‘Creating a new UK carbon market will be the foundation on which the UK achieves net zero emissions cost-effectively,’ reads the government’s new White Paper on Energy. It has promised to establish a UK ETS (Emission Trading Scheme) to replace the cap-and-trade system pioneered by the EU, in which energy-intensive businesses receive allowances to emit greenhouse gases and are obliged to buy more if they cross their threshold.

Since it began some 30 years ago, climate action has largely been based on the assumption that a market-based approach works best. Unfortunately, the EU ETS, the world’s largest trading place of this nature, has been marred by regulatory glitches, attempted fraud and, above all, too many years of low allowance prices that didn’t put a reasonable premium on emissions.

In their book, Making Climate Policies Work, published last December, Danny Cullenward (a lecturer at Stanford Law School) and David G Victor (professor of international relations at UC San Diego) argue that market-based strategies have not only fallen short in the past, ‘but they will keep failing the elements of deep decarbonisation that will be demanded as awareness of the climate crisis grows’. The two American climate experts maintain that market forces ‘can help optimise the allocation of resources, but they aren’t that good at leading massive industrial transformation’. Deep decarbonisation means actually accomplishing the hard target of net-zero emissions by 2050, as set by the UK into law.

This is not to say that progress hasn’t been made. The previous White Paper on Energy, released in 2007 when Tony Blair was prime minister, aimed at a 20 per cent share of renewable energy by 2020. In reality, more than a third of the UK’s power generation now comes from solar, wind and hydro-electric sources. The EU ETS contributed to this achievement, but was certainly not the sole cause.

The new white paper states that ‘the UK is open to linking the UK ETS internationally and we are considering a range of options’ – as if there were lots of options. Emission trading has been adopted by a few US states, a few Canadian provinces, China, Kazakhstan, New Zealand and the European Union. Guess who the UK should be partnering with...

‘What politics must do is create the incentives for industrial transformation,’ wrote Cullenward and Victor, who believe in straightforward climate policies. The market’s invisible hand may lend some help. But deep decarbonisation requires a big, visible hand, too.