Hoover Institution senior fellow Dominic Parker directs Hoover’s Markets vs. Mandates Research Program alongside senior fellow Terry L. Anderson. The Hoover program sponsors the Enviropreneur Fellowship Program, designed to help conservation professionals and innovators learn to apply market solutions to environmental problems. In this interview, Parker explains how market principles build the foundation to respond to climate issues.
Q: What are the main ways we can address climate change?
Dominic Parker: There are three main approaches. The first is mitigation, such as reducing emissions through cleaner energy. The second involves geoengineering, for example, reflecting sunlight to cool the atmosphere or removing carbon dioxide from the air. And the third is adaptation—changing the crops grown in a certain area, recycling water, relocating people from flood zones. Effectively addressing climate change will require all three.
Q: Which approach has seen the most progress so far?
Dominic Parker: Adaptation. In general, economic growth, better forecasting, and better preparation are already enabling people to respond more effectively to heat waves and climate-related disasters than in the past. This is why climate-related deaths have declined in recent decades, independently of climate considerations.
There are two reasons adaptation has progressed faster than mitigation and geo-engineering. The first is experience: people have been adapting to weather for centuries. Efforts to mitigate effects and geoengineer the climate are much more recent. The second reason is incentives. Adaptation provides clear, direct private rewards for adjusting to changes. There hasn’t been the same extent of clear rewards for mitigating or geoengineering, although this is starting to change.
Q: Governments have used regulations to try to solve environmental problems for a long time. Are regulations enough?
Dominic Parker: History shows that regardless of whether the problem is water or air pollution or fishery or biodiversity loss, command-and-control regulations tend to be costly and limited in their effectiveness. This is also true for carbon mitigation policies. A 2024 study of 1,500 climate policies across forty-one countries found that only 4 percent actually reduced emissions.
Command-and-control regulations are best at addressing problems that have an obvious, single cause. For example, banning the shooting of bald eagles helped them recover in America. And clean air legislation that required cars to have catalytic converters helped air quality in the 1970s.
But command-and-control regulations do a poor job of addressing dynamic and complex environmental problems. These problems, like climate, need long-term innovation, experimentation, trial and error, and new solutions. It’s not enough to simply eliminate a single activity—like burning coal—or mandating the use of a single, known technology like wind or solar power.
Q: What does it mean to address an environmental problem through the market? Can you give a simple example?
Dominic Parker: Addressing the problem through the market means using voluntary incentives, like prices and profit, to change how people and companies act. Markets use economic rewards to make green choices cheaper and harmful choices more expensive.
One example is markets that pay farmers to keep water in rivers and lakes during times of drought. This improves water quality, which keeps fish alive and lowers the cost of treating water for residential use. And through water-trading markets, farmers increase their overall profit by conserving water and buyers get better fishing and lower household water costs.
In the more familiar environmental market known as cap-and-trade, the government is more involved. It sets a limit on total pollution, and companies buy and sell permits to pollute. This makes cutting pollution a way to save or make money.
In both water markets and cap-and-trade, companies innovate and experiment in response to prices and profit opportunities.
Q: Why do we need entrepreneurs to solve environmental problems?
Dominic Parker: Behind every environmental market is an entrepreneur. The innovators we like to call “Enviropreneurs” first recognize when people are willing to pay more for better environmental quality, and then how to create businesses to supply that improved environmental quality to the people who want it. Successful enviropreneurs channel economic prosperity into environmental health, and vice versa.
Here’s an example from the Hoover Institution’s 2025 cohort of Enviropreneurs. Manuel Piñuela is the co-founder and CEO of a company called Cultivo. This company uses artificial intelligence, satellite data, and environmental science to merge ecosystem regeneration with carbon sequestration. The environmental problem Cultivo addresses is degraded land. It identifies farmland in the United States, Mexico, and Central America that’s underperforming, both economically and environmentally. Cultivo then is paid to advise the landowners on how to regenerate the land for biodiversity, soil health, and carbon capture. As the land is restored ecologically, it also becomes more economically productive for farming, hunting, and carbon credits. So, this is a win-win.
All of our Enviropreneurs are trying to convert environmental problems into opportunities. One project has set out to capture leaked methane, which would both increase revenue and lower greenhouse emissions. Another is trying to convert burned forests into “biochar,” a charcoal-like substance made of organic waste that sequesters carbon and improves the soil. This not only promises economic benefits but lowers wildfire risk. A third project addressing climate-induced flood risk by lifting houses in flood zones, reducing insurance costs and raising property values.
Q: Is it a good thing if a company can make money by addressing a climate problem?
Parker: Of course. Making money through markets while addressing a climate problem is evidence that a company is delivering benefits to society that are greater than the costs. Compare that to government regulations for climate, which often have costs greater than the benefits.
Profits pay employees and shareholders, broadening the economic gains. The gains also provide a foundation for further investments in tackling environmental problems, which can help scale up solutions and expand their benefits to more areas and more people.
Profits generally mean a solution is economically sustainable, which signals to investors that this approach is worthy of more investment, entrepreneurial effort, and economic competition. All of this is healthy for business.
Q: Today, there are many companies removing carbon, storing clean energy, and recycling water. When does a good climate technology become a good business?
Parker: When it can be utilized at a cost lower than the revenue it can generate. A company needs to convince buyers and donors that the technology works well and can be provided at a good price. Also important: the climate company also needs to convince people that they can’t just free ride and get the benefits the company provides without paying for them. To put it another way, the company must provide people with something from which they get mostly private gain, in addition to the public climate benefits.
Seen within that framework, we realize that electric vehicles will do well without government support once the technology works better and more affordably than that of gas-powered cars—the consumer decides when. Natural gas companies will fix methane leaks when doing so increases their profits. And nuclear power providers will thrive once they prove to ratepayers they can provide cheap, reliable, and safe electricity.
Q: If markets are so important, does that mean we need less of a role for government?
Parker: Yes. One of the problems with government subsidies for specific climate technologies is that this behavior crowds out private sector innovation. Big governments choose winners instead of letting market competition discover winners. They’ve have done this with large subsidies for wind and solar energy, for example.
Big governments have also gotten in the way of climate adaptation by doing things like putting price caps on rates for flood and fire insurance; by subsidizing construction in flood risk zones; and by subsidizing farmers who grow crops that do poorly in heat.
Governments also pass regulations making it hard for people to adapt to climate or to create new climate technologies. For example, outdated government rules prevent forest thinning even as wildfire risks grow, and outdated building regulations make it difficult to expand nuclear and solar power.
Government should play a different role, one that’s supportive of markets, rather than intrusive. A tax on carbon is more supportive of market competition than is a subsidy for certain renewables, for instance. The tax uses the pricing system to encourage companies to become more innovative and creative in choosing how to avoid the tax. This gives the companies broad incentives to figure out how to be energy efficient.
Limited government should allow competition between different technologies, always enforcing a consistent rule of law and not playing favorites among firms or technologies. And it should get rid of unnecessary regulatory barriers to adaptation, mitigation, and geo-engineering.
Q: What do we most need to change if we want to solve climate change?
Parker: I think it’s important to always be clear that every approach has tradeoffs, and that we’ll need to make progress on all three components: adaptation, mitigation, and geo-engineering.
The biggest change is mindset. We need to stop depending on governments to address the problems and instead recognize that we need Enviropreneurs to help on all aspects of climate.
This is why the Hoover Institution launched the Enviropreneur Fellowship Program. We aim to increase the visibility of these innovators and help them succeed. The work of the Enviropreneurs is critical for both the Hoover Institution and the future of environmentalism. They’re helping us understand why we need free societies to improve environmental and economic health at the same time.
