Friday, 5 September 2014

Why We Don't Need An Energy Revolution



"Pessimism won’t do. We need an energy revolution."

No, no, we do not. The Guardian's Zoe Williams is worried about human-induced climate change, and insists we should invest in alternative green technology - except by 'invest' she means throw taxpayers' money at it. I have good news for her - she can relax, because the situation will resolve itself through market forces. Here's the rub of the situation. Humans are causing climate change, but they are also penalised for their carbon externalities through green taxes and numerous regulatory measures. That is to say, because prices have been changed to account for the increased emissions, the only investment that is needed is investment that is more economically viable that the current prices.

The imminent effect of those price changes will tell us the best course of action. If, for example, our ability to augment our solar capacity enables that venture to be price competitive against our current carbon industries then consumers will respond to it. If it doesn't, they won't (that point alone illustrates how State interference can only impede the process). The costs (present and future) of staying with our current carbon trends have already been factored into the increased prices of our externalities. We don't need to throw taxpayers' money at it at all - because people's preferences for economic viability will drive this, as already happens in virtually every other market process.

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