Carbon Trading and the Morality of Markets in Laudato Si

In a brief but much noted passage of Laudato Si, Pope Francis criticized so-called “cap and trade” approaches to reducing carbon emissions. “The strategy of buying and selling ‘carbon credits,’” he said, “can lead to a new form of speculation, which would not help reduce the emission of polluting gases worldwide.” Commentators have interpreted the passage as a categorical and moralistic rejection of market-based solutions to climate change. Read within the context of the encyclical and the broader Catholic social tradition, however, it becomes clear that the Pope’s critique of cap-and-trade is simultaneously more and less all-encompassing than these initial readings allow. The Pope’s objection to market-based approaches to controlling carbon emissions is closely tied to his analysis of global economic inequality. It reflects an astute appreciation of the way in which inequality can distort the market’s ability to serve as an efficient and just means of allocating the costs of environmental protection. His critique therefore echoes earlier discussions within liberation theology of the notion of “structural sin” and reinforces calls within Catholic Social Thought for analysis of markets always to be considered within – and at the service of – a broader moral framework. Situating Francis’s discussion within these traditions makes clear that, under the right circumstances, a cap and trade system of emissions regulation could be consistent with the Pope’s analysis in Laudato Si. In this short essay, I will briefly describe the so-called “market-based” approaches to greenhouse gas reduction that have dominated policy discussions of climate change in recent years. I will then situate Pope Francis’s objection to these sorts of policy responses, both within the broader climate debate and within the tradition of Catholic social teaching. Finally, I will propose constraints that would seem to address Pope Francis’s concerns.