There is no doubt that the current capitalist economic system is environmentally unsustainable. Historically the emphasis on private profit-maximisation has been at the expense of the world’s climate and natural resources, but is there new scope for a less selfish economic system?
Over the last century the global economy has grown exponentially, creating wealth and development at an unprecedented level and rate. This was largely catalysed by the use of cheap, abundant, and unsustainable fossil fuels that are dramatically changing our climate. In 2019, 43.1 billion tonnes of CO2 were emitted into the atmosphere, as a result of human activities, an all-time high. But what if we could redirect the power and profit motive of capitalism away from contributing to the climate problem and towards driving solutions to help solve it.
At a simplistic level, capitalism is the pursuit of profit and wealth through the marketplace. The capitalist architecture of large-scale production and consumption markets assume those markets do not provide resources to mitigate any environmental damage of those processes. This requires non-market interventions of, ‘command and control’ policy from either state or social forces in order to reduce any ‘negative externalities’. These are the ‘off-balance-sheet’ or secondary impacts caused by economic activity and can be either positive or negative. The presence of negative externalities results in market failure, for example, the International Monetary Fund estimates the total unpriced cost of carbon emission from fossil fuels being $6 trillion – as it stands, climate change is the greatest market failure capitalism has ever seen.
Former Deutsche Bank MD turned environmental economist Pavan Sukhdev argues that ‘companies need to move on from seeing private profit as their sole purpose,’ and whilst this is beginning to occur, there is still a long way to go. What has driven the advance of environmental capitalism, in recent years, is an interest in innovation. It is increasingly possible for companies to out-compete direct competitors, make more money whilst
reducing their carbon impact, and introduce sustainable climate resolutions into markets. For the first time industries and corporations are beginning to see a ‘climate solutions marketplace’ become a reality. There has also been a change in how the market values companies through the combination of CSR and ESG factors and companies limit their access to pools of capital by not having a compelling ESG plan. These criteria are able to ensure business accountability and can measure the significance of a company’s efforts, meaning there’s more money to be made by addressing the climate crisis than there is through continuing to make it worse.
In essence climate capitalism is all about utilising its best and worst attribute – pursuing profit. There is money to be made in addressing the world’s climate crisis and investing in sustainable energy and conservation. Corporations have only scratched the surface of the economic potential in addressing climate change, it is estimated that the global renewable energy market will have reached $1.5 billion in the next four years. Capitalism is often criticised by its greed, if it continues to pursue profit with its selfish nature perhaps it too will be threatened by extinction. However, if it can evolve into system driven by green greed, capitalism may survive.