Pursuing climate capitalism has narrow economic dimensions


ogy and management. Had climate change emerged as an issue 50 years ago, governments would have developed substantial plans for state-led investment in wind, solar, and energy efficiency, and sought to develop transport infrastructures based on rail, bus, and bicycle. Such a response is now unimaginable in the contemporary ideological climate. Instead, we have market-based responses oriented around the aim of ‘putting a price on carbon’. Specifically, governments have developed a series of regulatory arrangements that create markets in allowances and credits, in effect in rights to emit carbon and promises not to emit carbon. These markets – the EU Emissions Trading Scheme, the Clean Development Mechanism and Joint Implementation schemes that are part of the Kyoto Protocol, and emerging markets in North America, Japan and elsewhere – are emerging as the overall architec- ture of climate policy.


These new markets are usually talked about in terms of achieving emissions reductions at the lowest overall cost. But equally important is that they have helped to create an influential coalition of forces favouring cuts in emissions. Most importantly it has brought financiers to the table who might otherwise not have much


interest in climate change. Building this coalition is politically crucial to overcoming the vested interests in a continued fossil fuel-led future by showing that there may be more money to be made in a low carbon future. But many are deeply sceptical that such markets can play the role of coordinating the scale of decarbonisation that is required. Critics often regard them at best as irrelevant distractions in the face of the need to rapidly decarbonise the economy, and at worst as neo- colonial attempts by the rich to avoid responsi- bility for reducing their own emissions while gaining greater control over developing countries’ economies. They also point to instances of climate fraud – such as the reselling of permits that should have been retired – as carbon markets create new opportunities for financial scams or ‘subprime carbon’. The most aggressive proponents of carbon markets tend to ignore these criticisms or claim that they are regulatory glitches that will be smoothed out over time. Others such as Sandbag, a UK-based NGO, occupy the mid- dle-ground arguing that carbon markets can play an important role in pursuing decarbonisa- tion, but only if they are strictly regulated and managed to ensure they achieve their potential.


This hints at the key issue in pursuing decarbonisation. Can it be pursued within the purely free-market version of capitalism that has prevailed since the early 1980s, or does it need to be more actively managed by states supported by an active civil society and progres- sive business organisations? Historically, big transformations in the way that capitalism has worked have occurred because of sustained pressure from social movements to reform and far-sighted responses by leading business organisations. The welfare state of the post-war period was the result of trade union activism during the 1930s, as well as the effects of the Second World War. Without such strong management, you have to have enormous faith in unregulated markets to avoid the conclusion that we will end up heading for the Oryx and Crake scenario. In that scenario, the opportunities for businesses pursuing a sustainable path will dwindle rapidly. Businesses thus have strong incentives to become ever-more proactive in building support for strong, well-governed responses to climate change. Many businesses are already involved in these sorts of activities pushing governments to set ambitious emissions targets and give clear signals that investments in low carbon technologies and services will be rewarded. Many others are also involved in private sector initiatives such as the Carbon Disclosure Project, where institutional investors get the world’s major companies to disclose their carbon emissions and strategies to reduce them or the Renewable Energy and Energy Efficiency Partnership, which works for policies that help promote sustainable energy. But again, the central aim here is as much political as it is narrowly economic. Business support is needed to sustain ongoing policy development on climate that prevents climate deniers and their allies in the ‘brown’ industries from regaining the sort of foothold in the polit- ical debate that they have threatened in the last year, especially in the US. It also entails address- ing the concerns of critics about the problems of carbon markets, both to sustain the political coalition with environmentalists, but also to make sure those markets actually can contribute to decarbonisation by being properly regulated. Only with that sustained political activity can we make climate capitalism a plausible scenario.


Matthew Paterson is Professor of Political Science at the University of Ottawa in Canada and Peter Newell is Professor of International Development at the University of East Anglia. Their book, Climate Capitalism: Global Warming and the Transformation of the Global Economy, is available from Cambridge University Press


Sustainable Business | August/September 2010 | 29


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