Monday, October 30, 2006

You can’t buck the climate

Telegraph leader column: “The Daily Telegraph accepts that the planet is getting warmer, and that human activity is probably contributing to this.”

Stern Review on the Economics of Climate Change: “The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response.”

Telegraph: “It is a pity that all three main parties have bought into the idea that state regulation is the answer. Market mechanisms have proved highly effective at delivering green goals.”

Stern: “Climate change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen.”

The Telegraph – which is, alas, not alone in its ‘I’m-not-a-racist-but’-type attitude to climate change – seems to believe that if the climate becomes a piece of collateral damage in the war against the nanny state, then that would be regrettable but acceptable. And by pretending that the free-rider problem of collective action doesn’t exist, it elides the connection between state compulsion and market mechanisms.

If everyone’s choices are voluntary, the incentive for any given market participant to make the short-term individual sacrifice needed for long-term collective gain will be minimal. This is why coordination by government (and, of course, among governments) is essential. In this case, a simple fear of future climate change – even if universally held – will not inspire adequate action by individual people and corporations.

The amount of CO2 (and other greenhouse gases) in the atmosphere is not the sort of thing that can be purchased by eco-conscious consumers, nor is it something that can be offered for sale by companies. Neither supply nor demand, in the standard economic sense, will coherently operate here. For market mechanisms to play an effective role, legislation has to create a market for emissions.

Stern argues that “international collective action will be critical in driving an effective, efficient and equitable response on the scale required. This response will require deeper international co-operation in many areas – most notably in creating price signals and markets for carbon, spurring technology research, development and deployment, and promoting adaptation, particularly for developing countries.”

And: “Putting an appropriate price on carbon – explicitly through tax or [emissions] trading, or implicitly through regulation – means that people are faced with the full social cost of their actions. This will lead individuals and businesses to switch away from high-carbon goods and services, and to invest in low-carbon alternatives.“

Market forces are tremendously powerful; they can outwit state regulation and drive the perpetual innovation that improves people’s lives. But without governments coming together to point the way, even Adam Smith’s invisible hand can’t buck the climate.


Courtney Hamilton said...


Stern might argue that climate change;

"will lead individuals and businesses to switch away from high-carbon goods and services, and to invest in low-carbon alternatives.“

However, if we want a low-carbon economy, we will need to build more nuclear power stations, and not just in this country, but all over the world, including Africa - but environmentalists still remain irrationally hostile to nuclear energy.

Environmentalists can't have it both ways. Even George Monbiot is finding it increasely difficult to oppose nuclear energy. He ends up opposing nuclear power now, all because of the 'problem' with waste - even though it was environmentalists who campaigned to ban deep sea waste dumping which is by far the cheapest and most effective way of getting rid of nuclear waste.

A link here about why deep sea dumping is the cheapest and most effective means of getting rid of all highly toxic waste - and why we need to overturn the ban.

Tom Freeman said...

Hi Courtney,

I do like George Monbiot but I find he’s best taken with a pinch of salt.

He says: “I am forced to admit that an accident like Chernobyl’s could not take place in a new nuclear power station.” Forced to admit? Surely better safety standards are unambiguously a good thing? If one of the options available has become better, then – whether or not that changes which option is best overall – how would that do anything other than improve our situation?

While wind farms are all well and good, I agree that in the next few decades the major non-fossil source of energy is going to have to be nuclear. And (speaking as an Ignorant Amateur) the idea of sub-sea-bed disposal looks like it could be a decent way of storing the waste. Them terrorists’d need to be mighty good swimmers to get at it…

Tom Freeman said...

Oh, and there's this from Anatole Kaletsky:

"The logic of the Stern report implies that the greatest enemies of constructive policies on climate change today are not President Bush and Exxon, culpable though they are. They are the environmental pressure groups and anti-capitalist zealots who have persuaded the public, the media and the political classes that any serious action against climate change will require huge economic sacrifices and a virtual abandonment of the modern, materialistic way of life. These are the real enemies of the planet: the people who chant that the world will come to an end if we go on flying, driving and consuming, who inveigh against globalisation and economic growth, who form human chains to stop nuclear power stations or hydro-electric dams."