Want Freedom From Regulation? Then Solve Climate Change.

The best way to eliminate a regulation may be to eliminate the harm that made it necessary.

Years ago, I found myself in a rather heated argument with the General Counsel of a company where I worked.

We were discussing a problem that was harming local wildlife. There was a practical solution we could implement without changing our business operations or product margins. It required a one-time investment of $2 million. My team’s financial modelling projected that the change would increase market share and generate an additional $18 million in profit.

I had the executive board’s attention.

Then I added that we didn’t just have a commercial opportunity. We had a responsibility to act.

That was when the General Counsel looked up.

We weren’t breaking any laws, he pointed out. No regulation required us to address the problem.

“As long as we’re following the law, we are being responsible,” he announced.

He wasn’t challenging the investment case. He was challenging my understanding of responsibility.

I suspect that if I hadn’t used that word, he wouldn’t even have looked up from his laptop.

I was astonished. And frustrated.

Surely responsibility couldn’t be defined entirely by whatever regulations happened to exist at the time.

I argued the point. Vehemently.

I don’t remember convincing him. But we did make the investment.

And my financial modelling was wrong.

We didn’t deliver an additional $18 million in profit. We delivered $21 million.

The commercial opportunity was real. Our disagreement about responsibility remained.

More recently, a conversation with another lawyer about the seemingly endless changes to environmental regulations brought that exchange back to mind.

Rules being introduced. Others being amended or repealed. Requirements that businesses had spent years preparing to meet suddenly becoming uncertain.

And I found myself returning to the same question.

If something is legal, does that necessarily make it responsible?

I’ve been telling my kids a version of this for years: your freedom to do something shouldn’t automatically supersede my freedom to live safely and healthfully.

For the most part, I believe rules should protect our rights, freedoms, health and well-being from the actions of others. Of course, we also need rules to establish contracts, resolve disputes and help society function.

But when it comes to preventing harm, the principle seems fairly obvious.

You shouldn’t be free to pursue your own prosperity by compromising someone else’s.

And yet, we’ve had an extraordinarily difficult time putting that principle into practice.

Consider sewage.

For centuries, people disposed of human waste in rivers, streets and waterways, often with devastating consequences for those living downstream.

Eventually, we developed laws, sanitation systems and standards to prevent it.

Think about that.

We needed laws to stop people from poisoning one another’s drinking water.

The people enjoying the convenience weren’t necessarily the people bearing the costs.

The same problem appears on corporate balance sheets. Or, more accurately, in what those balance sheets leave out.

Imagine two manufacturers producing essentially the same product.

One invests in equipment to prevent pollution from its operations, treats its wastewater and responsibly manages its waste.

The other doesn’t.

All else being equal, the second company may produce its product more cheaply. Its capital requirements and operating expenses are lower. Its margins are better.

Investors looking strictly at the financial statements might conclude that it’s the “better” business.

But is it?

The waste hasn’t disappeared. The pollution hasn’t vanished. The costs have simply moved somewhere else - to a community balance sheet.

Perhaps a community pays to clean up its drinking water. Families face higher healthcare costs. Another business must treat contaminated water before using it. Taxpayers eventually finance the restoration of damaged land.

The company has reduced its Corporate Cost by increasing the Community Cost.

Economists call this an externality.

I call it making someone else pay your bill.

If we accounted for the costs borne by everyone affected, would the supposedly cheaper product still be cheaper?

Would we be looking at a better business? Or simply one that has become better at transferring its costs to others?

This doesn’t mean every economic activity must be free of negative consequences. We make trade-offs, and some costs are unavoidable.

But there’s a meaningful difference between creating prosperity and creating prosperity by shifting avoidable harm onto someone else.

And nowhere is that distinction more consequential than with climate change.

A tonne of CO₂ emitted in one country contributes to a global problem. Its effects persist well beyond the immediate transaction. The people who benefit from the activity are not necessarily those who will experience the consequences.

Some of those bearing the costs may not even have been born yet.

That’s extraordinary when you think about it.

We have effectively built an economic system in which some of the costs of producing wealth can be transferred to people who never participated in the transaction.

And sometimes to people who don’t yet exist.

Climate change isn’t just an environmental problem. It’s the most consequential example of an economic problem - and a question of who pays.

I’ve spent more than 25 years working with companies, executives and investors on environmental, social, economic and sustainability challenges.

I’ve been in rooms where senior people have made it abundantly clear that they would rather not know the answer to a particular question. Because knowing might mean having to do something about it.

There’s a peculiar logic to that.

If we don’t measure the problem, perhaps we won’t have to acknowledge it. If we don’t acknowledge it, perhaps we won’t have to act.

And if the law doesn’t require action, perhaps we can convince ourselves that we’re behaving responsibly.

But ignorance doesn’t make the consequences disappear.

Deliberate ignorance certainly doesn’t.

This is one reason regulation matters.

According to the CEO of an energy company I once worked for, if regulations are getting in the way of margins, change the regulations. Not change operations. Change regulations.

Markets are extraordinarily powerful mechanisms for allocating capital, rewarding innovation and creating prosperity. But they don’t always account for the costs of the harm they create.

Regulation can help address that failure. It protects communities and can establish conditions under which companies compete more fairly.

Of course, regulation can also be expensive, ineffective or counterproductive. It can protect incumbents and discourage the very innovations we need.

I’ve never believed that the answer to every problem is another regulation.

But removing a regulation doesn’t remove the problem it was intended to address.

The greatest climate innovations may be those that make regulation less necessary by eliminating the harm itself.

Not by ignoring it.

Not by repealing the rules.

By developing something better.

I’ve been saying for almost 20 years that no one should have to suffer for sustainability.

Not businesses. Not consumers. Not communities.

The idea that protecting the planet must necessarily come at the expense of prosperity has always struck me as a failure of imagination - a failure of markets, policy and innovation.

Why shouldn’t we aspire to technologies that are more productive, more regenerative and more profitable than the systems they replace?

Why shouldn’t businesses make more money by doing less harm, or, even better, by restoring systems?

Consider agriculture.

Farmers need phosphorus to grow crops, and modern agriculture depends heavily on fertilizers to supply it. But those fertilizers are expensive. When excess phosphorus escapes into waterways, it can contribute to algal blooms, damage aquatic ecosystems and impose costs on surrounding communities.

So we regulate agricultural nutrient pollution.

But what if we could reduce the problem at its source?

There’s a company called Groundwork BioAg, in which I’m an investor, that I believe offers a remarkable illustration of what’s possible.

Groundwork cultivates mycorrhizal fungi that form beneficial relationships with plant roots, effectively extending their reach and improving their ability to absorb nutrients already present in the soil.

This can help farmers produce more - increase yield per acre - while using less fertilizer.

Higher yields. Lower input costs. Healthier soils.

And less phosphorus escaping into surrounding waterways.

The farmer benefits. The community benefits.

But there’s something else happening beneath the surface.

Those fungal networks also help move carbon captured by plants through photosynthesis into the soil, where some of it becomes associated with minerals and can remain durably stored for hundreds, even thousands of years.

Groundwork’s field results demonstrate annual carbon removal potential of 1.5 to 3.5 tonnes of CO₂ equivalent per acre. Its first independently verified carbon-credit issuance, announced in June 2026, represented 19,568 tonnes of net carbon removal, with an average measured effect of approximately 2.23 tonnes per acre in the initial cohort.

I believe this represents one of the most exciting opportunities in carbon dioxide removal. Not simply because of the amount of carbon that could be removed, but because of the economics that could make widespread adoption possible.

A farmer can increase productivity, reduce fertilizer costs, improve soil health and potentially earn additional revenue from removing carbon from the atmosphere. Communities can benefit from reduced nutrient pollution.

This balance sheet looks very different - for the company and the community.

More food. More prosperity. Less pollution. Carbon removed.

That’s why I’m an investor.

And that’s what I’ve meant all these years when I’ve said no one should have to suffer for sustainability.

Of course, the benefits depend on the conditions in which the technology is deployed. Improved nutrient uptake doesn’t guarantee the elimination of runoff, and soil carbon storage must be rigorously measured and monitored.

But rather than asking farmers to accept lower profitability in exchange for protecting the environment, we’re developing ways to make environmental improvement part of a more profitable agricultural system.

This is where capital markets come into the picture.

When a technology creates a compelling economic advantage, adoption doesn’t depend entirely on persuading people to do the “responsible” thing.

It can be driven by competition.

Investors finance the technology because they see an opportunity for returns. Businesses adopt it because it improves their economics. Competitors respond because they don’t want to be left behind.

Production scales. Costs fall. Technologies improve.

And eventually, older, more harmful systems may become economically obsolete.

Because something better has emerged.

That doesn’t mean governments should simply get out of the way.

Sometimes a harmful technology remains more profitable precisely because its producer doesn’t bear the full costs of the harm it creates.

Governments can help establish fairer conditions for competition. They can set standards, support research and create incentives that give superior technologies an opportunity to compete.

Capital markets can then finance their development and accelerate adoption.

Consider the possibility.

A regulation helps create a market for an innovation that eventually eliminates the very harm the regulation was intended to address.

That’s regulation and capitalism accomplishing something neither could necessarily achieve as effectively alone.

The existence of a better technology doesn’t automatically make a regulation unnecessary. The technology must actually displace the harmful activity, and some problems will continue to require enforceable rules.

But the ambition should extend beyond permanently managing harm.

We should strive to make responsible behaviour economically attractive, rather than permanently dependent on regulatory enforcement.

Which brings me back to my old General Counsel.

I understand his perspective. Companies need clear rules. Investors need certainty. Executives need to understand their obligations.

But I still disagree with the idea that following the law is sufficient to establish that we’re behaving responsibly.

Knowing that our actions cause harm should matter, whether a regulation exists or not.

In that instance, we had an opportunity to address the harm and make more money. We took it.

We should want an economy that produces more of those opportunities. Where governments encourage better outcomes, entrepreneurs develop better solutions and capital markets help bring them to scale.

Where businesses prosper by creating value rather than transferring costs to someone else.

And where some regulations become less necessary because we’ve solved the problems that made them necessary.

No one should have to suffer for sustainability.

But someone will continue to bear the costs of the harms we leave unresolved.

Because you can repeal a regulation.

But you can’t repeal the consequences.

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To read more from Nelson, you can purchase The Gigacorn Hunter: Seven Principles for a Climate Investor here.