Cameron promises green carrots will drive low-carbon economy

Conservative leader David Cameron has today given the clearest indication to date of how he plans to marry his vision for smaller government with his party's green agenda, arguing that incentives rather than state intervention and regulations will prove more effective at curbing carbon emissions.

In a wide-ranging speech to the Sustainable Consumption Institute conference in London earlier today, Cameron reiterated his view that climate change represents one of the defining political and business issues of the age and underlined his support for the UK Climate Change bill and binding emission targets.

He also built on the theme of small government established in his speech to the Conservative Party Conference last month, arguing that the most effective means of cutting carbon emissions and promoting sustainable "meaningful consumption" is through a framework of incentives, carbon pricing mechanisms and close co-operation between business and government.

"Too often when government wants to influence people's behaviour, it carries a big stick rather than a carrot," he told an audience of manufacturing executives. "By that I mean it tries to stop something bad from happening by punishing it, rather than encourage something good to happen by rewarding it. If we're going to encourage a green consumer revolution, I believe we need to turn that thinking on its head."

He cited a US experiment, where providing households that recycle with tokens that can be redeemed at local businesses has led to a trebling in recycling rates, as a prime example of successful incentives. He promised that following successful trials by Conservative councils, the party was looking to roll out similar schemes more widely.

Building on another theme set out in his conference speech, Cameron also argued that greater transparency would promote low-carbon activities. He praised Conservative-controlled Windsor and Maidenhead Councils' scheme for publishing council office's energy use online and outlining proposals to force energy firms to publish information that will allows households to compare their use to the average consumption. "I believe this simple act will transform people's relationship to the energy they use – helping them save money as well as protecting the environment," he said.

Cameron said this relatively light-touch strategy would extend to any Conservative government's interaction with the business community, arguing that "co-operation with business is always preferable to coercion".

He announced that shadow climate change minister Greg Barker would head up a new working group with industry designed to ensure all new appliances and electronic devices sold in the UK have their "economy" modes as the default setting, adding that: "We're not doing this to boss business around - we're doing this because we don't want to resort to regulation."

However, despite the anti-big government rhetoric and his insistence that " we want to call time on the big government approach", Cameron also announced a number of decidedly interventionist policies.

He reiterated plans announced earlier this year that would effectively ban the construction of any new coal-fired power plant that did not include some element of carbon capture technology, and underlined his commitment to green taxation stating that a Conservative government would aim to "put a realistic cost on pollution and waste".

In particular, he said he would put a floor under the 2013 level of landfill tax at £72 per tonne until 2020, and would replace the Climate Change Levy with a "proper carbon tax that targets the most polluting sources of energy".

A spokeswoman for Cameron said that currently the Climate Change Levy is applied to all forms of energy undermining the incentive for firms to switch to renewable forms of energy, but that the new carbon tax would only target carbon-intensive forms of energy. She added the exact level of the new tax and the emissions it would cover had not yet been finalised.

Cameron also reiterated his commitment to a number of previously announced environmental policies that are also being pursued by the government, pledging that a Conservative government would introduce a smart meter in every home, launch a feed-in tariff to encourage roll-out of onsite renewable energy systems, and deliver a Green Deal that would allow households to undertake green home makeovers at no up-front cost and then pay for the service through their energy bills.