Resolving The Green Paradox
The conventional argument behind the introduction of climate policies (such as carbon pricing, subsidies for renewable energy, and energy efficiency), is that consumers of energy will respond by switching over to lower carbon energy sources and becoming more energy efficient. Meanwhile, producers of fossil fuels, who now expect demand for their product to decline in the future, will respond by cutting production and instead, invest in alternative, low carbon sources of production.
But is that really how the market works? There is an argument that climate policy announcements could have exactly the opposite impact to that intended, at least when looking at it from a global perspective, and considering carbon emissions are a global problem that is the only perspective that matters.
Let’s dive in.