Climate change science is clear and undeniable in its general thrust. Climate change politics by contrast are murky and uncertain. Peter Newell and Matthew Paterson have spent nearly two decades researching and writing about the politics, and their new book Climate Capitalism: Global Warming and the Transformation of the Global Economy reflects all the uncertainties and ambiguities.
They well understand the suspicions and anxieties felt in relation to the capitalist economy by many who take seriously the threat of climate change. The economy’s growth has been fed by increasing CO2 emissions and many of its actors seem heedless of the need to change that dependence. The early business response to climate change was automatic denial. More than that, positive attempts were made to discredit the scientific base on which the case for action was made and to give the impression of widespread public opposition to action. Some companies are still stuck in those responses and in some sectors of the economy they seem likely to remain vociferously opposed to the economic transformation required.
However the authors see no likelihood of the abandonment of capitalism or its dependence on growth. For them the question has to be how capitalism can be configured to grow while gradually replacing coal, gas and oil. It’s a very difficult task but not a hopeless one. They point to those within the world of business and finance who have come to realise that the science will not be gainsaid and that the costs of action would not be disastrous. In a variety of ways those firms have begun to discern economic opportunities in a low-carbon economy. For sunrise industries, the nuclear industry and biotechnology companies the advantages are clear. For others reputation management and corporate social responsibility are to be considered. Overall there is a tendency to see failure to anticipate likely possibilities as a business risk — risk to reputation, risks of legal liabilities, risks of losing out on new market opportunities. It remains a mixed picture, but there is a policy momentum likely to keep the issue relatively high on the executive agenda.
Whether we like it or not, neoliberal capitalism has already shaped the character of our response to climate change. That is why emissions trading has become the preferred policy approach, ahead of environmental taxation measures. The authors comment that emissions trading became almost unstoppable once the dominant financial actors realised its potential as a new market, with its derivatives, options, swaps, insurance, and so on, and thus as a profitable enterprise.
The power of investors is to some extent being felt in driving an orientation to face climate change issues. One example is the Carbon Disclosure Project (CDP), effectively a consortium of investors who write annually to corporations listed on stock exchanges asking them to report on matters relating to CO2 emissions and their perception of risks from climate change. The uptake has been impressive and by 2008 the CDP was backed by $57 trillion worth of assets from over 3000 financial institutions. Investment growth in renewable energy has been considerable in recent years. The book recognises that, given the neoliberal context we live in, mobilising the money of large institutional investors like insurance companies and investment funds will be crucial to the transformation to a low-carbon economy.
The authors lead the reader patiently through the apparently bewildering variety of mechanisms by which the demands for a flexible carbon market are addressed. Of particular interest is their examination of the Kyoto Protocol’s Clean Development Mechanism and its emission credits whereby purchasers in the North can enable projects in the South. It has proved far more popular than expected, though in practice the book acknowledges that it has not yet delivered the benefits that many hoped for and expected, and critics continue to see it as a fraudulent mechanism that lets rich countries off the hook.
As the explanations proceed it becomes very clear that market governance is the key to whether a market-based approach to climate change will succeed in reducing emissions. The book tackles this squarely. A market requires more than a minimum of creating property rights and enforcing contracts. It needs rules by which trading can occur, elaborate accounting systems to measure emissions and make companies report on them, and complex methodologies to estimate whether a project has reduced emissions. The authors distinguish three basic sorts of governance. First, by quantity. Here rules are set which establish overall limits for carbon emissions, allocate them among different players, and enforce those limits. Second, by price. In emissions trading schemes so long as the targets produce scarcity a price is created for carbon emissions permits which exerts a governing effect on behaviour. Price can also be affected directly, through carbon taxes. Some governments have instituted such taxes and the authors consider they should remain a possibility if necessary. The third type of governance is by disclosure, where business and other actors are required to report on their emissions profile.
How good is all this governance at present? Not very, is the impression given. Targets set are often too weak. The flexibility allowed in meeting commitments means that carbon offsets are not sufficiently rigorous. The voluntary market is particularly prone to such problems. Can we learn and improve? The authors think the EU has made considerable improvements to its emissions trading scheme as time has progressed, tightening its allocations and data collection methods. The voluntary carbon market has also considerably strengthened its certification schemes.
In the very uncertain future for climate capitalism the authors have a preference for what they call climate Keynesianism, where strong governance directs the markets more closely towards the goal of decarbonisation and integrates them globally, including a green Marshall Plan-type global scheme. Their filling out of this vision is central to the positive view they have tried to achieve of the potential of a capitalist economy to successfully meet the climate challenge.
The book is sympathetic to those whose interest in climate change is driven not by the potential to make money but by the gravity the issue poses. But, say the authors, we have to understand how capitalism works if we’re going to have any chance of success in dealing with the threat in a humane way. It’s not easy, and it’s urgent. However there have been significant transformations of capitalist economies in the past. They instance the Bretton Woods system after the second world war which in a short space of time created a new global deal that produced an unprecedented period of smooth, rapid economic growth. On the technology side their analogy is the development of the railways in the mid-nineteenth century, a messy affair involving a number of entrepreneurial engineers acting competitively, and one which had far-reaching effects on daily life. They urge novel and probably uneasy alliances – environmentalists and venture capitalists for example – as we assemble the necessary coalitions to rewrite the rules of the global economy.
In the course of developing its major themes the book is valuably informative on many of the details of carbon markets and trading. The reader who wants a better picture of complicated systems within reasonably brief compass will be rewarded.
[Buy at Fishpond (NZ), Amazon.com, Book Depository (UK)]
Thanks for this review. Useful.
Factor this in:
http://johannhari.com/2010/07/02/how-goldman-sachs-gambling-on-starving-the-worlds-poor-and-won
Want to jump straight to the research behind the article?
http://www.networkideas.org/working/dec2009/08_2009.pdf
It begins:
Paper no. 08/2009
The Unnatural Coupling: Food and Global Finance
Jayati Ghosh
Abstract
The dramatic rise and fall of world food prices in 2007-08 was largely a result of speculative activity in global commodity markets, enabled by financial deregulation measures in the US and elsewhere….
That’s a telling piece, Hank. I read it over the weekend, with a fair degree of anger I have to admit. And then yesterday I stumbled on this Reuters blog, featuring a Royal Society of Arts cartoon video of a short talk by David Harvey giving a Marxist analysis of the financial crisis. Whatever your politics, it’s a fascinating session. The technique is brilliant too. I’d love to see it applied to climate basics, for instance…
A very insightful post and the related comments above. I am in the midst of reading “Blue Gold” The Battle against Corporate Theft of the World’s Water The subject is slightly different but the problems are essentially the same and the capitalist strategies are the same. Those with power and wealth will stop at nothing to gain more. An interesting post on the Standard highlights the failure of Neo- liberal economics to deliver. Frankly we need a new way – Capitalism as it presently stands will no be the saviour.
I’m currently finishing both McKibben’s ‘Eaarth’ and Hamilton’s ‘Requiem for a Species’, which is probably the most inappropriate and disturbing bed-time reading combination I’ve ever picked!
Particularly Mr. Hamilton – you think you’re clear-eyed about what lies ahead and then you read his assembled descriptions of +4C World, (which it’s, what, now 50% likely we’ll reach? I’ll guess it’ll be forecast as 80% likely by 2015!) At any rate you end up hoping the Deniers might be right after all! (Despite being well aware that this is arguably the most Pollyanna-ish position yet widely-adopted in human history!)
(Oh, and then there’s the news that even +2C isn’t as ‘safe’ as we figured!)
What these books and the above have in common is a recognition that UltraCapitalism, as it is currently constructed, is the equivalent of a slow-motion comet strike onto our planet’s surface. This isn’t even limited to just climate, we’re already undergoing, and will continue to undergo, a mass-extinction event whether we continue to warm or not. (I wouldn’t be too smugly sure that it won’t affect you, either, if your first response to this is an ‘oh boo hoo’ sneer!)
I’ve long thought that a political philosophy that venerates selfishness as its central axiom is not only inherently unstable, in our current situation it’s like a bad joke: here’s the worst of problems to deal with and an economic system that is structurally opposed to far-sighted or altruistic behavior that is not only the disaster’s major driver, it’s the only tool you’ll be allowed to tackle it with!
Fairy-stories about latent miracle-technologies and roosters-laying-when-the-price-of-eggs-rises-high-enough aside, if you lay aside hope springing eternal for a few moments you have to conclude: we’re stuffed!
We’ve tackled this before. We’re back to Orwell’s choice between socialism and barbarism. We can either use the Keynesian style intervention in the market techniques that built the most just and genuinely affluent societies that have ever existed after WWII – they still hang on in Scandinavia and parts of Europe – to build a mild ‘socialism’ that can be democratic, with recognition that antisocial and anti-environmental policies are simply off the table. This is relatively comfortable and balances individual and collective needs. It’s probably not very good at making deep changes, however, but adapted to a ‘war’ footing it proved surprisingly effective in undertaking successful collective endeavour. If the public really knows its enemy it can work!
Or then there’s the Chinese model. There’s been a lot of discussion that it may actually be better-suited to making hard decisions – and even distributing any pain more fairly – than democracy. I’m sure none of us wants to go there, but it’s still better than the outrightly barbaric alternative…
Because I can imagine a world – hell, its proto forces are in imminent danger of grabbing the reins here in Australia, and almost certainly will in 2 or 6 years in the US – that decides to keep Hayek and throw the World away; to ‘grow’ on to ‘prosperity’ regardless. To take the Wrathall/Lomborg line – if we just get richer we can each have our own Halliburton Lightweight Personal Sea-Wall in 2060, and can even hope to integrate it with our GE M27 Personal Mobile Air-Conditioner and Cocktail Dispenser!
And for those that can’t afford it; well, that’s just natural selection for ya! The rich get still richer in their increasingly high-security enclaves – everyone else just gets f&*^#d!
I’ve also recently finished both Eaarth and Requiem for a Species, and as Bill says, neither are happy reading. Both have their problems (particularly Eaarth), but the broad picture is deeply disturbing. If you haven’t had your “oh shit” moment, as Hamilton calls it, then reading his book might trigger it. Even then, neither book really draws the connections far beyond climate change. I had high hopes that Eaarth might do so, given the broader scope of its title and central concept. It is not just climate change, it is biodiversity loss, deforestation, desertification, soil degradation, fresh water stress, invasive species, ocean acidification, overfishing, peak oil, debt bubbles and more that we’re already facing: a series of converging crises all arriving in the next couple of decades or sooner.
“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” – Kenneth Boulding
Is growth capitalism the only capitalism there is? I really don’t see how the thing that caused the problem is going to solve the problem, but there a re a lot of things I don’t see.
For more on the topic of our time –
Tim Jackson’s Deakin Lecture
And the rest of Tim Flannery’s assembly of Deakin Lectures for 2010; all specifically on AGW and where we go from here.
And, central to the whole question: are we really just in it for the money? Another excellent RSA animation, this time to a lecture by Dan Pink (h/t Eli Rabett)
I was about to link to Jackson’s Deakin Lecture, which is very much on topic. Here is his book. Or a pdf of some of a report that summarises it.
This book seems to make a number of pertinent points that I agree with. You simply cannot decide to throw out the free market capitalist system in trying to deal with the challenges of climate change.
I see Bill is advocating either of socialism lite or totalitarianism socialism as our only options to avoid armageddon.
I can’t wait to see your election slogan ‘A little bit of socialism, or socialism with an iron fist, or death!’
And what, pray, is wrong with moderation? A society that recognises all sectors need to work together for the common good (rather than the enrichment of a few) is surely a better place than totalitarianism of any flavour.
Bill IS advocating some variety of what you call socialism-lite, or Keynesianism, or social-democracy, because it seems clear to me that an unfettered capitalist system leads to disaster, whether it’s AGW or the GFC.
Bill IS NOT advocating totalitarianism; in fact, as I’ve said before, I fear that if we don’t take the the ‘lite’ option of managing the reshaping of the economy within a democratic framework now we’ll end up with an invidious choice between some kind of relatively egalitarian centralised command-state and a kind of witless Tea Partyite dystopia of priviliged enclaves sealing themselves off from the chaos outside and continuing to exploit the planet to death because ‘it’s too late to do anything else now anyway’! Party on, dudes!
At that point – and I have no desire to reach it – I’d say the first option was an improvement on the second. Just as I’d rather have one arm cut off than both legs. I’d scarcely call that ‘advocacy’!
This is the kind of situation that concerns me. What price both ‘democracy’ and ‘free-enterprise’ in circumstances such as the following?
Military analyst Gwynne Dyer in The Climate Wars. (Please forgive the parsing if it’s odd, I got this from a – very recent – podcast transcript at DemocracyNow.)
As an Australian I have to tell you that – yet again – we’re getting a glimpse of a future like this here at home, and it’s very ugly. A few thousand poor desperate people in boats a year are enough to transform the majority here into rabid xenophobes. And for those locked outside the wealthy-nations’ barriers faced with a choice between starving and raiding – well, what would you do?
Frankly I think a little far-seeing regulation now is a small price to pay to avoid a future that looks anything like this.
Actually the neo-liberal economic model with its predominance of Multi-national – transnational corporations considers there to be “TOO MUCH DEMOCRACY” – people get in the way of profit!. Actual quote from the “Washington Consensus” upon which our present world system (view) is based.
#12 Gosman mentions socialism with an iron fist. Towards the end of the book the authors express concern at the possibility of the economy being decarbonised in a brutal, unjust manner. But as I read them it is unregulated capitalism that is the likely origin of such a solution. They raise the spectre of Hobbes’ Leviathan, the despotic ruler who could dispose of human lives as he saw fit but was the price of order in society. They prefer order through a humane Keynesian form of climate capitalism “that combines decarbonisation with a fair way of managing that transformation globally and a well-governed system of carbon markets”. Of course to some extreme free market ideologues Keynesian-type approaches probably appear virtually socialist.
Here’s a follow-up interview with Tim Jackson on Prosperity Without Growth via the ABC’s The National Interest.
Bryan, proper free-market capitalism requires a free an open society to function in the optimal manner. While you can have totalitarian regimes practicing aspects of capitalism they tend towards kleptocracy due to the excessive power of the state. It is therefore highly unlikely that unregulated capitalism would lead to the situation you postulate.
@ bill # 14
“Bill IS advocating some variety of what you call socialism-lite, or Keynesianism, or social-democracy, because it seems clear to me that an unfettered capitalist system leads to disaster, whether it’s AGW or the GFC.”
Ummmmm…. haven’t we had Keynesianism, or social-democracy in the ascendency for the past 70 years in the West?
Some of the biggest and most wasteful polluters have been from Socialist nations. State intervention does not necessarily mean the best outcome for the environment.
Gosman, I’m all in favour of a free and open societies, but I don’t think they are possible without the protection of human rights by law (and I don’t put property rights at the top of the list). The kind of capitalism the writers of this book hope will prevail is obviously constrained by regulation. I’m not sure whether you are implying that unregulated capitalism would do all that’s necessary in relation to climate change, but if you are the book’s authors (and I) don’t share your optimism.
Considering there has never been unfettered or unregulated capitalism anywhere on the planet I’d suggest it is a moot point. The argument has always been about the best approach to deal with perceived negative externalities of the market. Whether it is via the heavy hand of state regulation or a more market friendly structure is the essence of the discussion.
If you don’t think property rights are important I’d suggest you take a long hard look at places where individual property rights are ignored or trampled over, such as Zimbabwe. See how disdain for what should be a basic fundamental right contributed to a formerly prosperous African nation becoming an economic basket case.
Even the impact of climate change can be expressed and dealt with at a property level. Under a more equitable global free market system the people’s of the nations most impacted by any negative AGW inspired climate change effects should be able to seek redress from those causing the problems. This may even lead to countries and corporations curbing their negative behaviour to avoid the economic penalties.
#22 “should be able to seek redress from those causing the problems.” Yes, if the legal channels are established. By “the heavy hand of state regulation” perhaps? I won’t get into an argument with you about property rights, but just point out that I simply said they weren’t at the top of my list. I don’t think the authors of this book are suggesting a heavy hand of regulation, and they are obviously not market-unfriendly. The economists I read who take climate change seriously are all relaxed about market economies, indeed favour them. It’s the setting of the boundaries within which they can freely operate which is the real issue.
Gosman,
I agree there’s never been an unregulated market – the very concept is absurd – but in case you haven’t noticed there is a surprising number of people about who think, or say they think, it might be a good idea! ‘Ahistoric’ is the word that comes to mind. And that’s the kindest word that ends in ‘ic’ I could think of.
Some of the people who say they believe this have overseen 3 decades of deregulationist frenzy, one of the fairly predictable results of which is currently washing up on the beaches of Mississippi, Alabama, Louisiana and Florida.
Then there’s AGW.
You might be surprised to learn that we’re not as unalike as you might think – Keynesian ‘socialists’ often conclude that properly-regulated market mechanisms may well do the job; particularly in a market society.
But perhaps equally surprisingly these mechanisms then get labelled as ‘Socialism’ (which is inherently bad, tut tut) by people who see themselves as standing to lose a few bucks, or, to be more accurate, not to make as many as they had hoped, or told the shareholders they might make. They often then make noises that make them sound like the kind of people we were discussing above.
Capitalism is the most robust system in the world, we are told, and also simultaneously that the slightest intervention in it on behalf of the environment of any other public good will be sufficient to bring our society tumbling to the ground, bringing about the requisite wailing and gnashing of teeth that befalls all sinners against True Ideas.
It never seems to occur to many that, as in the American health-care debate, their overheated rhetoric and blatant obstructionism might end up making ‘socialism’ look good!
It does occur to me that no-one mentioned smashing property rights. ‘Socialism’ has been through a large number of loss of ‘loss of illusion’ phases, culminating in the fall of the Berlin Wall where even the most hardheaded had to concede centralised Marxist/Leninist statism’s failures. I personally think that socialism’s true successes are far more visible in Europe and particularly Scandinavia; and they were constructed by people who gave up on the statist revolutionary model more than a century ago!
So it strikes me that the only dangerous utopian project still going in The West is Capitalist, rebranded – the product gained a lot of well-deserved opprobrium, after all – as the ‘Free Market’. That’s where the contemporary danger of zealotry lies, and it may cost us all severely…
“Some of the people who say they believe this have overseen 3 decades of deregulationist frenzy, one of the fairly predictable results of which is currently washing up on the beaches of Mississippi, Alabama, Louisiana and Florida”
Really??? These people have evidence that the oil spill in the Gulf of Mexico was the result of ‘3 decades of deregulationist frenzy’ I presume?
I thought the problem was caused by a failure to follow the regulations that were in place rather than the regulations not being strict enough.
Even with the best regulations in place you can be let down by those tasked with implementing them. This applies to Capitalist and Socialist societies in equal meassure. Chernobyl comes to mind in regard to the later.