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I'm not sure if an individual choosing a "green energy supplier" is making any difference.

My (potentially naive, uneducated) logic is as follows:

higher demand for green energy = less demand for other energy

Less demand, therefore lower price, those who are polluting the most now have fewer incentives to switch. Supply and demand, elementary market forces.

I would like to better understand if choosing green energy makes any difference?

Personal note: I'm in the camp of effective altruism. In my version of reality, giving £1 to a homeless is a selfish "feel good" act that does solve the underlying problem of education, employability, affordable housing, mental health support, resilience and life skills.

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Your intuition is correct, actually switching from dirty good to clean good will also increase demand for clean good so price there might increase as well. However, this does not mean doing some voluntary change could not help as it also depends on how the quantity demanded changes with price (elasticity of demand). So switching is not necessarily unhelpful.

However, at the same time it is also only a partial solution. In order to fully internalize the externality it’s necessary to apply Piguvian tax to the dirty good at a level that fully internalizes the externality to people consuming the good.

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  • $\begingroup$ "The full solution" - for me the solution would be to remove FREE ALLOWANCES - ec.europa.eu/clima/policies/ets/allowances_en - if someone was polluting in the past, now they have permits to pollute for free. I believe that if all the energy was treated equally it would make CO2 heavy operations more expensive, therefore less competitive. $\endgroup$ – Mars Robertson Dec 2 '19 at 11:51
  • $\begingroup$ @MarsRobertson yes that’s definitely bad. That’s why I said that the full solution is to use Piguvian taxation and why I did not say that the solution is to hand out free pollution permits based on historical data $\endgroup$ – 1muflon1 Dec 2 '19 at 11:58
  • $\begingroup$ I was discussing on the syntax semantics level - "the full solution" vs "the solution" - I don't think taxation is the way, I think that deregulation (removing free allowances) is the way. I haven't run a large scale economic simulation yet but I thought about it a lot in my book: genesis.re/book (it's FREE, information always wants to be FREE) $\endgroup$ – Mars Robertson Dec 2 '19 at 15:41
  • $\begingroup$ @MarsRobertson let me put it this way in standard economic analysis to fully solve the externality you need to impose some Piguvian tax. I was not making value judgements, those are outside the realm of economics... but within the confines of economics the Piguvian taxes are full solution in a sense they fully correct for negative externality. Maybe full was not fortunate wording I edited my answer to “in order to fully internalize externality” $\endgroup$ – 1muflon1 Dec 2 '19 at 15:51
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Two things:

  1. The price reduction on the polluting good helps consumers of the polluting good, but also hurts producers of the polluting good. This results in less output and, in the extreme, market exit by the least-efficient polluting firms. A full analysis would be needed to show which effect wins in the end as far as overall emissions go.
  2. This is accelerated by imposing a Pigouvian tax on the polluter, both by raising the price of production for polluting firms and through revenue-recycling (which, when done properly, either raises incomes, accelerates the fall in price of green energy options, or some mix of both).

Of course, this is all airy-fairy stuff. A Pigouvian tax is challenging to enact, because on the global scale, enacting one is a kind of Prisoner's Dilemma. Hence output-based allocation systems for high-emitting, trade-exposed industries right or wrongly advocated on the grounds of "competitiveness".

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