<a href="http://www.greenlifestylemag.com.au/blog/14#">It&#039;s All About Energy</a>

It's All About Energy

Strategies for slashing CO2 emissions, by Alan Finkel.

Free Market Versus Government Regulations


Credit: iStockphoto

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The expressed intention of government is to rely on the free market to solve the problem of global emissions.
The logic is like this:

  1. Create an economic value for carbon dioxide, a commodity that is currently valueless. This will be done by issuing carbon credits.
  2. Create scarcity by limiting the number of carbon credits issued each year.
  3. Manufacturers, electricity generators, other industries and consumers will adjust their energy use downwards and increase their efficiency to minimize their expenditure on carbon credits.
  4. Problem solved.

However, it isn’t so easy. The problem of global warming is massive.

America would never have gotten astronauts to the moon if President Kennedy had left it to the free market. Australia would not have an interstate highway system if constructing it had been left to the free market.

When the challenges are massive, government has to accept a direct role.

Proposed emission trading schemes alone will not solve the problem of global warming. Neither will good will. We need governments to take a direct role through regulating energy use and direct investment.