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Friday 5
We need more carrots
10 January, 2025
Late last year, major fossil fuel and industrial companies including Shell, BP and Tata Steel signed a letter urging the EU to make less carbon intensive products more attractive to the consumer, demanding tougher mandates on high polluting products, subsidies for green technologies, and robust carbon pricing to make low-carbon alternatives competitive.
Their argument? Consumer demand is currently not strong enough for markets to solve the climate crisis alone. Without government intervention, green technologies—from sustainable aviation fuels to renewable energy—won’t scale fast enough.
Are they passing the buck to policymakers and consumers to delay immediate corrective action or are they making a valid point about the need for systemic change? Whatever your views on the first, they aren’t wrong on the second point. Lower carbon alternatives still often come at a higher price point, creating a financial decision many are unable or not willing to make.
But getting the policy balance right is no easy feat. The UK’s ‘net zero flight tax’ is already on the chopping block, having just come into effect. It’s designed to incentivise airlines to adopt sustainable aviation fuels by penalising high-emission flights; however, initial assessments from ministers suggest in a worst-case scenario it could increase the cost of flying by more than 20%. Whilst defenders of the tax suggest the actual cost increase would be closer to £4 per ticket, the resulting political backlash means the mandate may never actually leave the runway.
If this teaches us anything, it’s that government action can’t be all stick. Consumers desperately need the carrot. Encouragingly, the EU commission states it is currently investigating subsidising the cost difference between prices for regular commodities and their lower carbon alternatives, in exchange for commitments from companies to cut emissions. What that looks like is not clear. But it is a very large piece of the puzzle, which is currently missing.
By Budd Nicholson