Green, Easy, and Wrong

TWO pressing problems face the world: economic meltdown and global warming. Conveniently, a solution presents itself that apparently solves both: governments should invest heavily in green technology, thus boosting demand while transforming the energy business. Isn't that neat?

No. Mr Obama’s commitment to solving climate change is devoutly to be welcomed. There is also a case for giving the economy a boost through government spending. But combining the two by subsidising renewable energy is, like many easy answers, the wrong solution.

Governments can discourage companies and people from producing CO2 by making polluters pay or by reducing the costs of clean energy. Europe does both, through a cap-and-trade system (which caps CO2 emissions and requires companies to buy permits to pollute) and through subsidies. Mr Obama is, quite rightly, planning to introduce a cap-and-trade system, but he is also promising massive subsidies.