While the drama of the credit crunch has grabbed the headlines, a far graver market failure has been unfolding backstage.
Climate change, losses of wildlife and the increasing scarcity of water, forests and other resources, will have a longer-term impact on our economy than today’s credit crunch.
A recent report, published by the European Commission, estimated that losses of biodiversity and ecosystems worldwide – natural systems such as carbon and water storage from which we benefit – cost between £1.3 trillion and £3.3 trillion every year compared with losses in the financial sector of £0.7 trillion to £1 trillion.
The Chancellor had the opportunity on Monday, in the Pre-Budget Report, to design a package of measures to address the current crisis, while at the same time heading off the next big market failure that threatens to derail our economy.
He chose not to do this and instead, will invest only meagre sums in low-carbon initiatives that will do nothing to help.
The new distance-flown tax that replaces air passenger duty (APD) will not help either. Like the two-tier APD, the four-class distance tax will do little to discourage flying. It will not force airlines to fill their planes, so reducing the number of flights, particularly domestic and European jaunts. And that’s the point.
Mr Darling did promise us 200 more train carriages but it’s not clear whether they will be used to ease the rush-hour crush or compete with short-haul airlines. More tellingly, those 200 carriages were already on order.
But worse, the government diluted changes to vehicle excise duty stalling the incentive to buy less polluting cars. Instead, duty will go up by just £5 next year for the worst offenders and by £30 in 2010 rather than £90.
And since we’re at the wheel, drivers will also dodge any increase in fuel prices because the 2.5 per cent cut in VAT will cancel out December’s 2p/litre rise in fuel duty. Carry on driving.
Without doubt, Mr Darling had a tough job on his hands. Most financiers believe economies will get worse before they get better.
That meant the Chancellor took on a record-busting debt but not the looming environmental crisis now idling around the corner.
There was one good thing though: there will be more funds for wind power through the extension of the renewables obligation, which is a good thing.
And perhaps there’s something the RSPB can offer in return: a report we’ve published today shows how at least £2 billion could be saved by looking again at ways of generating green energy from the Severn Estuary.
With all that debt, the odd £2 billion could be quite a useful saving for this frazzled government and its beleaguered economy.
Read the Commission’s report here http://ec.europa.eu/environment/nature/biodiversity/economics/pdf/teeb_report.pdf