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Climate protection: the illusion of the neoliberal salvation of the earth

2021-05-14T20:42:12.281Z

Market apostles claim that the only way to save the climate is to let CO₂ prices take effect. It could end up doing more harm than good to the planet.



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An airplane pulls a contrail behind it: Anyone who insists on a purely market-based solution to the climate crisis is revering clearly outdated economic beliefs

Photo: Tobias Titz / fStop / Getty Images

When it comes to the climate, arguments quickly arise.

For example, driving bans, bans on single-family homes or bans on beef.

There seems to be only one curious agreement about one thing: the best of all ways would be if everything that harms the climate became more expensive.

Climate activists believe this, as do conservative politicians and even some economists.

Only that some think that the price increase should go through taxes - and the others prefer the free market forces.

Now, a supposed harmony between Greta Thunberg and Friedrich-Christian Merz-Lindner should make you wonder on principle.

Either it is a veritable miracle.

Or the agreement is one that only has a declaratory character.

Thomas Fricke

Born in 1965, has been running the WirtschaftsWunder internet portal since 2007.

From 2002 to 2012 he was the chief economist of the »Financial Times Deutschland«.

He is co-founder of the »Forum New Economy«, in which experts have come together to develop a new economic leitmotif.

Even FDP leader Christian Lindner recently admitted that it is not that easy in practice. He pulled out the calculator on a talk show and calculated the Greens how much a CO2 price of 60 euros per ton would cost a family. Result: quite a lot. Sure, he wanted to suggest that there was no such thing with the FDP. Ultimately, it relies on market-based solutions. Which begs the question of what exactly the market would do so miraculously different.

If, according to the assumption, the aim is to price away CO2, it should also be possible via the market - which, according to the common understanding, also requires prices of at least 60 euros.

Below that, the hoped-for effect would simply be too weak.

The family from the Lindner example shouldn't care whether their standard of living is made more expensive by the market or by taxes.

If a high CO2 price seems so easy at all.

There are some indications that the climate cannot be saved at all, on the contrary: The rescue could fail crashing if the rulers were to rely solely or significantly on increasing prices.

The theory sounds plausible at first: A rising CO2 price for consumers, for example for industry, would make it less attractive to rely on technologies that consume a lot of CO2.

At some point these would become so expensive that no one would buy them at all.

Anything that consumes little or no CO2 would become cheaper and cheaper in comparison, so that more and more people want it.

So far, so sub-complex.

Saving the climate by making it more expensive is a complex chain of effects

The problem begins with the assumption that the market is so predictable.

Experience has shown that there is in truth a lot of speculation about future policy when it comes to trading in CO2 - and not so much about supply and demand.

Actually logical, because the climate is also about the future.

The only result is that the CO2 price does not rise as gently and evenly as companies would like for their strategic planning.

Rather, there are sudden ups and downs alternating.

In the EU, for example, prices have been far too low for years, but have suddenly skyrocketed since the beginning of 2021.

Too much yo-yo for business planning.

Even market-savvy experts are now recommending controlling prices to a certain extent.

Or at least to set limits from which to intervene in order to prevent overly absurd course capers.

So you are recommending a controlled market.

Others, such as the federal government, will be counting on imposing fixed taxes on CO2 in the coming years and only allowing the price to fluctuate in very narrow corridors, even in the medium term.

But even that should not be enough to save the climate.

If the price of CO2 just rose, people might be urged to change their behavior, but social upheavals could also be expected - see the yellow vests movement in France.

So, as many parties have been planning for a long time, there should be compensation for people with less income.

However, these partially cancel out the steering effect of the CO2 price.

After all, if people get credits, it doesn't mean that they are only spending the money on velvet, climate-friendly purposes.

Steering is not easy anyway.

If, for example, demand falls because of expensive gasoline, the price of gasoline also drops again - and with it the motivation to switch to electric cars.

In short: saving the climate by making it more expensive is a complex chain of effects.

It should resemble a steady back and forth rather than a steadily rising line.

And it must be readjusted more often at this point.

more on the subject

  • SPD candidate for chancellor: No more cheap flights - Scholz wants to make air travel more expensive

  • Stricter climate protection: first the goal, then the wayBy Florian Gathmann, Christian Teevs and Gerald Traufetter

  • Forecast for 2021: Gas prices will rise by seven percentBy Stefan Schultz

In addition, it is not enough to just make climate-damaging technologies less attractive.

At the same time, we have to make climate-friendly technologies more attractive.

It is smarter to use positive incentives as well

As long as there are no more charging stations and longer ranges and more affordable electric cars, it is absurd to urge consumers to switch.

And as long as the state does not provide enough incentives for owners to renovate their apartments and houses to improve energy efficiency more quickly, it also makes little sense to drive up additional costs via the CO2 price.

The same applies to industry: as long as much more is not first of all invested in the public infrastructure for the procurement of hydrogen, for example from southern Europe, it is a dubious undertaking to increase the cost of electricity by adding CO2 emissions.

Here, too, the following applies: If you want to persuade a number of companies to switch, you first have to create an offer - do not rely on the fact that it will come about by itself through the pain of higher costs.

It is humanly and economically smarter to rely on positive incentives in addition to the cost pain.

For example, by making things that are good for the climate cheaper through subsidies or the like.

The past few months have shown how quickly this can work: Since the federal government has massively increased the premiums for the purchase of electric cars, there has been demand.

The manufacturers can't even keep up.

Which in turn motivates the corporations to work on the offer even faster.

So it is negligent to suggest that the pricing of CO2 alone can save the climate even remotely quickly.

Especially not purely market-based.

Hobby economists like Friedrich Merz or Christian Lindner parrot clearly outdated economic beliefs.

This is either rash - or it follows the secret calculation that the market alone will never lead to long-term large price increases. The gentlemen should then perhaps say right away that the climate is not that important to them anyway - at least not important enough to be sure that it will work; and not only good for free-market thigh-tapping.

Source: spiegel

All business articles on 2021-05-14

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