'Business can save the planet'

VIEWPOINT Peter Ainsworth

Business ingenuity is a prerequisite to successfully tackling climate change, says Conservative environment spokesman Peter Ainsworth. In this week's Green Room, he argues for a policy framework which gives the market long-term certainty about the value of the environment.

The extreme-green conception of capitalism rests on a flawed assumption of how markets work

All three main political parties have been talking a lot about the dangers of climate change.

The prime minister has called climate change "the world's greatest environmental challenge", and agreed that "to acquire global leadership on this issue, Britain must demonstrate it first at home".

In the Liberal Democrat camp, Sir Menzies' election speech recognised that "the planet we share is the most precious inheritance we can pass on to future generations".

And since becoming Conservative leader, David Cameron has put real weight behind the climate change agenda, shifting the entire terms of debate.

He has argued that "the need to tackle climate change is urgent", and has accepted that tackling climate change "is not just about ticking off a few boxes - it is about changing our political system and changing our lifestyles".

David wants to lead "a new green revolution". Indeed, the Conservatives ran the recent local election campaign on the theme of Vote Blue to Go Green, an idea that seemed to strike a chord with people throughout the country.

If 2005 was the year that put the science of climate change beyond reasonable doubt, 2006 was the year that everyone, including political parties, finally woke up to the need for action.

Green past

It is worth reminding everyone (because most people have forgotten, if they ever knew) that the Conservative Party has a tradition of caring for the environment which stretches from Disraeli to the present day.

HAVE YOUR SAY There is a prevailing view on Capitol Hill that, if climate change is happening at all, technology can cast a spell to end it, and that central government should butt out Send us your views

Margaret Thatcher was the first world leader to raise the need to tackle global warming.

The surprising thing is that, internationally and not just here, the centre-right allowed green issues to appear to be the preserve of the left.

I think this was a big mistake; one which accounts, in part, for the fact that for so long we have collectively done so little to address the looming problem of climate change.

There were some who came to believe that "the environment" was a left-wing plot. A few still do.

At the other end of the spectrum, there are environmentalists, increasingly rare but disproportionately loud, who hold that capitalism is directly responsible for climate change.

The Earth has finite resources, so the argument goes, but capitalism rests on ever expanding consumption. One day the Earth will run out of the materials that capitalism craves with an ever-increasing hunger. Capitalism, they say, is itself unsustainable.

An effective system

However, let us dispense with flat-earthers of both descriptions and accept the facts.

First, no other system has been so successful at increasing both economic progress and individual liberty.

In the 1920s, households spent over a third of their income on food. Now they spend just a tenth.

In just a few generations, millions of people around the world have been raised out of poverty by a system that responds effectively to people's wants and genuinely harnesses individual creativity.

For all its flaws, capitalism, as a system, works. Cutting economic growth is not a serious option for any politician who cares about the people he or she represents.

Second, the extreme-green conception of capitalism rests on a flawed assumption of how markets work. Yes, resources are finite. However, human ingenuity is infinite: if some resources run out, humans will find new ones instead.

A case in point is the move away - far too slow, yes, but nonetheless real - from finite fossil fuels to infinite fuels such as wind, wave and solar.

Margaret Thatcher took global warming onto the political stage

Moreover, markets have the power to extend, promote and invest in innovation. And this is the crux of the Conservative Party's argument: business ingenuity is a prerequisite to successfully tackling climate change.

Yes, dirty business has, since the industrial revolution, contributed greatly to environmental degradation; but having got us into this mess, capitalism now has a vital role to play in getting us out of it. As Jonathon Porritt has said, "it's the only show in town".

Cleaner, cheaper, faster: the marketplace is always looking for more efficient and more effective solutions, and it is more likely to find them than a government planner, especially if he or she is part of the beleaguered and marginalized construct they call Defra (Department for Environment, Food and Rural Affairs).

Capitol Hill

So, does the argument end here? For the current US government, unfortunately, the answer seems to be yes.

Despite positive action from states such as California, and from senators such as McCain and Lieberman, there is a prevailing view on Capitol Hill that, if climate change is happening at all, technology can cast a spell to end it, and that central government should butt out.

This is naive and, coming from the world's largest emitter of climate change gases, dangerous.

It is clear that, at present, the market is failing.

The costs of climate change will only become apparent in 30 or 40 years' time: for this reason, business is not factoring these costs in, and carbon-heavy fuels are, despite the recent hike in the oil price, artificially cheap.

Conversely, clean technology is relatively expensive at present, needing to gain critical mass, and businesses will be put at a competitive disadvantage unless everyone signs up.

To quote Lord May, former president of the Royal Society, unless we all act together: "the virtuous will be economically disadvantaged whilst all suffer the consequences of the sinners' inaction."

After Kyoto

So, how can we tackle these two problems? First, we need to make sure that the true cost of carbon is made absolutely clear: it is a free market tenet that business should pay for the costs they incur.

This can be done in a variety of ways: tax (such as the carbon levy we have proposed); regulation; incentives; and market mechanisms like tradable permits, whereby the government decides by how much industry needs to cut emissions (based on scientific evidence), but industry finds the best way of doing it.

The Conservative Party, through its Quality of Life policy group, has committed to a system of carbon pricing across the economy. However, this alone is not enough. We need to give markets certainty.

And this is where politicians must play a leadership role. I know that statement may cause groans all round, but there has rarely, if ever, been a more compelling case for political intervention.

A long-term framework guaranteeing emission reductions will dramatically change the way that business, and consumer, decisions are made.

This month, 14 key business leaders, including the UK heads of Shell, Standard Chartered Bank, Vodafone, Unilever and Tesco, wrote to the prime minister for a second time.

The leaders highlighted the need for a binding set of post-Kyoto emissions targets precisely because "establishing such a goal will be important for reassuring the global business community that there is international political consensus about the need for ambitious action to tackle climate change".

As the group wrote last year, "We need to create a step-change in the development of low-carbon goods and services by rapidly scaling up our existing investments and starting to invest in new technologies.

"To achieve this, we need a strong policy framework that creates a long-term value for carbon emissions reductions and consistently supports and incentivises the development of new technologies.

"Without such policies, our companies are not able to justify to our boards or investors the necessary high up-front investment in low-carbon R&D, technologies and processes."

Longer-term outlook

The duty for government, therefore, is to create a policy framework which gives the market long-term certainty about the value of the environment.

We need to guarantee investors that the UK will always require future environmental costs to be paid now, not in 50 years' time.

It is therefore the task of politicians to work together, across generations and across parties, to institute and guarantee this framework. A degree of cross party consensus on ends, and on key means, is absolutely crucial.

Tentatively, the Liberal Democrats and the Conservative Party are beginning to work together on climate change. This is too little but it is not too late: we have a once in a generation chance to get this framework right.

What will our children say to us if we fail?

A long-term framework, guaranteeing emission reductions based on the best possible science, will dramatically change the way that business, and consumer, decisions are made.

It is essential that we keep intact the creativity which makes market solutions so incredibly powerful, but we also must find the political will, both here and abroad, to lead us to a cleaner and more secure world.

Peter Ainsworth is Shadow Secretary of State for the Environment, Food & Rural Affairs for the Conservatives

The Green Room is running a series of articles from the environment spokespersons of the three main political parties in the UK

The Green Room is a series of opinion pieces on environmental issues running weekly on the BBC news website