Can Capitalism counteract climate change?

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In a recent interview with The Atlantic, Bill Gates has expressed the idea that capitalism on its own cannot save us from climate change. The world’s richest man believes the free market economy will fail to develop new forms of carbon-neutral energy fast enough to combat an irreversible environmental catastrophe. His solution is for human beings to invent their way out of the coming crisis, aiming to drive innovation in the carbon-free sector at “an unnaturally high pace”. This, he argues, can be achieved through unprecedented investment in research and development programmes, pledging to commit $2 billion himself. So, with this proposal in mind, can capitalism really save the planet?

Gates notes that levels of investment in the zero-carbon energy sector under capitalism have been lethargic. If we are to assume that capitalists act primarily in their own financial interests, the cause is simple: there is no fortune to be made. As it stands, the opportunity cost facing large energy firms that divert resources into green energy sectors is just too daunting. Few incentives exist for firms entering the carbon-neutral energy market, and there is simply not enough political will to impose higher taxes and control in the fossil-fuel industry. It could also be argued that firms have too big an investment in the existing industries to consider changing their focus anytime soon. In general, business prefers to stick with what it considers tried-and-true. Why enter into a market filled with uncertainty and sluggish investment when you already dominate another?

But why is this capitalistic behaviour prevalent in the first place? Slow innovation in services like the health sector certainly would not be as widely accepted. Unfortunately, money is both an incentive for the businessman and fuel for the researcher; when the businessman pulls their investment, innovation dies. The tobacco industry is a useful example. After the market became better informed about the health risks of cigarettes, it funded innovation, fuelling the rapid rise of the e-cigarette we are currently experiencing. In many ways, this draws parallels with the case of carbon-emitting fuels and subsequent environmental health risks. As firms view the green energy sector as increasingly risky and unprofitable, innovation stalls. Freeing innovation from the businessman’s grip requires a change in attitudes. It may be down to citizens to accept responsibility that, in the face of corporate inaction, they must drive change from the bottom-up.

If we take on board Gates’ assertions, and accept that capitalism is more than capable of coming up with a solution to the environmental problem in the right circumstances, the only realistic immediate response is to create them. Governments can, and should, intervene in the global energy market to create an environment where it is both highly profitable and politically fashionable to invest in zero-carbon energy. Generous subsidisation and liberalisation of the carbon-neutral industry, coupled with heavy taxation and regulation of the carbon-emitting industry could act to shift the market’s focus. Market forces can be quick to adapt to new problems, given the right direction. With business’ focus shifted, market forces combined with human ingenuity can, and will produce meaningful innovation. Capitalism then, needs a firm push in the right direction to disrupt business-as-usual. With equal measures of carrot and stick, climate-saving innovation through capitalism is our only realistic starting point.

Taking a more radical approach, tackling climate change under capitalism may only provide short-term solutions. If we are to see individualistic, capitalist narratives as a key cause of our environmental dilemma, then long-term, sustainable success will require a significant change in attitudes. From the bottom-up, sustainable consumption is vital; grassroots policies like recycling and ‘upcycling’ will have a massive effect on market forces and the environment. The energy sector too needs to contemplate its ethics, as it seems at best indifferent and at worst incapable of dealing with problems like carbon emissions and oil spills, with the environment paying the price. Energy giants could be brought back under the control of governments to ensure positive change and sustainable regulation, shoring up efficiency through a national monopoly and diverting huge amounts of capital back into energy research and development labs. In an ideal world, life-saving human ingenuity should not need the encouragement of a dollar sign.

Written by: James Gallagher & David Beach

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