By acting alone, however, the UK risks disadvantaging itself without furthering its environmental objectives. Companies that use a lot of electricity will consider moving elsewhere. The effect on investment will be immediate even if existing plants stay put for now. This could further deplete Britain’s industrial base just as the government tries to rebalance the economy away from financial services. The danger is exacerbated by an EU carbon price that has continued to fall since the floor was first proposed. This risks becoming a “beggar thyself” policy that merely shifts emissions – and associated jobs – to other European countries and beyond.The troubled EU scheme is itself a reminder that climate change cannot be solved by unilateral action, even by a bloc that accounts for roughly 11 per cent of global emissions. Since EU tariffs take little account of disparities in environmental regulations, the continent’s manufacturers have to compete with cheap imports from countries where dirtier production methods are allowed. Although carbon trading is being tried in places such as Australia and California, no major economy has shown much enthusiasm for European-style self-restraint.
Green policies like carbon caps are in many ways a policy luxury that only the developed world can afford, but in the aftermath of the 2008 financial crisis, we’re seeing less support for plans that would curb growth. Without a global agreement, industries will escape onerous green legislation by outsourcing production to less restrictive countries, a predicament Germany knows well. But a global climate treaty is dead in the water, a political non-starter.A revenue-neutral carbon tax that replaces payroll taxes and cuts corporate taxes makes a lot more sense, but the politics behind such a policy remain frustratingly broken. In the meantime, the UK would be better served going after green policies that don’t require economic asceticism: increases in energy efficiency, more telework, and homegrown shale gas, to name a few.[Image courtesy of Shutterstock.]