An efficient economy does not perpetuate the misallocation of capital it punishes it. The structure of our economy is broken. The governor of the Bank of England calls it "the tragedy of the horizon"; that point beyond the standard market outlook of 2-3 years where companies fail to anticipate and account for the impact of challenges to their prosperity such as climate change or environmental degradation.
Mark Carney highlighted the carbon bubble at last year's World Bank/IMF meeting and now the Financial Policy Committee has been tasked with assessing climate risk as part of its regular horizon scanning on financial stability. In response the market is catching up to the danger of organisations that remain wedded to fossil fuel power and inefficient resource use.
We are approaching a tipping point where the market decides to price fossil fuels as a liability and not as an asset. This is the point at which some of Britain's largest companies may fail. At that moment a Conservative Government will throw away its free market fundamentalism and use public money to bail out these companies.
I do not know what a future Labour Government would do, but I know what they should do: build an economy in which high carbon investors are no longer key drivers of our growth and prosperity. We must learn the lessons of the 2008 crash: no company should be able to become too big to fail.
Labour must deliver a transition that allows the carbon bubble to deflate rather than burst. That means an Apollo-programme scale investment in research and development for renewable energy, and it means new jobs in communities where these companies are the major employers.
This is what Yvette Cooper called for yesterday with her commitment to zero-carbon growth. Labour's Climate Change Act and our other reforms, including the Green Investment Bank, have been the foundation for the huge growth of Britain's green industries. Yvette has shown how Labour can make a clear economic argument that draws on our greatest successes in Government and demonstrates that we have learnt the lessons of the financial crises. Her arguments on decentralised energy, carbon capture and storage, and the need for massive investment in research and development are exactly right.
Right; but only the necessary first steps that Labour must take to place the low carbon transition at the centre of its economic strategy. Yvette and any other future leader must show that Labour can combine ethical and environmental sustainability with a strong business friendly economic model. A Labour government must follow this up with clear targets to stimulate investment, tough regulatory frameworks to require best practice and protect public goods, company reporting standards to level the corporate playing field and the elimination of perverse subsidies.
The Labour leadership contest is fascinating because it is pitched as a battle between heart and head, ethical integrity and economic competence. These are false alternatives. Yvette's remarks show that a green growth economic model can reconcile competence and integrity in precisely the way that Labour at its best has always sought to do.