But ‘fake markets’ such as you propose creating for fuel efficiency of imported cars – they always make me suspicious. They’re always harder to get right than people think.

Take your example of fuel efficiency. You could do all sorts of funky or odd things relating to the efficiency of cars being imported. So: is one vehicle’s efficiency equivalent to anothers? Because forcing a truck to the same standards as a car is unfair… but if you try to have two standards you distort the market (this is where SUVs came from – they managed to get classed as ‘trucks’ in the US for vehicle emission standards, which made them cheaper to produce than many cars).

If you want to make use of the invisible hand to improve fuel efficiency, then don’t mess around trying to create a market in fuel efficiency. Just slap a whopping huge tax on petrol. That will cause the invisible hand of the market to sort things out. The irony is that this would be seen by many commentators as the Greens ‘interfering with the free market’ – whereas absolute fuel efficiency standards would just be seen as govt regulation as usual.

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The state, in consultation with its citizens, writes the rulebook. We agree there I wasn’t trying to say that my take on a possible system is better than yours either, merely showing it all comes down to the old political game of who sets what and how.

It seems the Greens are on the cusp of something big, if only they can lose the watermelon suit.

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I do have this sense, though, that it’d be easier to improve the fuel efficiency of the car fleet by dealing with which cars enter the country, rather than by trying to improve those that are already here.

It’d also concern me that the poor, who would at the moment tend to have the oldest and thus probably the least fuel efficient cars, would be disproportionately hit by any market mechanism on cars already here. And I do believe businesses, just like individuals, should pay for the environmental effects of their actions, so I don’t see it as too problematic that car importers would have some constraints on what cars they bring into the country.

Whatever: the point is, whether we use your model or mine for improving the fuel efficiency of the car fleet, is that you can only utilise a market mechanism if the government sets its parameters in the first place.

And as for the Greens being more Red than Green thing (or “The Watermelon Greens” as some like to call us), I think this is more a media creation than a reality. When it comes to economic policy, the Greens certainly do not conform to the socialist dichotomy of market is bad/state is good. The NZ Greens are comfortable with market mechanisms being used to solve certain environmental problems. Kyoto has our support. The fuel efficiency example I sketched above is one that Jeanette has been advocating for a good while. But I keep coming back to the same point: you can’t use market mechanisms to address issues without government setting the market’s parameters in the first place.

Sure, there are some aspects of Green policy which seems to come from a traditional leftist standpoint, such as views on foreign ownership and free trade agreements and foreign policy. However, at core, all of these policies are actually built around an attempt to preserve human rights that the Greens hold very dear, not some innate belief in the inherent virtue of an all-powerful state. To be sure, there are arguments around whether these policies do in fact uphold the human rights they seek to uphold, but that is what, in my view anyway, motivates them.

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The NZ Greens are perceptually placed amongst their overseas lookalikes in Europe and America, in that they are seen to be more Red than Green. If the Greens are to gain more political credibility and mainstream support, they must clear the air and admit that free market mechanisms are the best tool for the job.

The carbon credits model is great. It uses the market to set the price of minimising harm, thus relieving everyone of a great deal of red tape. Setting the right initial conditions, however, is not so simple.

Taking your example of polluting cars. Why should the burden of pollution charges lie with car importers? A poorly-maintained car pollutes worse than a well-tuned one. Pollution is an ongoing opportunity cost, and therefore would be more applicable as a WOF debit/credit.

“Oh great,” says the consumercitizen. “Another running cost.” Such a policy is all stick and no carrot. “Ah,” says the new, improved Green economist. “If your car has above average efficiency, you get a credit to trade on your WOF.”

“Nice one!” says the consumercitizen. “The market rewards me for being environmentally friendly! A responsible petrolhead with a tuned-up car could trade this credit for a noise pollution debit on their Bass Amp.”

It’s overly-simplistic, but I hope you see my point. There are other factors to take into account regarding car pollution. Allocation, distribution and definitions of these factors need to be clarified if any system is to be effective, let alone understood by the public.

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