‘Market failure’ keeps economy brown
Published Tuesday, 22nd February 2011
Can a green, smart and sustainable society also be one with a growing economy? The United Nations’ Environment Programme (UNEP) says yes, but concludes it can’t be achieved through the marketplace alone.
Numerous other studies in the past have shown that reducing energy consumption, cutting waste and managing resources better are good for the bottom line — there’s nothing new there. So why aren’t all organisations, businesses and households doing so? Because, without the right government regulations and policies to encourage such actions, there will always be some content to coast along the business-as-usual path. It takes effort to change, even if the payoffs are more than worth it. In other words, human nature makes us tend to view a penny saved differently from a penny earned, pithy old sayings notwithstanding.
When it comes to infrastructure, the picture gets even more complicated. Unless governments make it easier and more worthwhile — through strategies like feed-in tariffs, for example — for renewable energy sources to tie in to the grid, established utility companies might be tempted to stifle would-be clean-energy competition. Similarly, fossil-fuel firms with control of oil pipelines could be reluctant to let biofuel producers use their distribution networks … unless governments give them reason to do so.
There’s an expression for this, and the UNEP’s recent exhaustive report on the green economy uses it repeatedly: market failure.
While you’re less likely to hear those words from, say, GE or IBM, technology types at such companies nevertheless see it as an obstacle. They understand the reality from a bottom-line perspective: unless there’s a compelling reason (ie, a government mandate) to install smart meters in homes and businesses, for example, why would an electricity company want to encourage consumers to buy less of its product? Following the old model of business, it doesn’t make sense.
That’s why new models are needed.
A policy framework that promotes the development of smart grids and renewable energy must take into account a range of wildly different factors: more expensive, and harder-to-access, oil; cheap and abundant, but environmentally damaging, coal; increasingly affordable, yet intermittent, wind and solar power; reliable, but problematic, nuclear energy; large, yet fast-to-deplete, natural gas fields; and rising carbon emissions with ever-more costly climate impacts.
No one says it will be easy, but it is necessary.
RELATED NEWS
Latest Insight
Germany’s no-nukes plan leads to gas pains
Germany’s already an undisputed powerhouse in renewable energy, but it will need to
Which countries produce the most wind energy?
The world was producing nearly 238 gigawatts (GW) of wind energy as of
