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July 30, 2009
Frank Stilwell in Sustaining What? at Overland says that an emissions trading policy, which is the central response to climate change by western governments, has its roots in orthodox neoclassical economic theory. He says that:
According to that orthodoxy, if a limit is set on the total volume of carbon emissions and if the restricted number of permits to pollute are traded in the market, then the permits will be acquired by the businesses with the greatest need to pollute and the greatest ability to pay for doing so. The prices of goods and services will rise to the extent to which the purchase of emissions trading permits adds to their costs of production. Products whose manufacture and supply requires the burning of fossil fuel will become significantly more expensive. Aluminium is a case in point, because its manufacture involves enormous amounts of electricity, typically produced in Australia by burning coal. Proponents of emission trading argue that, if aluminum products become more expensive, consumers will switch to buying cheaper, less environmentally degrading alternatives.
The implication is that patterns of production and consumption will adjust to changes in market price signals. Technological changes will also create products and processes that use less of the increasingly scarce and non-renewable energy sources, and create less pollution. However, the overall effectiveness of the policy, however, depends upon how strictly the limit on acceptable pollution is defined, how vigorously it is policed, whether the initial allocation of permits gives preferential treatment to existing polluters, and the conditions under which the market operates.
Stilwell adds that selling the environment in order to save it’ is a strange principle. It does not recognise that the more fundamental problem associated with capitalism as an expansionary economic system is that the extension of markets created the environmental stresses in the first place. It is a kind of ‘fine-tuning’ that leaves the underlying orientation towards relentless profit-driven economic expansion unchanged.
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