Why Pricing Carbon Won't Solve the Climate Crisis

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The idea that markets are the most efficient way to deal with environmental problems has long been a cornerstone of neoliberal economics. But no new market or tax regime has restructured an entire economy in any country. Not ever.

by Simon Butler
Green Left Weekly, July 18, 2010

The pressure is for the movement to accept, support and campaign for weak and inadequate climate policies on the grounds that something is better than nothing.

This is plain from looking at the new, media-driven “consensus” about the need for a “price on carbon”.

Putting a price on carbon is not the best way to deal with climate change, but a growing chorus of Australian media commentators, NGOs and politicians are nonetheless plugging it as the key solution.

Many who advocate a price on carbon would agree that we face a dire climate emergency. The problem is that they are willing to let the emergency response be privatised.

The idea that markets are the most efficient way to deal with environmental problems has long been a cornerstone of neoliberal economics. In the face of climate disaster, putting a price on pollution is a core neoliberal recommendation.

The theory presumes that once emissions have a price attached, business will be discouraged from polluting and more likely to invest in energy efficiency and renewables.

First, the argument goes, use carbon trading or a carbon tax to put a price on carbon. Then step back and let dog-eat-dog competition, rapacious self-interest, bottomless corporate greed and the profit motive work its magic.

Given the world recession and the ongoing international economic turmoil since the 2008 financial crisis, gambling on a market-based response to the climate crisis should appear irrational.

But, although the basic idea was first popularised by far-right economists, it’s now mainstream. Groups such as the Australian Conservation Foundation and GetUp! support it as an article of faith. Last week, the Australian Council of Trade Unions’ Union Climate Connectors emailed its members and urged them to phone MPs to demand “a price on carbon”.

Bernard Keane, a Crikey.com journalist with politics quite distant from neoliberalism, also now insists a carbon price is the only serious policy option to start a transition to a low-carbon economy. Anyone who says otherwise is a con artist, he warns.

“Any politician or commentator who tries to sell you measures other than a carbon price … is in effect telling you they think you’re either too stupid to notice you’re being conned, or they don’t care if you do notice,” Keane wrote on July 12.

But this overstates the case to a ridiculous extent. For instance, Prime Minister Julia Gillard will go to the election proposing a carbon price by 2012. And, as the July 13 Sydney Morning Herald reported, she has signalled that the biggest polluters and vested interests will be invited to help design it.

The current talk about a carbon price presents a danger to grassroots campaigners precisely because it is so vague.

It can mean just about anything: from a loophole-riddled carbon trading scheme, to a weak, business-as-usual carbon tax, to a punitive tax on the big polluters at the point of fossil fuel extraction.

If the climate movement came behind calls for the government to commit to an abstract price on carbon, it would amount to committing tactical suicide.

It would strengthen the hand of the advocates of business-as-usual, some of who are also clamouring for a price on carbon, but a price on their terms.

It also gets things the wrong way round. It departs from the principle that we should first decide what needs to happen to win a safe climate and then campaign for the mechanisms that will get us there.

Commentators such as Keane make a mistake by wanting to put the mechanism first, and hope the greenhouse gas cuts will happen as a side effect.

The real attraction of supporting a carbon price, without defining what shape it should actually take, is that it seems to offer the path of least political resistance. The stark truth is this is also the least effective path.

Of course, the abstract point is often made that a carbon price is just one measure among a range of others we need to use to fight climate change. That it’s a necessary, but not a sufficient, part of the climate solution.

But what is missing from the debate today is an acknowledgement that pricing can at best play a very minor role in a rapid transition to a sustainable economy. It’s not the main game at all.

So let’s be honest. There will be no fast transition to clean energy without direct public investment becoming the backbone of the effort.

Public investment is the key missing measure. It will happen only if the grassroots movement builds into an unstoppable force.

The movement should stay “on song” with its key message: the government must take direct responsibility to save the climate and not relinquish the task to business.

It should be stressed that no new market or tax regime has restructured an entire economy in any country. Not ever. Not once. Never.

Let’s keep in mind that there are exactly zero examples of system-wide, environment-friendly transformations that have been driven by price fluctuations and market forces. And it’s major, system-wide change we need to decarbonise the economy.

Should any government propose a carbon price, but refuse to massively scale-up public investment, then it really is conning us. It’s saying we can afford to leave the climate to the market.