by Fabian Leonhardt
The answer to this question is simple. The production factor nature is more or less free. Regulaters and economic theory did not take care of the fact that this will lead to an exploitation of nature by markets in the long run. Markets will not be able to solve this problem at least not without high costs for future generations.
The dilema can only be solved according to econmists by privatizing nature. This is a very theoretical argument, which would probably not work in the real world and might result in further negative effects for future generations.
What we need is a global institution or a worldwide legal framework insuring that nature has its price (good book by Prof. Radermacher Welt mit Zukunft on this). In the long run we will see an exponetial increase in the costs of nature as a production factor for society and next generations. This will give companies focusing on sustainability to date a strategic advantage and might provide good investment opportunities. Furthermore additional fundamental investments into reserach and subsidies from governments are very important and urgent.
On the other hand before we will see the clean tec market becoming the next kondratieff cycle a bubble in this field over the next 10 years is highly likely as well. Hopefully we will see a bubble, because financial speculation is necessary here to develop the new green paradigma. (George Soros Theory of Reflexivity)
Interesting additional opinion/facts by Janaway:
“Yet the next new economy can already be defined in broad strokes. Like the digital one we are currently still learning how to exploit and enjoy, that low carbon economy can be built only on a base of substantial state investment and agreed rules of engagement across both public and private sectors. To advance the frontier of needed innovation, much science remains to be done. A host of technologies – batteries and solar cells and fuel cells, among them – require extended investment to improve both absolute performance and the ratio of performance to costs. And the protocols for bringing alternative renewable energy sources online into the intelligent grid that is yet to be designed, let alone deployed, well need to be standardized, as where the networking and internetworking protocols of the digital economy. However, no significant private-sector investment in the new infrastructure, let alone the speculative funding necessary to finance deployment at scale, can be expected while return on that investment remain exposed to the volatile markets of conventional energy sources. Only collective state action- the prospect for which is not at all visible – can protect the new alternative energy technologies and accelerate the step-function to increases in thermal efficiency necessary to compete with conventional sources without state subsidy. In parallel, advances in materials and in information technologies to reduce the carbon content of consumers goods and services are similarly required and at risk.
By the way by 2010 China’s investment in Clean-energy technologies was estimated to have reached $54.4bn more than 50% above the US level in an economy less than half the size.”
…Along this dimension, the successive East Asian “miracle” economies, from Japan to China by way of the “Tigers”, generated growth initially through protection and subsidy and then once a sufficient degree of competitive maturity has been established backed off and opened up.” More particularly, by endowing multiple players in the Three-Player Game (State, Financial Markets, other sectors) with access to scientific and technological sources of innovation, the state can sponsor the open-ended process of trial and error that alone has the potential to explore new economic space.”
… Recognition that technology spill overs are key to generation of economic growth goes far back as Keynes’s mentor, Alfred Marshall, and resides at the core of New Growth Theory.
Janeway, W. H., (2012). Doing Capitalism in the Innovation Economy. Cambridge: Cambridge University Press. pp 277-278
Write a comment