NEW YORK (Project Syndicate) – Heat waves, floods, droughts, and wildfires are devastating communities around the world, and they will only take on more deadly shapes. Although climate change deniers remain strong, the need for immediate action is now recognized even beyond active workers. Governments, international organizations, and even business and finance are bowing to inevitability – or so it seems
Indeed, the world has wasted decades with carbon trading and “green” financial labeling schemes, and the current trend is to create fancy hedging strategies (“carbon offsets”) simply denying the simple fact that humanity is sitting still. Boat. “Offsetting” may serve individual resource holders, but it will do little to avoid the climate catastrophe that awaits us all.
“The DNA of capitalism makes it incapable of dealing with the consequences of climate change, which in no small part is itself a product of capitalism. The basis of the whole capitalist system is the privatization of profit and the socialization of loss.”
The embrace of “green capitalism” in the private sector seems to be another ploy to avoid real reckoning. If business and finance leaders are serious, they will recognize the need for massive change to ensure that the planet is hospitable to all humanity now and in the future. It is not about replacing brown resources for green, but about sharing the losses that brown capitalism has inflicted on millions of people and ensuring the future of even the weakest.
The truth may be very good
The notion of green capitalism implies that the costs of tackling climate change are too much for the government to bear, and that the private sector always has a better answer. Thus, for supporters of green capitalism, the public-private partnership will ensure that the cost of transition from brown to green capitalism will be neutral. Efficient investment in new technology will prevent humanity from entering the abyss.
Read Rachel Conning Bills on Climate Change
But it sounds too good to be true, because it is. The DNA of capitalism makes it incapable of dealing with the consequences of climate change, which in no small part is itself a product of capitalism. The basis of the whole capitalist system is the privatization of profit and the socialization of loss.
The law licenses anyone who is intelligent enough to establish a trust or corporate entity prior to pollution to exclude the cost of destroying the planet. This encourages the off-loading of environmental liabilities achieved through bankruptcy restructuring.
And it holds all countries hostage to international law that privileges the protection of foreign investors’ returns for the benefit of their own peoples. Several countries have already filed lawsuits against foreign companies under energy charter agreements in an effort to curb carbon-di-oxide emissions.
“The new Sense focuses on minimal financial disclosure because that path is promised without it being changed.”
Two-thirds of the total emissions since the Industrial Revolution came from just 90 companies. Yet if the managers of the world’s worst pollutants are willing to follow a quick decarbonization, their shareholders will resist. For decades, the gospel of maximizing shareholder values has reigned supreme, and managers know that if they deviate from orthodoxy, they will be prosecuted for violating their fiduciary responsibilities.
Shareholder, not scientist
Not surprisingly, Big Business and Big Finance now support climate disclosure. The message is that shareholders, not managers, must encourage the necessary behavioral change; The solution must be found through price-methods, not through science-based principles.
The question of why an easy exit option and hedging opportunity lots of investors should be careful about disclosing future losses of some companies in their portfolio is unanswered.
Clearly, more drastic changes are needed, such as the carbon tax, a permanent moratorium on natural resource extraction, and so on. These policies are often dismissed as methods that distort the market, and yet they idealize markets that do not exist in the real world. After all, the government has heavily subsidized the fossil-fuel industry for decades, spending 5. 5.5 trillion (both pre- and post-tax) in 2017, or 6.8% of global gross domestic product.
And if fossil-fuel companies go out of profit to offset these tax breaks, they can only sell themselves to more profitable companies, rewarding their shareholders for their loyalty. The script of these strategies has long been written in the law of consolidation and acquisition.
But the father of all subsidies is the centuries-old process of legally encoding capital through property, corporate, trust and bankruptcy laws. It is not the law, the market or the organization that protects the owners of capital assets, even though they involve others with huge responsibilities.
Proponents of her case have been working to make the actual transcript of this statement available online. That is why they are now lobbying the government to subsidize the replacement of assets, so that the price of green will go up as the price of brown assets goes down to compensate the owners. Again, that is capitalism. Whether this represents the best strategy to ensure the habitation of the planet is a completely different question.
Instead of tackling such questions, the government and regulators have once again surrendered to the siren song of the market-friendly system. The new Sense focuses on minimal financial disclosure because the path promises that it changes without paying. (Accountants, lawyers and business consultants create jobs for the entire industry with their own powerful advocacy weapons.)
Wash green instead of decarbonizing
Not surprisingly, the result is a green wash wave. The financial industry has happily poured trillions of dollars into green-labeled assets that are not green at all. According to a recent study, 71% of ESG-themed funds (presumably reflecting environmental, social or governance criteria) are negatively linked to the goals of the Paris Climate Agreement.
Our time is running out for such experiments. If the goal was really to green the economy, the first step would be to eliminate all direct subsidies and tax subsidies for brown capitalism and to stop carbon “expansion”. The government should also issue a moratorium to protect polluters, their owners and investors from liability for environmental damage. Incidentally, these steps will also eliminate some of the deadly distortions in the surroundings.
Catherine Pister, a professor of comparative law at Columbia Law School, is the author of “The Code of Capital: How Law Creates Wealth and Equality.”“
This commentary was published with the permission of Project Syndicate – The Myth of Green Capitalism
More about the economics of climate change
Diane Coyle: Now is the time for economists to give nature its availability
William Nordhaus: Preventing pollution and climate change pays for itself
Megan Green: How the Fed can give the green light for environmentally sustainable investments