This year, the evidence that global warming is occurring, and that the consequences for humanity could be severe and potentially catastrophic, has become more compelling than ever: Record global temperatures in June and July; unprecedented heatwaves in Australia and India, with temperatures above 50°C; huge forest fires across northern Russia. All of these things tell us that we are running out of time to cut greenhouse-gas emissions and contain global warming to at least manageable levels.
The response has been growing demand for radical action. In the US, proponents of the Green New Deal argue that the US should be a zero-carbon economy by 2030. In the UK, advocates of the Extinction Rebellion movement demand the same by 2025, and have severely disrupted London transport through very effective forms of civil disobedience. The argument that avoiding catastrophic climate change requires rejecting capitalism has also been gaining ground.
Against this growing tide of radicalism, companies, business groups and other establishment institutions urge caution and more measured action. Achieving zero emissions as early as 2030, they say, would be immensely costly and require changes in living standards that most people would not accept.
Illegal actions that disrupt others’ lives, it is said, would undermine popular support for necessary measures. A more affordable and gradual path of emissions reduction would be better and still prevent catastrophe — and market instruments operating within the capitalist system could be powerful levers of change.
These counterarguments are robust. The costs of achieving a zero-carbon economy increase dramatically if the target is 10 years, not 30. Most forms of capital equipment naturally need replacement within 30 years, so switching to new technologies over that time frame would cost relatively little, whereas switching over 10 years would require companies to write off large quantities of existing assets.
Technological progress — whether in solar photovoltaic panels, batteries, biofuels or aircraft design — would make it much cheaper to cut emissions in 15 years than today. This profit motive is also spurring venture capitalists to make huge investments in the new technologies required to deliver a zero-carbon economy.
Decentralized market mechanisms such as carbon pricing are essential to drive change in key industrial sectors, given the multiplicity of possible routes to decarbonization, but socialist planning is not as effective: Venezuela is an environmental as well as a social disaster.
There is a real danger that excessively rapid action could alienate popular support. After all, the yellow vest movement in France was provoked by tax increases designed to make diesel vehicles uneconomic, but they were imposed at a time when electric vehicles were not yet cheap enough and lacked the range to be a viable alternative for less well-off people living outside major cities.
However, the capitalist system has failed to respond to the challenge of climate change fast enough. In some ways, capitalism has impeded effective action. Venture capitalists financing brilliant technological breakthroughs have been matched by industry lobby groups successfully arguing against required regulations or carbon taxes.
If adequate policies had been adopted 30 years ago, a zero-carbon economy could be just around the corner, and at a very low cost — that net-zero carbon emissions is not on the crest of happening is, in part, capitalism’s fault.
Massively accelerated action is required. All developed economies should commit to achieving net-zero carbon emissions by 2050. Zero must mean zero, with no pretense that large quantities of fossil fuels can continue to burn late into the 21st century, balanced by equally large quantities of carbon capture and storage.
Developing economies should get there by 2060 at the very latest. That would still leave humans vulnerable to significant and unavoidable climate change, but climate science suggests that it would be sufficient to avoid a catastrophe.
As the Energy Transitions Commission described in its Mission Possible report, it is still possible to achieve that objective at a relatively low economic cost, provided that the policies required to drive rapid change are adopted without delay.
Carbon taxes should be introduced at a sufficiently high level, and with future increases declared well in advance, to drive the multi-decade investment plans required to decarbonize heavy industry. Carbon tariffs should be used to protect industry from being undercut by imports from countries that fail to apply adequate carbon prices.
Airlines should face either steadily rising carbon prices, or regulations requiring them to use a rising proportion of zero-carbon fuels from clearly sustainable sources, with the percentage reaching 100 percent before 2050.
Blunt but effective instruments — such as banning new sales of internal combustion engine vehicles from a specific date in the future, such as 2030 — should also be part of the policy armory. Regulations should ban putting plastics in landfills and plastic incineration, forcing the development of a complete plastics recycling system.
These policies are not anti-capitalist. Instead they are the policies needed to unleash capitalism’s power to solve the problem. Once clear prices and regulations are in place, market competition and the profit motive would drive innovation, and economies of scale and learning-curve effects would force down the costs of zero-carbon technologies.
If that power is not unleashed, climate change will almost certainly not be contained.
Believers in a market economy are dismayed by radical voices arguing that capitalism is incompatible with effective climate action, but unless capitalism’s defenders support the immediate establishment of far more ambitious targets and policies to achieve net-zero emissions by mid-century, they should not be surprised if an increasing number of people believe that capitalism is the problem and not part of the solution. They would be right to do so.
Adair Turner, chair of the Energy Transitions Commission, was chair of the British Financial Services Authority from 2008 to 2012.
Copyright: Project Syndicate
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