Extinction Rebellion (XR) are back to causing nuisance by blocking London Bridge with a bus, smashing the windows of JP Morgan and much more besides.
This kind of pointless posturing is made all the more galling by the fact that so many prominent environmentalist reject the most effective ways of addressing climate change. XR, for instance, flatly refuse to back solutions like nuclear energy. Similarly, the organisation behind Greta Thunberg’s global climate strike in 2019, when school children took to the streets, rejects carbon trading and technological solutions.
Much of the modern green movement rejects any use of economics, technology or markets to address climate change. Indeed, the likes of XR regularly decry capitalism and free markets, claiming they are exploitative. These groups often appear more concerned with pushing a radical socialist agenda than they are with addressing climate change.
A new paper out from the Adam Smith Institute and the British Conservation Alliance, ‘It’s Easy Being Green’, adopts an entirely different approach, promoting an environmentalism that embraces market mechanisms and nuclear energy.
Take carbon dioxide emissions. They are a ‘negative externality’ which harm others but are not considered a cost in private transactions. The obvious solution to a negative externality is to force producers to internalise the social costs of their actions. A carbon tax would ensure these costs are priced into businesses transactions and would reduce emissions by making it more expensive to pollute. It would also incentivise firms to develop low carbon technology, so they can reduce their tax burden.
This would be a far better approach than the Government’s focus on picking winners through subsidies and regulations, pushing up the cost of addressing climate change with limited benefits. A carbon tax would make the profit motive part of the solution to the climate crisis, giving companies every incentive to reduce emissions and harnessing entrepreneurial innovation.
The tax would need to be border-adjusted and apply to imported products, so it would not end up with businesses outsourcing. This is not envisaged as a revenue-raising exercise and the tax should be set at an appropriate level to price in the externalities. Any additional revenue could be used to fund green initiatives or reduce taxes elsewhere.
We should also review the UK’s fossil fuel subsidies, such as the reduced rate of VAT on domestic heating and fuel. Raising this to the standard rate of 20% and implementing a carbon tax would help adopt a consistent and rational approach towards tackling climate change.
Nuclear energy will be vital in the fight against climate change, as former XR spokesperson Zion Lights has noted on these pages. However much environmentalists might wish otherwise, renewables alone do not yet have the ability to address the UK’s energy needs. Research by the ASI shows that in order for the national grid to be powered solely by existing renewables in the UK, 7560 GWh of energy would need to be generated and stored to mitigate fluctuations in energy generation. The cost of battery storage on this level would amount to approximately £2.9 trillion – a sum larger than the UK’s annual GDP. Even if it were affordable, the production of batteries to this scale would require the allocation of the entire global battery production between now and 2026-2028 to cover only the UK’s grid (not including demands for electric cars).
Nuclear energy is emission-free and will allow us to transition away from fossil fuels. There’s a bitter irony in seeing countries which reject nuclear power being forced to revert back to fossil fuels to meet demand for energy. For example, Germany has been forced to push back its closing date for coal-fired power plants as a result of Angela Merkel’s decision to decommission nuclear plants by 2022.
Our own government should go in entirely the opposite direction, by liberalising funding mechanisms and encouraging the private sector to invest in nuclear power plants. It could do this by making nuclear power plant construction projects tax-exempt and by providing interest free loans. Doing so would be a simple way to offset the large fixed costs of designing and building reactors while achieving regulatory compliance.
A carbon tax and promotion of nuclear energy are sensible ways to help us meet our obligations under the Paris accords and reach net zero in 2050. Instead of taking us back to the dark ages and embracing interventionist solutions which make us all poorer, it’s high time we recognised that market mechanisms are a great ally in the fight against climate change.
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