Market Wimps – Why we need more CEOs like Grant King


The latest calls for delays to action on climate change in Europe and Australia shows just how weak our captains of industry and their political supporters are when it comes to their commitments to markets. It exposes their Stalinist, command and control tendencies and reminds us, despite their protestations otherwise, they really are more comfortable with oligopolies and private gatherings in the old club, than with the rough and tumble of a genuine market.

The transformation of the economy to a low carbon one requires change driven by new incentives. This should be music to the ears of anyone who believes, as I do, in the innovative power of people and markets when given the right incentives. Yes, change can be hard work and must be managed, but it sorts out those who are innovative and courageous, those prepared to have a go, from those lazy, over protected sections of the economy that need shaking up for the greater good.

This of course is what our captains of industry argue about markets, that if we expose our ideas, technology and management capacity to the rigours of an open process of capital allocation then the best will rise to the top. That is why many of them are so nervous and now scream for protection, because they fear that their day is coming to an end and more innovative technologies and companies will replace them. So they seek any excuse to slow down that process.

A classic example of this is the debate over trading vs taxes. The corporate sector argued strongly for trading as the most effective and efficient method of identifying where capital should be directed to cut CO2 emissions. They were right to do so as a well-designed market for carbon, without free allocation of permits, is the right answer. It lets government guarantee a steadily reducing level of CO2 pollution (the cap and trajectory) and lets the market find the right price to achieve it.

Having argued for this, many so called market advocates then wimped out and started complaining about “certainty” – that they would face uncertainty on price. Well duh, that’s what markets are, a way to set the price given limited but unknown supply. So now the market advocates seek government intervention – compensation, price caps, longer term trajectories and delay – anything to avoid this being a real market.

There are notable exceptions, such as Grant King at Origin Energy. Origin has long recognised the inevitability of a carbon price and argued strongly in favour of one, even when it was very unpopular in the corporate sector to do so. King was a part of a small group of CEOs – the Business Roundtable on Climate Change – that pushed the Howard government to act, despite derision from the conservative members of the BCA.

Beyond policy advocacy, Origin saw the writing on the wall and invested in gas and renewables and positioned their brand as a green one with consumers. So now while the market wimps are calling for protection and delay, Origin is saying “bring it on”. Their recent submission to the government called for stronger targets than Garnaut. No wimps there.

The business community needs to decide if they want a market solution or not. Either they face up to the market and let it do its work or get out of the way and let government regulate a command and control solution. You can’t have it both ways and if we don’t get to work on the market approach soon, the heavy hand of government will be the only option left.

3 thoughts on “Market Wimps – Why we need more CEOs like Grant King

  1. “You can’t have it both ways and if we don’t get to work on the market approach soon, the heavy hand of government will be the only option left.”

    I’m not standing in the way of the CPRS, but I’m convinced we have to do a hell of a lot more, and very quickly, if we are to still have a chance of avoiding catastrophic climate change.

    On current trends the Arctic will be free of sea-ice in summer by about 2013. That’s one of our polar ice-caps gone missing, for part of each year.

    There’s nothing we can do now to prevent that. The resulting Albedo flip will add several degrees of warming to the whole Arctic region.

    I can’t see how we can allow that situation to carry on for decades and still avoid catastrophic climate change, such as the melting of Greenland’s icesheet and thawing of permafrosts. Can you?

    Hansen has shown from paleo-climate records that Garnaut’s target of 450 ppm is very likely enough CO2 to eventually melt all the ice on the planet, ie an 80m sea-level rise. Hansen believes we need to return below 325 ppm to have a chance of restoring the Arctic sea-ice. Seems reasonable, given that we’ve never seen more than 300 ppm for at least 600,000 years, no?

    We are now at 387ppm and IPCC models say that “strong” targets of 25-40% reduction in developed countries by 2020 would be required to stabilise below this 450ppm target. That might be doable with strong market incentives, but 450ppm means aiming for runaway warming, not a safe climate.

    To restore a safe climate, we need genuine emergency action now to reduce emissions to near-zero as soon as possible and start drawing down atmospheric carbon before the positive feedbacks from the Arctic melt and other recent changes make runaway warming inevitable.

    And that means that, while a market solution may be necessary, it is nowhere near sufficient to avoid catastrophe.

    We don’t fight wars just by introducing taxes or market incentives! In WW2, countries devoted up to half their GDP to the war. That’s the kind of effort we need to save the planet.

    Which is why I’m putting my own efforts into mobilising my part of the global community to support genuine emergency action, and to ditch this softly, softly pantomime.

    Do you agree? This seems a little different to your own conclusion:

    “As for me, I have new work to do. I now understand my highest purpose is to motivate large numbers of people from all walks of life to act. We all now need to personally engage, in whatever way is appropriate in our circumstances, to slow down the crash and to get our society as ready as we can for the challenges ahead. So I’m going to talk, write, guide and support people, to help them do so.”

    This seems to be based on the idea that the “crash” will be survivable. I agree the initial social or economic shudders may be survivable – the current financial crisis is a case in point – but if we fail to prevent runaway warming, that’s game over.

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