Green Capitalism
Alberto Fernández García
Faced with the severe climate and energy crisis, green capitalism has gained momentum in the public debate. According to its defenders, market mechanisms could optimally solve environmental problems, with the aim of making the global economy sustainable and emissions-free. For many economists, it represents a new economic paradigm, as it involves a holistic approach that values nature and redefines the foundations of growth. Thomas Friedman, one of its gurus, speaks of a “green revolution” that can relaunch investment and growth globally (Friedman, 2008). By fighting environmental challenges, countries will also addres their own issues, as the new green economy represents a great historical opportunity to solve the problems of the “Climate-Energy Era”.
Until now, nature had been marginalized in economic literature; lacking its own concept, it was excluded from utilitarian calculations and accounting books. Indeed, the concept of externality reflects this deficiency: the price of a good or service does not accurately reflect the cost or benefit associated with that good (Daly; Farley, 2008). Indirect effects, such as the destruction of an ecosystem, constitute an externality in which costs are passed on to nature—or other social agents—with all their consequences, without the company or the consumer taking responsibility for them. In this way, externalities render invisible all those environmental burdens produced by economic activity; they do not appear in economic accounting. However, in the fase of the severe climate emergency, global society is increasingly aware that such externalizations cannot occur indefinitely. In economics, the concept of internalizations arises to reflect these costs in the price of goods and services (Daly, 1996).
The concept of externalization highlights a deficit in conventional economic theory regarding nature. This has led to the development of a Natural Capital theory (Constanza; Daly, 1992). Nature produces and provides us with “environmental services”. From now on, nature is valued and conserved in a sustainable manner, as it offers us a flow of resources and services. In other words, the aim is to monetarily quantifying the utility of nature in order to be aware of the cost-benefits of these environmental services. Therefore, the concept of natural capital can be defined as the stocks of natural assets that include geology, soil, air, water, and living beings. The concept of capital as a factor of production thus becomes extensible to the flows of ecosystem goods and services provided by nature. Since nature is endowed with value, it must be conserved: this is the concept of sustainability, which becomes central to green economy growth models. And the best way to manage this is by conserving these flows without reaching their depletion, setting certain limits on their exploitation based on their rate of replenishment or without causing damage to the ecosystems from which they originate. In some cases, this natural capital has been commodified and commercialized (Gómez; Ruiz, 2011). An example would be companies dedicated to pollination.
On the other hand, States and financial institutions seek to incentivize the decoupling of their economies through internalization. We find one of the flagship measures of green capitalism: carbon emission markets (Moreno, 2012). The objective of this measure is to put a price on carbon emissions in order to reduce them, thereby adhering with the principle of “the polluter pays”. To this effect, a cap is set on GHG (greenhouse gas) emissions that bondholders must not exceed at any time. At the end of the financial year, each holder must submit a number of bonds corresponding to the number of emissions they have produced. If emissions were lower than the cap, the surplus bonds can be sold; conversely, if emissions exceded the cap, the holder must acquire new ones. This incentivizes investment in renewable and sustainable productive technologies. The European regulations on the emissions market are governeds by the European Union Emissions Trading System (EU ETS), Directive 2003/87/EC, and were revised in 2015 with the purpose of meeting the emission reduction targets set for 2030.
The key asset of green capitalism lies in technological development. Innovation and the widespread adoption of new green technologies will make it possible to decouple economic growth from carbon emissions (Fox, 2023). New markets will emerge, driven by new technologies, in a spiral of green investment. Faced with the energy and ecological impasse, new valorization opportunities, coupled with incentives such as emission markets, would lead to a progressive shift from polluting technologies to renewable and green ones, which over time would become more profitable for companies. Then, the market mechanisms themselves would give rise to a “technological fix” that would be the future engine of green growth.
These are the approaches economists have adopted in rethinking the relationship between capitalism and nature with the aim of addressing the severe global climate emergency. Their proponents may adopt a more interventionist perspective, which emphasizes the fundamental role of the state in leading the green transition, so that taxes and market regulations contribute to achieving this goal; or a more liberal approach, which advocates for market deregulation to foster innovation and individual entrepreneurship. But despite the difference in policies, both end up agreeing that capitalism and the market are the best ways to end the climate crisis, drawing a future scenario where the growth ecomomy is sustained by green technologies. But this growth would not be merely quantitative; more importantly, it would be a qualitative growth that emphasizes human and natural well-being. The ultimate reflection of this is the Sustainable Development Goals (SDGs) (2023) established by the UN, which seek to transform the global economy to make it compatible with nature and sustainability.
However, many are skeptical about the possibility of green capitalism. Criticism from the degrowth movement (Kallis, 2015), in particular, focuses on the argument that there is no longer enough time for market mechanisms alone to bring about a transition to a global green economy. On the contrary, the urgency of the climate catastrophe would force a reduction in production and consumption levels which would require a transformation of the productive system (see Agroecology, Energy Sovereignty, Food Sovereignty) and some economic planning. It underscores the impossibility of decouple economy from emissions without altering the very patterns of growth, which inherently depend on increasing levels of production and consumption (Tanuro, 2014). Other criticisms, in relation to the above, discourage economists’ techno-optimism regarding the solution of environmental problems. Capital will always seek to optimally exploit the cheapest energies and technologies to accumulate incessantly. In fact, what we observe is a re-coupling of certain sources (e.g., coal) and an absolute increase in annual demand for terawatt-hours (Pineault, 2023). This phenomenon is known as the “Jevons paradox”: improvements in efficiency do not lead to a reduction in overall consumption, but rather accelerate it. Competitive pressure and the market, argue the critics of green capitalism, do not lead to decoupling within a framework tied to growth.
Finally, critiques extending beyond the economic sphere and challenge the purely anthropocentric view of green capitalism. The concept of natural capital reduces nature to value, thereby reproducing the Society/Nature dualism. Due to these theoretical assumptions, the green economy can only reproduce the instrumental exploitation of nature, so that any form of environmental ethics or justice is reduced to the market framework and “corporate responsibility.” In the face of these limitations, new perspectives are emerging that assert nature’s intrinsic value, such as the ethics of care or organicist models; there are also other alternatives to the growth-based welfare model, such as the concept of buen vivir.
Bibliography:
Friedman, T. L. (2008). Hot, flat and crowded. Why we need a green revolution and how It can renew America. FSGBooks.
Constanza, R. & Daly, H. E. (1992). Natural Capital and Sustainable Development. Conservation Biology, 6(1), 37–46.
Daly, H. E. & Farely, J. (2004). Ecological Economics. Principles and applications. Land Press.
Daly, H. E. (1996). Beyond Growth: The economics of Sustainable Development. Beacon Press.
D´ Alisa, G.; Demaria, F. & Kallis, G. (2015). Degrowth. A vocabulary for a new era. Routledge.
Tanuro, D. (2014). Green Capitalism. Why It can´t work. Fernrwood Publishing.
Moreno, C. (2012). La economía verde y los mercados de carbono. En VV.AA., Capitalismo Verde. Estudios Ecologistas.