Market solution to pollution

While the risks posed by climate change are compelling, it is also important to recognise the huge potential unlocked for business through a market-based solution.

By pricing pollution, Labor established a cost incentive for companies to lower their greenhouse gas emissions.

This has helped to foster and expand new and established companies to invest in services and infrastructure for a low carbon economy, such as carbon abatement and renewable energy.

Pricing pollution through a market-based solution allows the government to get out of the way and simply provide a regulatory oversight role.

Labor’s scheme recognised that the market establishes and develops the most efficient and effective means available to lower our greenhouse gas emissions.

Indeed, a considerable part of the business community has already embraced a market based solution.

The Australian Industry Group, for example, has long supported an emissions trading scheme.

The Group’s Chief Executive, Innes Willox, is on the record stating that, quote:

“Emissions trading is the cheapest and most flexible path to reducing emissions.”

[Innes Willox opinion piece, AFR 7/03/2013]

The Australian Industry Group’s policy mirrors the one Labor took to the election – to move from a fixed price to an ETS one year earlier than initially scheduled.

Also, linking Australia’s ETS to Europe’s would have expanded international carbon abatement, in line with our liberalised trade practices, ensuring our nation is well placed to profit from the international community’s progressive embrace of a market-based solution.


By and large, business recognises the need to act on climate change to preserve our way of life. They also recognise the potential released by pricing a commodity that was previously uncosted.

Costing pollution means companies have to think of the expense incurred by polluting and, therefore, find ways to mitigate it as much as possible. This ensures a more efficient means of production and a cleaner atmosphere.

Releasing this incentive through an ETS is the most efficient means of effecting a reduction in carbon emissions, encouraging economic and environmental sustainability in the process.


Too often, the policy argument for climate change is framed around economic growth versus environmental sustainability, but they essentially go hand in hand.

Of course, the profits to be made in a low carbon economy form as much incentive as the costs associated with inaction.

Climate scientists produced research published in the journal ‘Nature’, warning that the the melting of the Arctic permafrost could slash $60 trillion from the world economy if nothing is done to mitigate the effects of climate change.

Melting of the permafrost would release huge methane reserves that scientists predict will cause global mean temperatures to rise by over 2 degrees, 15 to 35 years earlier than previously thought.

Considering the global economy was worth around $70 trillion last year, this research highlights the financial cost of not acting, as well as the incentive to act.


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