Before delving into the depths of GC, it must be noted that a large part of the challenge for climate change activists is changing social attitudes and endorsing a sense of collective responsibility. Whilst this is a discussion well worth having, this article is going to focus on the practical implementations of GC. An initial starting point is to figure out which sector, public or private, is most adept for initiating GC policies.
Considering climate change action is in the greater public interest, there is an argument that these policies should come from the public sector. After all, it is true that responding to the climate threat requires strong government action at all levels – the architecture of national and international regulation is vital to responding to the challenge of climate change. However, it is worthwhile dispelling the myth that the private sector is ill suited for implementing GC policies as some of them may well not be profitable.
Free markets constrained by law and regulation have been the preferred means of producing most private goods, with a degree of collective harmony, by most of the rich economies of the world over the last century. Markets work by incentivising people to prioritise and economise on scare resources, laws by expectations and sanctions making the law abiding keep within permitted boundaries. Certainly, much can be done with incentives: subsidies for renewable energy and responsible land stewardship, for instance. On this view, the most important first step is regulatory, to establish a carbon price within a deep and liquid global carbon market or set of interlocking markets, either by cap-and-trade or by a carbon tax. Following this methodology, we will likely be a large part of the way towards solving the problem by incentivising the introduction of appropriate technologies and penalising inefficient practices.
Many companies and investors are already demonstrating leadership and others are ready to align their agenda with the right policy signals. Regulations and incentives that hamper the shift to a low-carbon and more circular economy should be reformed, such as subsidies, tax breaks and regulations that encourage unsustainable activities. A big push on innovation, in particular through international partnerships and financing to tackle challenges beyond energy, is needed. This can be achieved, in part, by accelerating investment in sustainable infrastructure, supported by clear national and international strategies and programmes. This is a central driver of the new growth approach. It requires integrating climate action and sustainability at the heart of growth strategies, investment plans and institutional structures to facilitate the flow of public and private finance. It could include investing in areas such as the natural infrastructure that underpins our economies, such as forests and wetlands.
The struggle to combat climate change brings out the best and worst of capitalism. Decarbonisation of the economy requires alternatives for coal and cars that run on diesel and that plays to capitalism’s strengths. Innovation is a large part of what capitalism is about and there has been staggeringly rapid progress in developing clean alternatives to coal, oil and gas. The cost of producing solar and wind-powered electricity has collapsed. Costs of producing and running wind and solar technology have dropped 60% since 2009 and we are expecting another 40% reduction over the next 10 years. So what started as a decarbonisation process, thanks to better technology, is about to become a process driven by cost and economics. In wind technology we can now see bigger blades and bigger turbines which can produce maximum power on a much lower wind speed. What used to require 20 knots now only requires 10 knots, so the output produced has been significantly improved which, in turn, greatly improves the economics of the technology. Furthermore, great advances are being made in battery technology which is vital for the new generation of electricity-powered vehicles.
The next 10-15 years now represent ‘use it or lose it’ moment in economic history. It is expected that around $90 trillion will be invested in infrastructure by 2030, more than the total current stock. Ensuring that this infrastructure is sustainable will be a crucial determinant of future growth and prosperity. The next 10-15 years are also essential in terms of combatting the real effects of climate change: unless we, as a planet, make a decisive shift by 2030, we will pass the point by which we can keep global average temperature rise to week below 2C. We have a remarkable window of opportunity to do so now, given the major structural changes the world faces, notably rapid urbanisation, increasing globalisation, shifts to service-based economies and increasing automation. The transition to a low-carbon, resilient economy is just one part of this broader transformation which, if managed well, has the potential to deliver more equitable and prosperous growth.
A key mechanism of GC is known as true cost pricing, the concept is to factor into consumer prices the fuel costs of clear-cutting forests, fossil fuels extraction and refining and all the bigger processes that go into making the most basic things we use in our daily lives. According to GC, this would create greater market transparency and, in doing so, the fewer resources a manufacturer uses in producing something, the cheaper the product would be. Market transparency is essential within GC, not least because it adheres to Adam Smith’s notion that if a market is transparent and consumers have full information then they’ll make rational choices. In turn, those marketplace decisions will encourage ecologically sane production.
It can be argued that the climate crisis in front of us is a problem created by market tendencies. Sir Nicholas Stern wrote in his book ‘Stern Review’ that “climate change is a result of the greatest market failure the world has seen. The evidence on the seriousness of the risks from inaction or delated action is now overwhelming”. So, if the climate crisis has come about from market failures, changing market norms would be one of the foremost methods in countering climate change. It is easy to understand why there is a held belief amongst climate change activists that there is a disconnect between business and climate action.
This disconnect can be symbolised by the fact that a significant portion of funding for the Paris climate summit in 2015 came from major fossil fuel companies and carbon emitters. However, as we have seen above, business holds the potential for unlocking large swathes of climate action at one time. Nonetheless, it is also important to remember that, whilst new technology and business methodology is indispensable in addressing global problems, it would be a mistake to fall for a crude reliance on technology and business, viewing it as a magic solution to all problems. It will take a collective effort from both consumers and businesses alike.
Capitalism has traditionally had trouble thinking beyond the here and now. People running big corporations see their job as purely maximising profits in the short-term, even if that means causing irreparable damage to the world’s ecosystem. What’s more, they think they should be free to get on with maximising profits without any interference from politicians, even though the fight against climate change can only be won if governments show leadership, individually and collectively. In the past, politicians have only tended to focus on climate change when they think there is nothing else to worry about. When policy makers have other things to worry about, tackling climate change drops down the list of things to do.
There’s a longstanding narrative that ecology and economy are natural adversaries – you can’t take climate down without killing jobs and stifling growth. This narrative is simply wrong. The high cost of climate inaction is self-evident, but we shouldn’t fixate on these costs alone. Our energy is better spent focussing on the financial benefits of climate action. Unchecked capitalism drives many of the challenges exacerbating our climate conundrum, aligning environmental goals with market forces may prove to be our salvation. The challenge lies in harnessing capitalism’s relentless focus on financial growth in a climate-conscious direction.