The Case for Climate Capitalism

Economic Solutions for a Planet in Crisis

Tom Rand

• Publisher: ECW Press
• Year: 2020
• ISBN:
  9781773055091
• Topic: Economics
• Subtopic: Environmental Economics
• Index: Economics

A call for the Left and Right — the business community and environmentalists, bankers and activists — to join together, reclaim capitalism, and force profits to align with the planet

A warming climate and a general distrust of Wall Street has opened a new cultural divide among those who otherwise agree we must mitigate climate risk: anti-market critics such as Naomi Klein target capitalism itself as a root cause of climate change while climate-savvy business leaders believe we can largely continue with business as usual by tinkering around the edges of our economic system.

Rand argues that both sides in this emerging cultural war are ill-equipped to provide solutions to the climate crisis, and each is remarkably naïve in their view of capitalism. On one hand, we cannot possibly transition off fossil fuels without the financial might and entrepreneurial talent market forces alone can unlock. On the other, without radical changes to the way markets operate, capitalism will take us right off the climate cliff.

Rejecting the old Left/Right ideologies, Rand develops a more pragmatic view capable of delivering practical solutions to this critical problem. A renewed capitalism harnessed to the task is the only way we might replace fossil fuels fast enough to mitigate severe climate risk. If we leave our dogma at the door, Rand argues, we might just build an economy that survives the century.

Part One

What’s the Problem?

“We certainly don’t have time for wholesale changes in our economic system, because that sort of thing uses up all the available political energy for decades; if you want to overthrow capitalism, leave it for later.” ³

– Gwynne Dyer

Chapter One

The Debate — From Popes to Apologists

Is modern capitalism capable of solving the unfolding climate crisis? Is a stable climate compatible with the voracious growth demanded by the modern capitalist global economy? The answers aren’t obvious.

At one extreme, social critics like Naomi Klein and Pope Francis argue that unchecked capitalism and market forces are the cause of the climate crisis. Only by chucking out our growth-addicted, free-market economy can we meaningfully curb global greenhouse gas emissions. Klein’s bestseller This Changes Everything and Pope Francis’s second encyclical, Laudato si’, set the standard for the anti-market crowd. At the other end of the spectrum, uber-entrepreneurs believe those same market forces are our salvation. Only capitalist markets are capable of creating the innovative clean energy technologies and massive deployment we need. Led by the likes of Bill Gates, George Soros, and Jeff Bezos, they’re kick-starting the effort by seeding the Breakthrough Energy Coalition with a few billion dollars.

Lots of views sit somewhere between. “Techno-optimists” believe innovation will naturally bubble up from the bottom and disrupt fossil fuels the way Uber did the taxi industry. Many environmentalists argue we just need to get the big, bad energy companies out of the way so existing solutions like solar and wind can blossom. Nuclear is particularly controversial. To advocates, it’s the only zero-emission energy source that can play in the big leagues. To opponents, it’s yesterday’s dangerous white elephant. Some particularly jaded folks have given up on climate mitigation altogether. According to them, our addiction to fossil fuels can’t be broken quickly enough, so we’d better get on with planetary Band-Aids like sucking carbon out of the air or geoengineering to cool the planet.

Fossil fuel apologists like Bjørn Lomborg and the Fraser Institute flip the climate issue on its head and frame increased emissions as a moral issue wrapped in free-market garb. The developed world’s wealth was built on fossil fuel, the story goes, so we should let everyone else burn lots of the stuff so they can get rich, too. Limiting carbon emissions is like taking food and schooling from the poor and hungry masses! And being wealthy is the best defense against a changing climate. So, better to keep the coal fires lit and batten down the hatches than try to avoid the storm: adaptation good, mitigation bad. There’s nothing like a love of fossil fuels to bring out the far right’s professed love of the poor and needy.

And there’s always the question of cost. There’s no free lunch in a capitalist world, and solving this problem looks expensive. Climate action may be the right thing to do, but it’s a drag on economic growth. Or is it? I (and many others) argue we’re better off in the long run switching from resource-based energy sources like natural gas, oil, and coal and transitioning to technology-driven sources like solar, wind, and storage. But even if that’s true, a radical rewiring of our energy systems comes with real up-front costs. Solar might be free once it’s up and running, but someone has to buy the panels and the storage facilities to make sure the lights stay on after the sun goes down. Who pays?

Developed countries built our roaring economies on a foundation of fossil fuel. Does that mean we owe an historical debt to act first, to help less-developed countries get off fossil fuels and adapt to a changing climate? When the Maldives disappear under a rising ocean, can they sue us? International climate negotiations have bogged down on these issues for decades. Current behind-the-scenes negotiations in North America indicate some kind of trade-off whereby the fossil fuel majors get indemnified from climate damages in exchange for their support of a carbon price. Is that fair? What price, and for what degree of indemnity?

It’s true that historically, developed countries emitted the majority of emissions. That speaks to a responsibility to take the lead on climate, but it’s not that simple. The resulting modern economy produced a technological base from which all developing countries benefit. They don’t have the same development cycle that, say, Britain or the United States went through. Hence, they inherit an ability to short circuit most of the historical development trajectory. Those benefits are direct and substantial. They can leverage low-cost modern energy technology as they seek to mitigate their own emissions and even gain economic advantage. China did not invent, nor commercially develop, the solar panels they now sell to the rest of the world. While there is a moral argument that developed nations must take the lead, it’s not as clear-cut as it might appear.

Regardless, the Canada I know doesn’t shy away from punching above our weight on the great ethical issues of the day. Our diplomatic strengths shouldn’t be underestimated. We led the multinational framework that did away with ozone-damaging chlorofluorocarbons (CFCs), for example. We are well-suited to show leadership on climate change. Resolving our provincial-federal squabbles may serve as a model for intranational disputes — how to fairly and effectively distribute emission reduction responsibilities among subparts of a larger economy? And dealing responsibly with the heavy-oil assets we have in the ground (leaving most of them there) would go a long way to convince other petro-states to do the same. Bottom line: if a rich, comfortable country like Canada can’t make a good-faith effort to limit emissions, we have no business asking others to do so. That’s not my Canada.

Somewhere in the middle of this raging debate, reasonable-sounding economists quietly urge a variation on wartime British resolve: “Keep calm and price carbon.” And if it’s made revenue neutral by lowering other taxes an equivalent amount, we might secure the endorsement of a right wing opposed to all things tax-like. They don’t even need to care about climate! With this view, no one gets hurt. Everybody wins. We break our addiction to fossil fuels gradually — carbon price as methadone. Yet the urgency, scale, and pace of change we need belies such a soft landing. Surely it can’t be that easy? Spoiler alert: it’s not!

The many views on climate reflect different backgrounds, priorities, and assumptions. Some have more merit than others. A few are ill-informed or disingenuous — the result of willful blindness, propaganda, or ignorance. But in each there is at least a grain of truth, some core idea or motivation that’s intuitively valid. The cacophony of voices reflects the hard truth that weaning our economy off fossil fuels is the most complex and difficult problem humanity has ever faced. It makes putting a man on the moon look like a walk in the park.

As times get tough — and they will — people look for villains. Populist politicians find scapegoats. Deserved or not, the business community will make a good candidate for climate villain; Klein and the Pope are winning the battle for mind space on that front. On the other hand, for too long, the loudest corporate voices have been those who hijack action in this sphere. It’s time for others to speak up, to acknowledge the trouble we’re in, and endorse a difficult economic transition. It’s enough to say, “We don’t have all the solutions. But we get the problem, and we’re going to try.” The alternative is being on the wrong side of history — the villains of the story. In which case, we have the ugly prospect of decades of combative protests and increasing odds of real populist revolution at the ballot box that may well upend the economic system we know (mostly) works.

Perhaps most difficult of all: in an age when mistrust of elites is normal, climate risk asks that we place our trust in experts. Those who spend their professional lives studying climate science have increasingly bad news. As the scientific consensus and degree of certainty grows, so, too, has the level of alarm. It’s always tempting to ignore bad news, especially when it’s countered by the comforting noises of a slick, well-funded campaign of disinformation. But the atmosphere cares nothing for our cognitive comfort. And nature always bats last.

Paris Promises and the Pace of Change

One of the first foreign visits for a freshly elected Prime Minister Justin Trudeau was to attend the twenty-first annual UN Conference of the Parties (COP21) in Paris in the fall of 2015. Trudeau was flanked by provincial leaders as he gave his opening address to the delegates. “Canada is back, my friends. We’re here to help,” declared the newly minted federal leader. His timing could not have been more fortuitous. COP21 had a markedly different mood from previous gatherings right from the start. And for the first time in years, the lengthy gabfest resulted in what was hailed by many as a meaningful agreement. Declared global ambitions were high. Action was imminent. The optimism of our “sunny ways” new prime minister seemed in tune with global sentiment.

It was quite a turnaround, both for Canada and the COP process itself. At previous conferences, Canada, under Stephen Harper’s leadership, was rightfully painted an obstructionist. The number of “fossil of the year” awards Canada won rivaled our hockey golds. This time was different, and Team Climate Canada included some hefty support from Catherine McKenna, our negotiation-savvy minister of environment and climate change. Tapped by French foreign minister Laurent Fabius, McKenna helped shepherd more than a dozen countries across the finish line in a dramatic last-minute push. The world upped its stated ambition, formally endorsing not only a hard 2°C limit to warming, but vowing to make efforts to stop at 1.5°C.

In one year, Canada went from obstructionist to enabler. And global leaders went from bafflegab to speaking of meaningful targets. Triumphalist quotes flooded social media:⁴ French President François Hollande told the assembled delegates, “You’ve done it, reached an ambitious agreement, a binding . . . universal agreement. Never will I be able to express more gratitude . . . You can be proud to stand before your children and grandchildren”; UN Secretary Ban Ki-Moon, called the agreement “a monumental triumph for people and our planet”; French foreign minister Laurent Fabius said, “[The delegates] can go home with their heads held high . . . Our responsibility to history is immense”; Christiana Figueres, then-executive secretary of the UN Framework Convention on Climate Change (UNFCCC) and a key architect of the COP21 agreement, said “One planet, one chance to get it right, and we did it in Paris. We have made history together.”

Wow. Sounds like good news, right? The planet’s health in capable hands? Well, maybe. It’s one thing for a kid to declare she’s going to play on an Olympic hockey team and win a gold medal and quite another to actually make the team (never mind win the medal), even if her parents, coaches, and teammates are all on board. That’s a bit like COP21: declaring an intention to stop at 2°C is akin to making the Olympic team, and 1.5°C is winning the gold. The targets are meaningful only insofar as they express admirable degrees of ambition. How likely are those ambitions to be met?

Not very, unfortunately. There are a few ways to look at how we might meet any given target: how soon we need to drop net emissions to zeroi; how much carbon we can emit in the meantime (the carbon budget); and the sheer scale of the zero-carbon energy infrastructure we need to build to replace existing emissions and accommodate growing energy demands.

1.5°C: A Quixotic Dream?

Let’s start with the more ambitious goal of limiting warming to 1.5°C above preindustrial levels.ii Despite the hopeful talk, that’s not going to happen. Why? Because we’re pretty much there already!⁵ And no matter what we do, there’s more heat already baked into the near future. We’ve seen warming accelerate over the past few years as oceans burped out some of the heat they’d been storing temporarily. Critics pointed to a recent flattening of the atmospheric warming curve (since the late 1990s) as evidence we needn’t worry so much. But the oceans are the great thermal battery in the atmospheric system, storing more than 90 percent of incoming heat. And they have kept heating up. Their inexorable rise was an easy clue as to what happened next.

Sure enough, even as COP21 was taking place, global temperatures spiked massively. In the three months immediately after the conference, we bumped against the 1.5°C ceiling; January to March of 2016 averaged 1.48°C, with February hitting 1.55°C. Yes, that was a temporary peak driven by a strong El Niñoiii and is within a range of short-term fluctuation, and it’s true that three months do not mark a long-term trend, but it’s a strong indicator we’re already committed to blow through the 1.5°C target. The longer-term trend agrees with that directional spike in warming: 2016 marked the third record year in a row, at 1.2°C above preindustrial times.

Ok, let’s say we try. Really hard. What do the emission numbers look like on the 1.5°C target? We’d need to reduce global greenhouse gases by nearly 10 percent per year, every year. I don’t know anyone, anywhere, who thinks those kinds of reductions are remotely possible absent a catastrophic economic shutdown. Even getting to net zero emissions tomorrow — an impossibility — means warming will still continue for decades beyond that because of the long lag it takes for the planet’s warming to catch up to what’s already out there in the atmosphere. Sadly, it looks like a 1.5°C rise is already baked into the system. When I hear people talking hopefully about that goal, I’m reminded of Don Quixote, who tilted at windmills while imagining himself to be living the heroic life of a chivalrous knight. It’s a nice story to make us feel good, but it has little basis in fact.

An Intergovernmental Panel on Climate Change (IPCC) special report on the target was released in 2018. It made for interesting reading. It confirmed that “limiting warming to 1.5°C is possible within the laws of chemistry and physics,” but to do so requires the pragmatically unattainable global reductions of “45 percent from 2010 levels by 2030, reaching ‘net zero’ around 2050.” That’s ten years to reduce emissions by half ! Unsurprisingly, it emphasized the need for late-century carbon suctioniv and geoengineeringv to square the circle.

I expect going fo rward to see a sleight of hand in public discussion of targets to save face while politicians quietly shift baselines to something else, like a comparison of the modern average temperatures to 1985–2005. That gives 0.6°C of breathing room; but it’s just an accounting trick, like hiding debt by moving it off the balance sheet. Or, in ke...

Table of contents

• Preface
• Introduction
• Part One: What’s the Problem?
• Part Two: Climate Capitalism: Carbon, Politics, and Solutions
• Part Three: Welcome to the Anthropocene
• Index
• Endnotes
• Copyright