Wednesday, July 06, 2011

Free The Market!

Putting a price on carbon allocates resources most efficiently, from polluters to providers of sequestration services and renewable energy. The ‘hidden hand’ of the market guides the resources from the energy sources of the past into the energy sources of the future. Markets work most efficiently to the extent that they are free. A free market is a market in which economic intervention and regulation by the state is limited to tax collection and enforcement of private ownership and contracts. It is the opposite of a controlled market in which the state directly regulates how goods, services and labour may be used, priced or distributed rather than relying on the mechanism of supply and demand. The mechanisms for government intervention in markets inevitably create complexity. Complexity creates costs and acts as a disincentive to involvement. The development of the Positive and Negative Lists in the Carbon Farming Initiative as an attempt to simplify procedures for the approval of methodologies is in itself a testimony to this principle. The Lists are the main mechanism of regulation in a market-based instrument into which, with the best of intentions, the Minister and his Department have written themselves roles that will make proceedings slow and expensive.

Opportunities in the Carbon Farming Initiative will be revealed at the Carbon Farming Conference & Expo, 28-29 September, 2011

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