The COP28 conference in Dubai, United Arab Emirates, has largely been an exercise in futility and waste.

Besides working themselves into a frenzy over the “ climate emergency ,” attendees have resolved on a host of anti-market “solutions” to climate change, such as government handouts to green energy firms , tax credits for climate mitigation, net zero mandates , and subsidized lending, or outright grants, to developing countries for climate projects.

That’s the wrong approach. These policies are wasteful, costly, and unnecessary. Climate change concerns and problems should be addressed through free markets.

Even if the predictions of the Intergovernmental Panel on Climate Change and the United Nations about the costs of climate change are correct, then governments should implement a simple tax on carbon emissions and let the market sort things out. Instead, we have gotten the biggest waste and misallocation of capital in recent history with the 2021 Infrastructure Bill ($1.2 trillion) and the 2022 Inflation Reduction Act (initially about $900 billion, recently forecast to cost over one trillion dollars).

The inefficiency already boggles the mind . All kinds of problems have arisen trying to ramp up the electric vehicle market. Auto manufacturers have delayed plans for battery facilities and scaled back production of EVs, even as EVs are piling up on dealership lots around the country.

If renewable energy, efficiency improvements, and net zero targets really made companies more productive and profitable, then we wouldn’t need subsidies or mandates. Companies would implement these climate-friendly practices of their own accord to increase their profits.

But if renewable energy and other climate-friendly practices do not improve companies’ productivity and profitability, then they are costly burdens undertaken for external global benefits. But even in this case, subsidies and mandates are destructive and wasteful ways of getting companies to adopt costly climate mitigation technologies and practices.

Market forces can address questions of efficiency and optimality better than any government board, bureaucrat, or program because they discourage waste. Companies make more money by using fewer and cheaper resources. Companies also make more money by creating valuable products.

Government programs neither discourage waste nor reward the production of valuable goods. For example, federal and state governments champion heat pumps over gas furnaces because they are more “efficient” and environmentally friendly. But if heat pumps are more efficient than furnaces, why would governments need to heavily subsidize them ?

Leaving aside concerns about heating performance, people might not install a heat pump because it costs more than a gas furnace or because it has a shorter lifespan. “But,” advocates say, “if it is more efficient, people can save money on their monthly utility bill by having a heat pump.” Yet whether that justifies paying extra money up front depends on how much more a heat pump costs and how much people can expect to save on their monthly bill.

The same reasoning applies to decisions between electric and internal combustion engine vehicles. Consumers must weigh the monthly benefits of lower charging costs against the higher up-front cost. Remember, up-front costs represent the resources, effort, and energy needed to produce the vehicle. While electric vehicles may need less energy to run, they generally take more energy to produce.

Prices, profit, and loss are the best mechanisms for separating the wheat from the chaff, and the energy sector is no exception. No one knows exactly how much solar power there should be relative to hydrogen, natural gas, wind, or nuclear power. And no one knows which solar producers or electric vehicle producers are the most efficient. Every company will claim to be the most efficient, but many of them will turn out to be wrong after they compete in the marketplace.

Government officials, however, can’t answer these questions because the “answer” varies based on hundreds of geographic, resource, cultural, and political factors, not to mention consumer preferences! Trade-offs vary across geography, consumer, and company. Governments, rather than recognizing the complexity and variability of trade-offs when it comes to “green” or “sustainable” products, simply mandate an answer — an answer that creates waste, inefficiency, and distortions.

The “answer” will constantly change as entrepreneurs discover and utilize new technologies and new ways of harnessing, storing, and transmitting energy. The anti-market “solutions” to climate change — subsidizing renewable energy, EVs, charging stations, and battery production and banning other forms of energy use — are no solutions at all.

The best thing governments can do is set clear rules for the market and then get out of the way.

Paul Mueller is a senior research fellow at the American Institute for Economic Research.