Thu, Sep 05, 2019 - Page 9 News List

Capitalism in the last chance saloon

By Adair Turner

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.

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