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POWER DECODED

Latest edition: 16 Feb 2024
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Go to today's edition of the newsletter


WHAT IS ‘GREEN CAPITALISM' AND CAN IT TACKLE THE CLIMATE CRISIS?

It remains to be seen if capitalism – or a version of it – can adequately
facilitate the shift towards a global green economy.

The recent confirmation by the World Meteorological Organization that 2023 was
the hottest year on record and the limited commitments to climate action at the
COP28 conference that preceded it beg the question of whether society's current
systems can deliver the rapid changes required. What is 'green capitalism' and
can it tackle the climate crisis?

Few disagree that capitalism, as humanity's dominant economic system, has played
a central role in driving climate change. It remains to be seen if it – or a
version of it – can adequately facilitate the shift towards a global green
economy.

Josh Pitman, managing director of sustainable packaging firm Priory Direct,
tells Energy Monitor: “I believe capitalism has caused the climate crisis, but I
don’t think that makes capitalism the enemy, and to argue that would be
counterproductive.”

Similarly, Dr Ana Nacvalovaite, a research fellow at the University of Oxford’s
Kellogg’s Centre for Mutual and Co-Owned Business, views capitalism as an agile
system that could yet accommodate humanity's need for change.

“Capitalism is responsive to consumer behaviour,” she explains. “There is truth
in saying that the industrial and economic activities characteristic of
capitalist systems have contributed to the climate emergency. However,
capitalism is dynamic, adaptable, and capable of evolving with changing societal
values and technological advancements.”




GREEN CAPITALISM DEFINED

With this in mind, the concept of ‘green capitalism’ has been variously touted,
including recently by Bloomberg reporter Akshat Rathi, who argues that the
climate crisis was caused not by “capitalism but the corruption of capitalism”
and that it is “cheaper to save the world than destroy it”.

Proponents of the concept believe that tools, mechanisms and regulations can be
enacted to deliver a form of capitalism that is consistent with – and, indeed,
can deliver – a sustainable global future.

Explaining the two core principles of green capitalism to Wired, Adrienne
Buller, who criticises the concept in her book The Value of a Whale: On the
Illusions of Green Capitalism, wrote: “The first is that it’s an attempt to
resolve the climate crisis in a way that minimizes disruption to our existing
ways of organizing the economy, to existing distributions of wealth and power.

“The second tenet is pursuing decarbonization in a way that makes sure that
there are still opportunities for profit-making and rent extraction in that
decarbonized future. In contrast to, for instance, moving away from private car
ownership to mass transit as a climate solution, the green capitalist framework
is more about making sure we can transition to electric vehicles when we’re
moving away from fossil-fuel-driven cars so that private companies can keep
profiting.”

Green capitalism in essence is based upon the premise that profit and
environmental sustainability can be reconciled.




GREEN LEGISLATION AND BUSINESS RESPONSIBILITY

For this to be feasible, businesses must be governed by rules that are aimed at
facilitating sustainability, such as the EU’s Corporate Sustainability Reporting
Directive.

Pitman says: “Capitalism got us into this mess, but we’re now so embedded in
this productive model that we must use it as the ultimate driver of progress
towards sustainability. If we legislate businesses to make positive ESG outcomes
and natural capital a significant part of their bottom line then I believe
business and capital could be the main driving force innovating our way to a
more sustainable future.

“We shouldn’t look for bad people, but bad systems. Our current capitalist
system offers a lot of opportunities for productivity and innovation and has
huge momentum. Align this momentum with positive outcomes for the planet, and
watch us progress.”

Indeed, Rachael Delacour, CEO and founder of climate analytics firm Sweep,
argues that companies that do not begin to adjust their business practices will
start to face regulatory fines, reputational damage and therefore loss of
customers over the next ten years.

She adds, however, that a key challenge for green capitalism is operating in a
fragmented world, with different regions having varying regulations and emission
standards.

Renaud Heyd, chief financial officer in the UK and Ireland at software giant
SAP, believes that it is not just regulations that will affect change, but
pressure from the likes of customers and suppliers.

“From my own conversations with leaders, there’s a general feeling that this
train has left the station,” he says. “Environmental action is financially good
for business.”






CLIMATE FINANCE

Despite these drivers of change, there remains a need for significant financing
of green initiatives.

Bart Wesselink, chief financial and risk officer at environmental commodities
trader STX Group, explains: “Corporate action and climate finance play a pivotal
role in steering the global energy transition towards sustainability.”

He points to climate finance trends such as green bonds and climate risk
insurance that have been mobilising private sector capital for environmentally
friendly initiatives, but Wesselink is also clear that funding is currently
falling short.

“Total pledges at COP28 equated to $85bn, which was well short of the $3-6trn
annually that the IMF said will be needed until 2050 to meet the Paris Agreement
targets,” he comments.

“A huge funding gap from global banks is evident, and though a huge amount of
work is going on to galvanise action from banks at an international level, it
falls to the private sector to close the gap.”

Similarly, Wesselink highlights that, despite some positive trends in climate
finance there are severe challenges in the equitable distribution of funds
across the globe: “Developing nations face hurdles in accessing climate finance,
requiring global cooperation to address the disparities.”






AUSTRALIA ENERGY TRANSITION MARKET

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TACKLE FUTURE DISRUPTION WITH THEMATIC INTELLIGENCE

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IN OUR PREVIOUS EDITION

Power Decoded

IS BARCLAYS REALLY MOVING AWAY FROM FOSSIL FUELS?

15 Feb 2024

Power Decoded

ANALYSIS: CANCELLATIONS THREATEN BIDEN'S 2030 OFFSHORE WIND TARGET

14 Feb 2024

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13 Feb 2024


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