Environment as Political Priority

It is fascinating to watch a shoal of inshore fish in tropical waters. They all face one way, then in a flash they all point in another direction. They move with smooth synchronicity. No doubt slow motion cameras could capture which one moved first, but it's all so swift and sudden that I doubt if even they know that. They remind me of traders, One moment they're all chasing energy shares and then suddenly they're all going for mining companies. Whoosh again and it's commodities; just like the fish.

Business obsessions are also like that, thinks Graham Searjeant, financial editor of the Times, He writes that protecting the environment is top political priority for business leaders. Speculators have dumped mineral oil in favour of vegetable sourced energy, with maize prices doubling in a year on its ethanol role.

Looking back at the top priorities of earlier years, recorded by the UPS Europe Business Monitor, we see that computers were on everyone's mind, and the hype spawned the dot-com bubble. Then, following the terrorist attacks of 2001, the war against terror and the need for security were uppermost. After that, in the wake of the Enron and Worldcom scandals, it was corporate governance and business malpractice, with an over-reaction that has seen New York's financial pre-eminence slip back under the weight of over-regulation. Like the fish, their habit is to point the same way, then change.

The obsessions can play a role in overcoming inertia and getting a trend going, says Searjeant, but they should not be mistaken for sustainable market action.
In economic terms, going green is more akin to the war on terror than the online revolution. There are more minuses than pluses and it will be a long while before cuts in carbon emissions are meshed fully with free market forces. If cutting carbon emissions is really the top priority, for instance, other governments will follow France’s big switch to nuclear power. Biofuels for transport will be as prominent in Europe as in Brazil. But complex and sustained interference with current free market pricing will be needed to achieve this without economically crippling costs.
Rather than "complex and sustained interference," governments might find it more attractive to offer financial incentives for the development and adoption of cleaner technologies, and concentrate on speeding their movement to market mainstream. It's possible to have cars that don't pollute or burn fossil fuels. It might be possible, certainly harder, to make relatively green aircraft. The incentives have to be there to encourage people to commit to long-term investment in such things. Long before then, of course, the fish will have changed direction again and be facing a new priority.

Source: www.adamsmith.org