Canada joined two climate coalitions last week – and an economist says one of them will definitely raise prices for consumers.
In an interview with True North, UBC economist Werner Antweiler said market interventions from the “First Movers Coalition” (FMC) will spike production costs in several industries. He said the coalition’s mandate to push for more green technology use throughout the economy will be expensive, and companies won’t have much of a choice but to pass the cost on to consumers through bigger price tags.
“At the end of the day, somebody’s got to pay for it,” he said. “The higher cost has to be passed on somehow… money is not coming from ‘somewhere.’ And they are surely not going to go and take it out of the investors.”
As True North reported last week, the First Movers Coalition is a group of top global players that have agreed to steer money away from carbon-intensive production methods, and instead direct the money to clean technologies that cannot yet compete at a cost-effective level.
“There is no free lunch here,” said Antweiler. “Any new technology that replaces an older fossil fuel technology tends to be more expensive. […] At the end of the day, switching to cleaner technologies poses a cost that needs to get passed on, essentially, to the final users.”
After announcing that Canada joined the FMC last week, Innovation Minister François-Philippe Champagne said Canada is committed to decarbonization.
While consumers can expect these commitments to cause price hikes in the short term, it won’t last forever, said Antweiler.
The UBC Sauder Strategy and Business Economics chair said clean technology will become significantly cheaper over time. He pointed to solar panels as an example, and said innovation was key.
“That is the crux of the matter for all these industries that are hard to decarbonize,” he said. “We will only see massive changes in these industries if there are competitive new technologies that are sufficiently cheap.”
Antweiler said the First Movers Coalition is focused on industries that have costly gaps to fill between carbon-intensive and clean technology– and that we can expect to pay for the bridge.