two years ago at the african climate summit in kenya, i met hajar ahjum-mathee from south africa, who shared her community’s struggles. outside the crowded conference hall, she expressed frustration. “they say we must pay more for electricity because of climate change,” she said. “but has anything changed? the air is still dirty. the heat is worse. and we are the ones who pay.”

her words made me question the way we’ve been approaching climate change solutions. we’ve been told that pricing carbon — making pollution expensive — will force industries to clean up their act.

but hajar’s perspective revealed a fundamental flaw in this economic model:

who really pays?

the market’s promise — and its failure

the south african government (2019), through the national treasury, implemented the carbon tax act to curb greenhouse gas emissions by assigning a cost to pollution, aiming to encourage businesses to transition to cleaner alternatives. according to the international monetary fund (imf) (2023), if companies paid for each ton of carbon emitted, they would find cleaner ways to operate.

this carbon tax act was rooted in neoclassical economic principles, with policymakers assuming that price signals alone would drive rational decision-making, leading to emissions reductions. however, this approach overlooked the complexities of human behavior and economic disparities. markets do not think—people do. and human behavior does not always align with economic models’ predictions.

by treating climate change as a market problem according to aldy and stavins (2011) — one that could be solved through the right pricing mechanisms — this act failed to account for the social and economic realities of those most affected.

on paper, emissions dropped. however, in townships like hagar’s, where energy costs rose as industries passed on expenses, the reality was stark. as reported by the international monetary fund (imf) in 2023, families already struggling with poverty found themselves paying higher electricity bills, while industries lobbied for exemptions and continued polluting, illustrating the unintended consequences of a purely market-driven approach. 

a different kind of solution

across the indian ocean, a different kind of solution was taking shape. according to the international energy agency (iea, 2025), india’s energy consumption was rising rapidly, and millions of households relied on inefficient incandescent bulbs, wasting vast amounts of electricity.

in response, india launched the ujala program in 2015, a nationwide effort to replace incandescent bulbs with energy-saving led bulbs. unlike carbon taxes, which rely on financial disincentives, ujala used insights from behavioral economics—understanding human biases, habits, and motivations to encourage change. instead of punishing pollution with higher costs and expecting people to buy leds based on long-term savings alone, the government made the transition effortless. through the program, they removed upfront costs, subsidized bulbs, and leveraged social influence, letting community leaders demonstrate the benefits first.

and the results?

ujala reports over 360 million led bulbs were distributed, reducing carbon emissions by more than 45 million tons annually. households saved money. energy demand dropped. and most importantly, the program did not burden the poor—it empowered them. this was climate action designed not just for economies, but for people.

why the market alone won’t save us

the difference between south africa’s carbon tax and india’s ujala program is more than just policy. it is a fundamental shift in how we think about change.

parry (2019) stated that market-based mechanisms (i.e., carbon taxes) are designed to encourage a shift toward low-carbon energy sources by raising the cost of fossil fuels, electricity, and consumer goods.

but in the real world, the center for behavior & the environment (2018) reported that addressing climate change requires more than just economic policies. it demands solutions that engage people emotionally, use social incentives, and design choices that encourage sustainable behavior.

a factory owner, for example, might find it easier to pass carbon costs onto consumers rather than overhaul operations. or, a low-income household might not invest in solar panels, even if they eventually save money, because the upfront cost is too high. this is where behavioral economics—the study of how people actually make decisions—becomes crucial. according to the climate change committee (2021), effective climate policies must be designed with an understanding of human behavior to drive meaningful change.

building a smarter climate strategy

imagine if south africa’s carbon tax had been paired with targeted rebates for low-income families—ensuring that those who could least afford higher energy prices weren’t the ones paying the most.

imagine if cities across the world applied ujala’s insights, making clean energy the easiest and most obvious choice, rather than something individuals had to actively seek out.

the solutions exist. we just have to be willing to rethink the way we implement them.

here’s how we do it:

1. make sustainability the default choice: many people want to reduce their carbon footprint, but small barriers — cost, inconvenience, lack of information — stop them. by designing default green policies, we can drive change effortlessly.

2. leverage social influence: people are more likely to adopt sustainable behaviors when they see others doing the same. community-based programs, peer-led initiatives, and visible commitments from businesses and governments can create a ripple effect.

3. prioritize equity in climate policy: carbon pricing and other market mechanisms must be designed to protect the most vulnerable. revenue from carbon taxes should be reinvested into community development.

4. use psychology, not just neoclassical economics: behavioral economics has shown that simple interventions — like framing choices in terms of immediate benefits rather than long-term savings — can significantly impact decision-making. climate policies should be designed with these insights in mind.

a future that works for everyone

hagar’s story is not unique. across the world, communities are suffering from climate policies that fail to account for real-world complexities. but we can change that by designing solutions that put people at the center.

the future of climate action isn’t just about economic models or carbon taxes. it’s about creating policies that work for everyone — policies that recognize human behavior, systemic inequality, and the importance of equity. india’s ujala program shows us that small, accessible changes can lead to transformative outcomes. meanwhile, south africa’s carbon tax highlights the dangers of relying solely on market-based approaches.

to achieve real change, we must integrate behavioral economics into our climate strategies. it’s not just about reducing emissions; it’s about making sure the solutions are fair, effective, and inclusive. by considering psychology, equity, and human behavior, we can create a future where sustainability doesn’t come at the cost of survival.

the road ahead is clear: we must move beyond rigid neoclassical economic models and build a climate strategy that works for people — and, in turn, the planet.