By Daniel Lacalle*
If we want a true alternative to fossil fuels that improves the environment, reduces emissions, and strengthens global welfare, it will only come from the free market.
Historical evidence and economic incentives show us that interventionism and socialism never protects the environment; they only use it as a subterfuge to increase control of the economy while subsidizing polluters under the excuse of “employment” using the term “strategic sectors.”
Interventionism, in fact, puts all obstacles to technological innovation and disruptive developments:
First, because technology and competition reduce government power when it comes to price formation and economic vertebration of society. This means the state is the one picking winners and losers, as well as when, where, and how to spend.
Second, because disruptive technology is disinflationary and it does not allow governments to fill bloated companies with political jobs in inefficient conglomerates controlled by political power. The fundamental reason why interventionism will never defend the environment and innovation is that it detests competition and technology and competition weaken its power.
However, in the protests we see in the media throughout the West, the silence is deafening about the most interventionist economies controlled by governments and their state-owned companies, which are the world’s worst polluters. That is why it is sad that something that we should all support — protection of the environment — becomes (like so many other objectives shared by all) a propaganda instrument to whitewash the most deplorable and absolute form of interventionism.
This is not about protecting the environment, but about protecting political rent-seeking, which is very attractive to the most interventionist politicians because it is the only way to continue exercising a power that escapes their hands when there is real competition, technological improvement, and transparency.
The reality is that the interventionist systems never defend the improvement of the environment, but aim to appropriate the climate banner to do the opposite and then blame the nearest external enemy. The politicization of climate action does not defend the environment, but whitewashes interventionism. Hence the silence on the environmental records of highly interventionist regimes like China and Iran.
China has approved to build more installed coal capacity in the next twelve years than the entire current US capacity and almost double that of the European Union. Meanwhile, Iran is the country that subsidizes fossil energies the most.
The biggest subsidies to pollution are, surprise, all in countries with low economic freedom, governments with maximum control of the economy and with state-owned companies. Of the 147 countries that have ratified the latest environmental agreements, in more than 90%, the companies, and polluting sectors are 100% public (the producers of the petro-states, the largest coal plants, steelworks, etc).
Of course, it is very easy to be an “activist” in open economies, railing against publicly listed companies that are the solution, not the problem. It is very easy to raise taxes on citizens with an environmental excuse while subsidizing the most polluting sectors.
Don’t you find it amusing to read that countries that tell us that they have an unquestionable environmental commitment have, at the same time, refineries and coal plants as large pillars of state investment in the next ten years? Not because they are needed – these are two sectors where there is overcapacity at a global level. This is done because what interventionists always promote by definition are white elephants. They build things for the sake of building.
When competition is ignored or rejected, and economic logic in investment is abandoned, governments never promote change, they only disguise inefficiencies with good words.
Those activists – not all – who are attacking innovative leading companies and open economies, which are the solution, do not do so due to lack of information or ignorance. They do it because their goal is different. Some climate activists are happy to join totalitarian governments, theocracies and dictatorships (whether pollutants or not) to destroy what little is left of the free market in a western world that is drowned precisely by interventionism.
Some climate activists seem fixated on attacking companies that have been successful at leading technology, sustainability and environmental change, because the goal is not to have efficient champions who are capable of leading by creating employment, strengthening their position and growing in the world. The goal is to expropriate them to fill them with political positions, exactly what has led global state oil companies to destroy value, efficiency and perpetuate overcapacity.
It is not that the interventionists are foolish or incoherent in their silence with Venezuela, China, or Iran and their attacks on US companies that improve the environment by innovating and growing. The objective is that competition and private innovation, the two factors that will continue to improve the world, reduce poverty and create wealth, disappear.
This is the sad thing about politicians who call themselves progressive and in reality are regressive, what they want is to have state conglomerates that sink competitiveness, and distribute positions by political designation. This is the perfect formula to annihilate innovation and change.
There are only two ways to solve environmental challenges: competition and technology. No government obsessed with power and price controls will defend those options. They will eliminate them. And it’s happening in a country near you right now.
Interventionist governments want inflation and control. Technology and competition destroy those two factors.
Technology and competition can only happen in a capitalist system where the incentive to innovate is rewarded by success and creative destruction of the obsolete sectors with the growth of the productive and innovative ones generates more and better welfare for all. This can only happen in capitalism. Economic freedom is the only guarantee of environmental protection.
Decarbonization is unstoppable, but it would be even faster without the pitfalls of those who today present themselves as saviors of the Earth while in reality they just tax citizens to perpetuate polluting “national strategic champions”.
Technology and competition can achieve decarbonisation faster and more efficiently. But technology and competition reduce prices and curb government control, two things governments hate.
Only free markets give the solution to climate challenges.
Source: This article was published by the MISES Institute