Economy
Transitioning to a low-carbon economy is not just an environmental imperative—it’s an economic opportunity. Investments in clean energy, electrification, and sustainable infrastructure can stimulate job creation, attract private capital, and improve long-term economic resilience. From local energy efficiency projects to national-scale grid modernization, climate-focused investments generate returns across sectors, reducing vulnerability to fossil fuel price shocks and public health costs.
Equity, Access, and Economic Justice
Climate economics must also grapple with questions of equity. Vulnerable communities often bear the brunt of pollution and climate disruption, yet have the fewest resources to adapt. Economic tools must be deployed not only to reduce emissions, but to ensure a just transition—where benefits like clean energy access, green jobs, and healthier environments are equitably distributed. Integrating climate justice into economic planning ensures that climate action supports both environmental and social resilience.
For a quick review of the twelve-step explanation of the climate change problem, visit: The Twelve-step Climate Consensus
Research
What About…?
The question: ” What’s In Your Wallet?” is part of the campaign of one of our leading banking conglomerates. It’s a great question! This is because the major banks in the U.S. . (and across the globe) are among the most serious offenders in terms of investing in fossil fuels and all that contributes to global warming and climate chaos. On an individual level, we can send a message to these banks by removing our funds from their clutches and instead lodging our funds with banks that have committed to behaving in a socially responsible manner. There are two external certification mechanisms that banks may use to substantiate their ‘socially responsible’ credentials. The most obvious is to become a Benefit Corporation – a business that does not simply focus on maximizing profits but also includes environmental and social justice in its criteria for incorporation (see What’s a Benefit Corp). Another is the Global Alliance for Banking Values. Banks that have joined one or the other organization are certified not to focus only on profits but to honor the triple bottom line of ‘profits, people, and planet’ or ‘economy, ecology, and equity.’
For a list of banks that are making the effort.
Banking on Climate Chaos (2022) Fossil Fuel Climate Report. Since Paris 2015, Banks have funneled $4.6 trillion to fossil fuel corporations.
A 2019 discussion of Community Development Financial Institutions (as opposed to ‘regular banks’ is available here. Not that the worst offender in terms of fossil fuel investment are Morgan Chase, Wells Fargo and Citi. If you are trying to find a better bank for banking, credit card, credit union, or loan visit Green America’s Get a Better Bank site and then Break Up with your Mega Bank.Green Business: Green America’s Green Business Network® is the first, largest, and most diverse network of socially and environmentally responsible businesses in the country. Home to both rising social and eco enterprises and the most established green businesses around.
Where you bank—and which credit card you carry—has real climate and community consequences. Many major credit cards are issued by banks that heavily finance fossil fuel extraction, environmental degradation, and unethical corporate practices. By contrast, socially responsible credit cards give individuals the power to align their everyday spending with their values—supporting clean energy, local economies, and social justice initiatives.
Green America’s “Responsible Credit Cards” campaign helps consumers move their money away from climate-harming banks and toward cards issued by community development financial institutions (CDFIs), credit unions, and local banks. These institutions often reinvest in underserved communities, fair housing, renewable energy, and small businesses—ensuring your fees and interest go toward public good, not private pollution.
The campaign includes a Responsible Credit Card Guide, an interactive national bank map, and step-by-step instructions for making the switch. Green America empowers users to take immediate action to reduce the social and environmental impact of their financial choices.
Choosing a responsible credit card is a simple but powerful way to advance climate action and economic justice—one transaction at a time.
Invest in a Future Worth Living In
Socially responsible investing (SRI) is a strategy that aligns financial decisions with environmental, social, and governance (ESG) values. Instead of funding extractive industries or companies that exploit workers or ecosystems, SRI directs capital toward sustainable infrastructure, clean energy, equitable housing, and other regenerative sectors. It’s not just about feeling good—SRI funds increasingly match or outperform traditional portfolios, especially as the global economy shifts toward low-carbon systems.
Divesting from fossil fuels is one of the most impactful climate actions an individual or institution can take. Banks, pension funds, and mutual funds that support coal, oil, and gas development are prolonging the climate crisis and delaying a just energy transition. By divesting, investors send a market signal that the era of fossil fuel dominance is ending—and that sustainable alternatives are not only viable, but preferable. Where we put our money matters—and it’s time to stop funding the problem and start building the solution.
Dear big banks: Stop investing in fossil fuels or we take our money elsewhere. (March 29, 2023) by Lisa Howe Verhovek, Mary Lou Dickerson and Bobby Righti, The Seattle Times.
Banking on Climate Chaos: Fossil Fuel Finance Report 2021 Rainforest Action Network, Banktrack, Indigenous Environmental Network, OilChange, Reclaim Finance, Sierra Club.
How Attacks on Responsible Investing Could Hurt Climate Progress by Eleanor Greene. (winter 2022) Green American
The Power of Divestment (Green America) A discussion of the importance of divesting from institutions that support fossil fuels.The Top 200 Fossil Fuel Companies 350.0rg’s Go Fossil Free
Offer to Community Groups & Organizations
- Printable document to share with groups: Offer to community groups & organizations
Publicity
Generic Flyer (word document so you can edit)
Power Point Presentation
This presentation is designed to answer 5 questions:
- Why do we need legislation to reduce greenhouse gas emissions?
- How does cap, trade, and invest work?
- What does it mean to me? (see below)
- What is the current status of the bill? This will include details about the bill when it’s available.
- What can I do?
There are different options for Question 3 (What does it mean to me?)
The following are available. We recommend using “Oregon Residents” and one other of your choice.
- Oregon Residents
- Faith Based Groups
- Agriculture & Forestry
- City and County Government
The following are under development.
- Small Businesses
- Social Justice/Equity/Diversity
- Health Care
- Youth
- Service & Non-Profit Groups
- Trade Groups
Clean Energy Jobs – Oregon’s Climate Action Program
Oregon’s Climate Action Program – Master 3-4-2019 Note: this will be updated as segments are developed.
Script Notes for above presentation
Pacific Power Blue Sky Program:
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The cost is $1.95 per 100-kilowatt-hour block per month.
Arcadia Power
Arcadia was founded in 2014 on the belief that everyone deserves access to clean energy. Our initial investment in community solar drove progress toward that vision — then we built the Arcadia Platform to solve for access to energy data. Today, we help businesses navigate today’s complex energy landscape to unlock a future of abundant, affordable clean power.
Articles & Presentations
Cap and Trade vs. Cap and Fee
Cap-and-Trade and Cap-and-Fee are both market-based strategies to reduce greenhouse gas emissions, but differ in structure, incentives, and predictability.
A Cap-and-Trade system sets a limit (cap) on total emissions and allows entities to buy and sell permits (allowances) under that cap. It creates a flexible, market-driven mechanism that rewards efficiency and innovation. Revenues from auctions can be reinvested into climate programs, clean energy, and community resilience—making it a scalable tool with political traction in many regions.
By contrast, a Cap-and-Fee model (often called Carbon Fee and Dividend) imposes a steadily rising price on carbon at the source and returns the revenue directly to households as a dividend. This approach delivers price certainty and maintains broad public support by offsetting potential consumer cost impacts. It doesn’t involve trading, but ensures fossil fuels are consistently disincentivized at the point of production.
Both mechanisms aim to internalize the cost of carbon, but Cap-and-Trade prioritizes emissions certainty with variable pricing, while Cap-and-Fee offers price predictability with variable reductions. The best choice often depends on context, implementation, and equity safeguards.
Carbon Offsets
Examples of How Offsets Help Communities
The Yurok Tribe Is Using California’s Carbon Offset Program to Buy Back Its Land. (April 19, 2021) By Abaki Beck, YES! Magazine. With income from sequestering carbon in its forests, the tribe has supported youth programming, housing, road improvement, and businesses development.