Market forces spur green economy

11:12, May 06, 2010      

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Among entrepreneurs, the green economy is the hot topic of the day. But discussions always seem to focus on what steps the government is taking. This approach, however, downplays the role that market forces play.

A green economy can only be realized through the market. Furthermore, we don't know whether consumers are willing to pay for environmental protection and low-carbon products and technology. Without markets and prices, it is very difficult to develop a green economy.

First, the price is a signal to tell us what we should and shouldn't do. Who can tell us what degree of green development we have reached or how advanced is our low-carbon technology? The final answer can only be the price.

Second, the price is one kind of mechanism to inspire people to choose the correct action. If we want to save water, the most effective means is increasing the water price. Similarly, the most effective means to save energy is increasing its price.

Third, the development of a green economy finally comes from technological innovation. But price and profit are the important motivators behind green technology. If our petroleum price is high enough, it will induce more alternative-energy technology development.

Long ago, Western countries used whale oil for fuel. After the whale oil was used up and the price was extremely high, people were forced to discover petroleum. Now that petroleum has been used for more than 100 years, it is facing depletion. Therefore the future substitute needs a fundamental technical breakthrough, and the low-carbon market and carbon transactions will possibly be the most viable method.

Humanity is very ignorant in certain aspects. We fail to understand the influence our behavior has on the external environment. For example, we don't know to what degree humanity's behavior has caused climate change. But our experience has proved that the market is a good way to correct mistakes through price adjustment. Therefore, we should have confidence in the market to develop a green economy.

By People's Daily Online


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