It’s not everyday you get to hear a lecture from a Nobel prize winning economist, but I got the chance to see Joseph Stiglitz at the University of Queensland yesterday and I'm glad I did.
Stiglitz's talk covered the reasons behind the GFC, the good and the bad things governments have done since then (summary: stimulus good, austerity bad and risks a return to recession) and some thoughts on how to get the global economy moving again. This presents a problem because we don't want another bubble, debt driven consumer consumption is out and monetary policy has little room to move (ie: you can't reduce interest rates below zero).
So, how to stimulate global aggregate demand and do so in a way that reduces the impact we have on the planet? What we want are policies that provide stimulus in the short term and sustainable growth in the long term.
One answer is a price on carbon.
Because, Stiglitz explained, a price on carbon will drive massive business investment in low carbon technology and products; and business investment is what we need to stimulate global demand (and I would imagine, to create jobs). Except this time we will be growing the economy by retooling for a low carbon future.
Whenever you hear that businesses are waiting for "certainty" on a carbon price before investing, this is what they are talking about. A carbon price makes investments in low carbon tech both necessary and profitable. The earth's atmosphere, as Stiglitz said, is a scarce resource, there is only so much pollution it can handle, but right now that pollution costs nothing so markets are "free" to pollute and damn the long term consequences.
To give an example of this business investment what we are all missing out on, here's an excerpt from Thomas Friedman's column in the New York Times from the weekend.
Lew Hay, the C.E.O. of NextEra Energy, which owns Florida Power & Light, one of the nation’s biggest utilities, e-mailed to say that if the Senate would set a price on carbon and requirements for renewal energy, utilities like his would have the price certainty they need to make the big next-generation investments, including nuclear. “If we invest an additional $3 billion a year or so on clean energy, that’s roughly 50,000 jobs over the next five years,” said Hay.
This is from the US, but I imagine something similar would apply here and it's just one company, imagine if it was the whole economy.