“It is governments of oil-importing developing countries that are likely to have the most urgent need for energy – and also the widest array of possibilities to meet that need”
There is never likely to be a perfect moment for introducing new climate policies. Long-run problems require policies that send long-run signals. And these policies cannot be constantly fine-tuned to the volatility of the moment. Attempting to do so only fuels further volatility (which is what really hurts growth). Now is always as good a time as any to take action.
And we should do so under no illusion that the transformative outcome we need will be a smooth, incremental process. Technological changes whip up gales of creative destruction. There will be – must be – many losers. But there will also be winners, as new technologies create new business opportunities. Governments that try to protect the status quo will not only fail on climate change; they will ultimately impose higher social costs, even as they fail to capitalise on the economic opportunities created by reform.
Climate-change policies must be steady and consistent. Action must lubricate change, not repeatedly stop it in its tracks. Once investors see that the fossil-fuel game is over, governments must let the effects of the resulting capital reallocation play out. It will be bumpy. But there is no other choice. Trying to fine-tune an economic and technical adjustment path would be as futile as trying to control the price of crude oil.