Myth:

Actions to mitigate climate change are incompatible with a market economy. They would involve a move to socialism. 

Fact:

 There is no truth to this statement. Climate sceptics tend to make it because they believe that all climate activists are closet Marxists. In fact, market mechanisms are by far the best way to drive the economy towards carbon neutrality. By introducing a carbon tax or an emissions trading scheme (ETS), businesses would be given a price signal that would push them to reduce CO2 emissions without significant input by government. Such mechanisms are no different in the way they operate than tariffs and excise duties (such as taxes on tobacco and petrol). They skew market signals so as to produce the government’s desired outcome. The carbon tax that operated in Australia from 2012 to 2014 was extremely effective in reducing CO2 emissions, without in any way impeding economic growth. Interestingly, the so-called ‘direct action’ policy that replaced it saw only a marginal fall in emissions. [By one estimate, if the rate of reduction under the Coalition government were to have continued, Australia would not have reached net zero emissions until 2167!] 

Hence, there is no need for excessive government intervention in order to transition to a carbon neutral economy. What is needed is a clear set of price signals to encourage businesses and consumers to stop using fossil fuels and invest in renewables. [Interestingly, it is the fossil fuel industry that has been the main beneficiary of government intervention globally. The OECD and the IEA estimate that subsidies to fossil fuel producers and consumers were $697.2 billion in 2021! Strangely, few climate sceptics claim this to be a form of socialism.]

Sources:

Damian Carrington, “’Reckless’: G20 states subsidised fossil fuels by $3tn since 2015, says report,” The Guardian, 20/7/21

Damian Carrington, “Global fossil fuel subsidies almost doubled in 2021, analysis finds,” The Guardian, 1/9/22

Rachel Williamson, “Global fossil fuel subsidies rocket to almost $US700 billion in 2021,” Renew Economy, 5/9/22

Joshua S. Hill, “Annual global fossil fuel subsidies jump to $1.7 trillion – just in the G20,” Renew Economy, 12/11/24