Climate change is real, yet the question of how to properly tackle the planetary-scale crisis must be reconciled with the political and economic system of the countries which have the most power to shift the needle. That system is, of course, liberal free-market capitalism. This system, in its most simple terms, is driven by private enterprises competing for maximum profits in their industry, a goal which they achieve by maximising efficiency.
Fundamentally, the coexistence of a movement towards environmental protection and a commitment to the liberal free market seem paradoxical. Global capitalism seeks to maximise profits and growth, yet it inevitably does so at the expense of natural resources. Avoiding industry specificity, it is a well acknowledged fact that economic growth is positively correlated with greenhouse gas emissions.
Thus when the United Nations includes the commitment to 'promote inclusive and sustainable economic growth, employment, and decent work for all' in their 17 Sustainable Development Goals, it begs the question of whether this is possible in the first place.
One manner in which free-market supporters sustain their faith in the ‘compromise of liberal environmentalism’ is to suggest innovations in efficient resource use will result in lower consumption, given that less is needed to achieve the same output. However, given the profit incentives of a market system, more efficient methods of consumption will only attract greater economic activity, leading to an increase in the quantity of finite natural resources being consumed. This is a phenomenon known as Jevons Paradox.
Even if private firms were to develop clean energy technology, this progress would be hindered by the ubiquitous profit motive of a private market system - one that would require, ironically, the prospect and continuation of growth as a prerequisite to funding the green transition.
The fundamental ideological commitment from the west to free-market principles further harms government attempts to rein in the degradation of the environment. As France and the EU attempted to reduce the environmental footprint of agriculture through tax hikes on agricultural diesel, farmers were aggrieved at the EU’s policy stance after being made less competitive globally.
This understandable public discontent is manipulated by the less-progressive agents of the political class, boosting their popularity among a disillusioned electorate, and making the discussion of climate policy unproductive for winning elections.
In a profit-driven global economy, progressive policy projects that require sacrifices are by design unpalatable in an economic system that incentivises a ‘race to the bottom’. An increase in the influence of large polluting corporations thus inevitably stifles climate change legislation, visible to an almost comical degree in the United States; where aspiring politicians are effectively forced to appease oil companies for campaign donations, and the secretary of state was the chief executive of ExxonMobil.
‘Almost’ is the operative word here, given the future of the human race is at stake.
More recent evolutions in the policy approach to tackling the climate crisis by wielding the invisible hand of financial markets have also been unproductive. The emerging Wall Street Consensus, as the name might imply, suggests that private financial investment should spearhead the green transition.
Governments around the world, most significantly those in developing nations, are encouraged to attract foreign private investment into sustainable development projects by making these less susceptible to profit-loss. Countries grant tax exemptions and subsidies, commit to ensuring the continuous flow of profit to private enterprise, and remove regulations in return for investment.
Predictably, these developing countries suffer. Propping up these investments presents a great fiscal risk and is exacerbated given that investors can leave as quickly as they arrived and the natural volatility of demand shocks grows positively with climate change. Once again, the inherent profit incentive of a market system is antithetical to progress on climate change.
I believe it is always good to end on a positive note, so I will try to provide one here. It has become clear to governments and international organisations that the climate crisis is an issue that demands our attention. In recent years, we have seen historic legislation passed promoting the sustainable transition in the USA, despite its structural issues, and the European Commission has implemented wide-reaching regulations as part of its 2019 Green Deal to aid in the climate transition. A ray of hope for the future lies in younger members of the electorate’s unprecedented passion for environmental protection. If nothing else, the prospect of losing sales to a climate-conscious generation might now shift the culture. In 20 years time, we will know if it was already too late.
Image: Flickr/Gobierno CDMX
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