Prime Minister’s climate capitalism won’t work without a price on carbon
Scott Morrison has suggested that “active” capitalism is the answer to climate change. And the Prime Minister is right – but only if he is prepared to reward companies that take initiative with the right set of incentives.
Some companies will make money by developing green energy alternatives – especially now that the government is subsidizing these companies and their access to capital. It has been suggested that the $ 1 billion Low Emission Technology Commercialization Fund could lead to new investments in emerging techniques such as direct air capture and storage, or methane-reducing livestock feed. . This is good news for early stage green tech companies looking for cheap capital.
But a lot of companies are going to look at these new green alternatives and say, “I can, but I won’t.” These alternatives do not improve my results. Why? Because even with great technological advancements, they are likely to be more expensive than coal for a while – unless one takes into account the true social cost of coal, which includes its environmental damage.
There’s a reason fossil fuel technologies have been so dominant for so long. This is because they are cheap when you consider only the financial cost and not the environmental cost. The success of a green technology push requires taking into account the social cost of energy. This puts all technologies on a level playing field and thus provides the right incentives for adoption as well as innovation.
Take carbon capture and sequestration – a technology that can dramatically reduce carbon emissions from coal-fired power plants. This is an existing technology it could probably be refined. It exists and it works – we don’t need a billion dollar slush fund to develop it. But it is expensive to implement and reduces the energy produced by these plants by about 20%.
So if the factories are owned by private companies, who do not think about the costs and social benefits, there will be little incentive to embrace carbon capture. The positive attitude of these companies is “yes, we can pollute and remain profitable”.
The only way dynamic capitalism makes sense, as an environmental policy, is for the government to adopt a carbon price, or an equivalent market-based policy, such as the cap-and-trade model offered by Business. Council of Australia into the existing safeguard mechanism.
If there is a price on carbon, pollution costs businesses money. So the positive attitude is about how to reduce these costs and, with them, the pollution itself.