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CO2 arbitrage will make heroes

To avoid capital destruction, simulate a business model under a correct shadow price of carbon

ILLUSTRATION: AJAY MOHANTY
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ILLUSTRATION: AJAY MOHANTY

Ajay Shah
When an advanced economy enacts pollution control in a certain industry, there is a surge in demand and profitability for Indian competitors who face weak pollution control. These firms don't think deeply about the sources of their triumph. They feel they are geniuses who are being rewarded by the meritocratic market economy. In the advanced economy, the product tends to be imported, and that country does not have to deal with the emissions, which harm the local people in India. A similar story will unfold with CO2 emissions, with some twists in the tale.

Consider a manufacturing task that pollutes. This
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First Published: Feb 19 2023 | 10:51 PM IST

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