The article in the url below is a reaction to the UK Prime Minister's recent announcement scaling back his government's commitment to phasing out internal combustion engines in cars:
"The science is simple: halting the rise in global temperatures requires getting to net-zero emissions. But the politics is hard: getting there will require every one of us to end the use of many carbon-emitting devices. And so pundits viewed it as a mere political maneuver last week when UK Prime Minister Rishi Sunak announced he will be delaying the end date for the sales of fossil-fuel powered cars from 2030 to 2035. The prime minister argued it should be market demand — not government bans — deciding the pace of EV uptake."
What I found particularly interesting is that the graph in the article presents a comparison between the predicted adoption rates of EV cars, in the UK, for government-mandated coercion vs. market-based consumption. In other words, it shows the adoption rates if the government bans fossil fuel combustion engines in 2030, versus the expected adoption rate if market forces drive consumer decisions (through efficiencies and lower prices, increased technology and design, etc.).
This is interesting because I don't think I have seen such a direct comparison, before. The element missing from the analysis in the article is what markets are best at – identifying the optimal technology. In others words, if we rely on government mandate, the 'wrong' (or sub-optimal) technology may be forced on everyone. In contrast, if market forces are allowed to play out, a competing technology might emerge as costs decrease, technological awareness increases, along with competition among firms to develop the 'winning' design.
In other words, while government intervention might be the quickest pathway to full adoption, it might not be the 'best' pathway and, even worse, might generate unforeseen consequences that have other negative implications.
The other factor, of course, is whether we have the luxury of allowing the market to decide, given that we have waited so long, to date, and have distorted the market through things like fossil fuel subsidies, for so long.
Take care
David
David Chandler
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Why Ban CO2-Emitting Cars if the Market's Moving Against Them Already?
By Akshat Rathi
September 26, 2023
Bloomberg
