The market rules, okay?

Climate change solutions, says Ciwem executive director, Nick Reeves, cannot be left to the market nor to personal conduct alone

The Stern Report, published last October, was, well... stern. Commissioned by the Treasury, it was aimed at a global audience and, in particular, those who have peddled the myth that action on climate change was unaffordable.

It warned of climate catastrophe unless all countries (especially the big polluters) do more to curb their carbon emissions. What Sir Nicholas Stern said was nothing new, though, and articulated what had been obvious to most of us for some time. But it received a fanfare of media interest.

His words carried weight because Stern is a big beast among economists, a former panjandrum of the World Bank, and not one of the usual suspects from the green movement. And Stern forced us to consider, for the first time, the greater economic cost of not changing the way we live. Previously, all the talk had been of the high (but relatively lower) cost of doing nothing.

So, when Stern told us that the market had failed, politicians believed him. For them it was a eureka moment. And we will surely see the introduction of green taxes, the end of cheap flights, a purge on gas-guzzling motor cars, and a price on carbon. The cost of going green, said Stern, will be 1% of world GDP. The cost of business-as-usual could be as much as 20%, and an economic recession of devastating magnitude. He has now handed the hottest of political hot potatoes to our leaders. How will they react?

But, when it comes to the environment, we must, like Dr Johnson, have many passions, but few illusions. This means that, in our determination to act, we should avoid the sense of hopelessness as we stagger like a drunk towards the edge of the cliff.

It's time to stop asking whose job it is to prevent climate change. Taking personal responsibility to save energy and water in our homes is fine but, as Stern says, we need governments to get to grips with the big picture and treat climate change as a matter of foreign and economic policy.

We need governments to take a lead. Leaving it to consumers, activists and NGOs is just fiddling around at the margins. There are some signs that this government has bent to pressure from green groups (including from Ciwem) and that it will set binding targets on carbon emissions. On the same day, last October, that the UK government announced that it was going to publish a new Climate Change Bill (which would create a new independent body dedicated to the science of climate change that would set targets on carbon emissions) there was an interesting speech by foreign secretary Margaret Beckett.

She said: "This [global warming] is not just an environmental problem. It is a defence problem. It is a problem for those who deal with economics and development, conflict prevention, agriculture, finance, transport, innovation, trade and health". And she's right. No longer can environmental issues be filed under E, and given to one minister to deal with. This is the cross-cutting issue to trump all others.

Unfortunately, Margaret Beckett and her entourage flew to Berlin to deliver the speech, which added to the 1,000 tonnes of carbon dioxide generated by cabinet ministers in one year. Anyway, putting that inconvenient truth aside, the significance of the speech was that it was made by a foreign secretary, and not an environment minister. This indicates at last that climate change will run right through all future foreign policy.

Stern is clear: the environment and economics are inseparable. Beckett is clear: the environment and foreign policy are inseparable. As Beckett said, wars over resources such as water, land and fuel are as old as history. Darfur-like wars, where conflict between nomads and pastoralists over water, land and grazing, are not new. And, as the climate changes, there will be other Darfurs. The UK is now dependent on Russia for gas and the Gulf States for oil. What would it take for us to be held to ransom and for the lights to go out? Even if climate change did not matter, there would be a hard-headed realpolitik reason to kick the oil habit and go clean.

If the environment is a foreign and economic policy problem, then it must be true that foreign policy is part of the solution. Carbon emissions do not recognise borders and so, global treaties, accepted by all nations, can be put in pace to stop the world from choking. But is that likely when the US is barely emerging from denial?

But what about the EU? It has a massive e120B (£81B) budget. Sceptical feelings aside, the EU has a lot of clout. It can encourage eco-innovations, alternative energies and more efficient gadgets. It can also do more of what it does best - regulate those that cause harm out of existence. It could go one better and cosy up to China for a low-carbon free-trade area, a single market for low-carbon technology.

Bright young people in governments all over the world are wrestling with the right blend of taxes, regulations, incentives and trading protocols that might stop the world from frying. Public servants know that the private sector will be spending around £9 trillion in the energy sector between now and 2030. They also know that their powers are few, and that the best that they can do to ensure that the money is spent in the right areas is to push, prod and cajole.

But, a worrying thought is that governments are very limited in what they can do when they no longer control the economic levers. If they did, they would surely have acted by now. Instead, they live in hope that the market will work its magic and that the behaviour of the polluters will change - just in time. And time, of course, is what we don't have.

We won't revert to state ownership (and in any case state-owned enterprises were just as dirty and polluting as those in the private sector) and the command economy. Yet, if ever there was a time to worry about the power and the pre-eminence of the market, it is now.

Make no mistake, it poses a mortal danger to us all. As Stern said, our changing climate is the biggest failure of the market, ever. Bigger than any war and the Depression of the 1930s combined. And that's big.

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