Check out the Depression of 1920-21[1] for an example of the economy bouncing back without government intervention.
As soon as you introduce price controls, permitting, licensing, interest rate controls, labor restrictions (age, wage), quotas, or any of the other government interventions in the economy, you introduce inefficiency compared to the "unfettered market."
The primary criticism of markets is externalities not accounted for in prices. This is where free-market environmentalism[2] steps in to argue that that the failure is due to the fact that there is no property in air and water, so you have a tragedy of the commons. Increasing property rights to include previously unowned resources could capture the externalities and begin to correct market failure.
[1] https://en.wikipedia.org/wiki/Depression_of_1920%E2%80%9321
[2] https://en.wikipedia.org/wiki/Free-market_environmentalism
In that case, in place of policy debates in parliament and election campaigns, you now have a big lawsuit going between Exxon and whoever owns the atmosphere, as well as everyone else with an economic stake in our current climate.
As bad as taxes and regulations are, is there any evidence that court battles and lawyers are more efficient? There isn't a nonzero transaction cost to resolving these things. Is it less costly than legislating a carbon tax?
Furthermore, judges and juries are going to be just as vulnerable to Exxon misinformation campaigns as politicians and voters are today. And with the owners of the atmosphere having a direct financial stake in showing that pollution is harmful to their interests, the research they fund would be even less credible than government funded research.
Does accurately estimating and doing the accounting for the externalities get easier or harder in that kind of a system?
Economic thinking: disposable consumer devices should have the cost of recycling and safe disposal priced in.
Ecological thinking: we shouldn't allow disposable consumer devices.
Hotelling's Rule (still taught despite no empirical support), the Rule of Capture, and law of unintended consequences are only three of the more glaring elements of this.
The dynamic Bernard J. Stern identified of established powers and agents seeking to retain, inflate, or at a minimum prevent devaluation of their assets or positions (this has no general name of which I'm aware) is another huge element. One mechanism of this does have a name: agnetology, a/k/a, manufactured ignorance or confusion, as expressed in the lead, asbestos, tobacco, alcohol, and fossil fuel industries, among others. See Proctor, Oreskes, and Conway, particularly in Merchants of Doubt.
Fully accounted petroleum would reflect a cost millions of times greater than present market prices.
https://en.wikipedia.org/wiki/Hotelling%27s_rule
https://en.wikipedia.org/wiki/Rule_of_capture
https://archive.org/details/technologicaltre1937unitrich/pag...
https://en.wikipedia.org/wiki/Agnotology
https://en.wikipedia.org/wiki/Merchants_of_Doubt
https://dge.carnegiescience.edu/DGE/Dukes/Dukes_ClimChange1....
The idea of and faith in economic adaptation as described in the parent (price/demand dynamics) is greatly dependent on the assumption of underlying ecological stability (from which sufficient timeframes for adaption and resource alternatives are provided).
"enough time to adapt" is always present, if you stop thinking about stability being present at all. The system is in a constant state of adaptation to current circumstances, and those circumstances are constantly changing. As those circumstances change, so the system adapts to them. It doesn't need "time to adapt", it is constantly adapting.
Ecological thinking emphasises the brittleness of a particular system, and talks about ecological collapse when the situation changes too fast for the system to cope with. Economic thinking emphasises the adaptability of the system, and how it flows from one state to another depending on circumstances.
What we have now is not a "stable system" that has a finite tolerance for change, relying on an underlying stability provided by a fixed set of parameters. It's an adaptive system that has an infinite tolerance for change, underpinned by nothing stable.
If the externalities of that system become apparent, then the system will change to cope with it. There's a good argument that the current "climate emergency" is exactly this: that the system has previously treated the atmosphere (and ocean) as infinitely-large dumping grounds for waste products, and that it is now adapting to the fact that that's not true.
Of course, if anything inside this adaptive system relies on a particular aspect of it to remain stable, then that is a challenge for that entity. On a grand scale, you could view this as humanity depending on a livable biosphere. On a smaller scale, this could be your country depending on oil revenues. On a smaller scale, this could be your family depending on the housing market always rising.
I've recently been reading AntiFragile, and that talks about the same thing. Relying on stability is fragile. Adapting to (and benefiting from) change is antifragile.