Breaking the economic - emissions growth nexus

The realpolitik challenge of climate change lies in its economics. Although governments and environmental movements alike have long advocated the use of market mechanisms such as emissions trading in concert with traditional regulation and conservation measures, the major stumbling block to building a universal consensus for action is the link between economic growth and emissions growth.

It is axiomatic that, while powered predominantly by fossil fuels, economic growth will result in an increase in carbon emissions. This makes economic transitions from developing to developed countries have an exponential effect on carbon levels and push the atmosphere into dangerous territory. It paradoxically makes the problem more urgent and less amiable to agreement and action. Hence overtly capitalist, free-market theorists and commentators dismiss the need for climate change and heavily critique emissions trading despite its core reliance on market principles.

It is clear that unless this nexus is broken, we will find out exactly how much effect carbon can have in the atmosphere. The key to breaking this nexus comes when our power supplies need to either be replaced or augmented with new installations. That means that renewable energy and low emissions technology such as gas have to be utilised in a way that makes them economic competitors with fossil fuels.

The key tools for this task are a thorough assessment of power station requirements, an emissions trading scheme recognising the true price of carbon, international targets for renewable energy production to stimulate development, international accounting charting a decline in emissions growth versus economic growth, adequate compensation mechanisms for people overly affected by increased prices, vigilant regulators preventing profiteering, removal of artificial barriers supporting coal and oil over gas and encouragement of technology adoption through government initiatives.

We need to attack assumptions such as the supposed inability of renewables (or anything other than nuclear or coal) to produce baseload power. We need to encourage innovative technology and find ways to exploit our geothermal, solar and wave resources rather than our oil. Gas and energy efficiency can set the ball rolling, but wave, solar and wind technology must be facilitated to become more efficient and cheaper.

In short, we need to recast, redefine and adapt our economic structures and the energy delivery systems that power them to subsume environmental and economic responsibility into the one concept. We need to set meaningful targets, design appropriate processes and coordinate action and encourage innovation.