How do we stop climate change?

How do we stop climate change?

Sustainable Investing

Is climate change a problem that can be solved by capitalist means?

In this essay, I am going to argue that climate change is not a problem that can become solved by capitalist means. By ‘capitalist means,’ I mean the methods and operations adopted from the profit-seeking market where the means of production and distribution are privately or corporately owned. In the first part of the essay, I’ll explain why capitalist countries inevitably encounter the problem of negative environmental consequences such as climate change.

Then, I move to illustrate why  those problems could not become solved by capitalist means and market-based solutions such as carbon tax. In making these arguments, I draw upon the work of Christopher  Wright and Daniel Nyberg, who argue that market-based solutions only delay climate  change for continued economic growth and consumption rather than solving it. The temporary achievements of  market-based solutions becomes canceled out as pollution-heavy industries shift to the  developing countries where profit-seeking corporations find a lower cost of  production. 

The trade-off between economic development and environment

Capitalism bases its fundamentals on the renewability and support of nature, and  the destruction of nature is the byproduct of industrialization. As economic activities  expand, more supplies become needed to meet the growing demand of consumers’. A considerable portion of that supply becomes drawn directly from the exploitation of nature,  especially during the early stage of industrialization. Imagine as agricultural  productivity rose, natural resources such as forests became cut to obtain construction  materials and land for cultivation. Considering the nature of economic behavior is  profit-seeking, it’s not hard to deduce that industry would reach its hands to resources  as much as possible to keep the cost of production low.

“Forests are particularly vulnerable during the take-off process of industrialization,1” as deforestation may  result from overharvesting and land clearing for agriculture. It’s true that things do get  better for forests as the economy further develops and shifts its focus to non-agricultural  production. However, the consumption of energy and the generation of emissions rises with the level of economic growth. The number of vehicles and the amount of  consumption of electricity are directly related to the stage of economic development. The wastes and emissions generated by industrial activities ultimately find their way  back to the environment and cause pollution on the essential elements of the  ecosystem, such as air, water, and land. “Empirical evidence shows an inevitability of  environmental degradation along a country’s development path especially during the  take-off process of industrialization2.” 

Some may argue that the economic growth itself could be a powerful way for improving environmental quality.

The idea is that capitalism could also be the  answer to the environmental problems it caused because capitalism encourages  innovation of alternative resources. In the hope of reducing costs and increasing profit, private companies would invest in researches of new technologies for better  efficiency in production. Given such advantage of capitalism, structural  transformation once again occurs and gradually shift industries from energy-intensive  to services and information/technology-intensive. The effectiveness of technology in  cutting waste in production is undeniable.

However, it’s dangerous to call that a  solution to the environmental problem because it suggests that we should focus more  on economic growth and technology investment rather than coming up with particular  environmental policies. There Are several reasons why technology innovation isn’t the  ultimate solution for the problem even though it does help. Firstly, some  environmental damages are just irreversible. Technology and clean energy make  contributions to the whole picture at the later stage, but those methods can’t make up  to some environmental degradation happened at the early stage of development, such  as loss of biological diversity and destruction of unique natural sites.

In addition to technology innovations, certain environment-targeted policies becomes needed here to offset such damage. Secondly, even though new technology can help slow down the acceleration of environmental damage and climate change, it’s not something that happens over-night and saves the world all of a sudden. It could take decades to make  ground-breaking progress and successfully apply such technology to the production frontline while such a complicated and enormous economy has been exploiting the  environment for ages. Again it’s dangerous to sit and wait for the new technology to  arrive without making an additional effort in making environment targeted policies as  the technology may not come in time before the country desperately needs it.  

Current market-based methods 

The method currently favored by many countries is geoengineering, the large-scale intervention designed to tackle the effects of climate change directly. An  example of that would be carbon credits. Carbon credits are the permits that allow the  company that holds it to emit a certain amount of greenhouse gas. Companies who  need to emit greenhouse gas have to buy a corresponding amount of carbon credits  before emission.

Moreover, the total amount of carbon credits sold on the market becomes regulated by  the government.

It aims to set a limit to the total amount of emission of greenhouse  gas and transfer public environmental cost to the private cost of production. Such a  method is effective as it forces companies to internalize the negative externalities  imposed on the environment that they usually don’t take into consideration. By pricing  and commoditizing nature itself, the responsibility to respond to climate change  and the specifics of emission reduction is left to private corporations. The carbon credits are also designed to be exchangeable as emission becomes an asset, and the  data regarding carbon credits are collected by the government and compared between  corporations for the future regulation guide. 

Critics of such an approach from Christopher Wright and Daniel Nyberg state that: 

“such set-up suggests that the environment can solely be protected through the logic of  market exchange4.”

The concern is that the market mechanism of carbon credits is pretty traditional. That the value of the commodity becomes calculated by the price and risk,  and the speculations of the future.

The curtness behind this method is worrisome because the environment is not stable, predictable, or  linear that can be simplified to commodities.

The attention on the commoditized part  of the environment may lead to neglect over the unpriced aspects that could be just as  important, and the unpredictability and instability of the natural environment make it  difficult to monitor what’s missed. 

Moreover, the geoengineering method is actually delaying climate change for  continued economic growth and consumption rather than providing a solution. The  use of geoengineering provides an excuse for the lack of action to reduce emissions.  

Christopher Wright and Daniel Nyberg claim that “the lack of urgency blinds us to the  most obvious solutions: keep fossil fuels in the ground, transitioning to renewable  low-carbon energy sources and slowing down material consumption6.” It’s obvious that other approaches mentioned above acquire significant advantages that market based methods neglect.  

Further concerns 

As mentioned above, market-based methods effectively contribute to the slow-down  of climate change within the country, though they can’t fundamentally solve the  problem. However, there’re still concerns about such effects as it only works its magic  in a particular country. No matter whether it’s investments in technology innovations  or carrying out carbon credits policies, it increases the cost of production for the  companies. There’s an alternative way to dodge the cost – shift environmentally  unfriendly business to the developing countries. Not only could the company save  money on costs such as carbon credits, but it’s also a natural incentive for profit seeking companies to turn to the developing countries for their cheap resources. 

Developing countries tend to have cheaper labor and unexploited natural resources  that set them to be an easy target.

While they are particularly vulnerable to environmental damage due to lack of regulations and technologies. Multinational companies may manage to reduce emissions at their home-country but fail to follow  the same standard at a distant land. Moreover, climate change, such as global  warming affects the planet as a whole. The emission and environmental degradation  that happens in developing countries would eventually affect every country,  including developed countries, even if they successfully manage to control their  emission. The limited achievement of market-based solutions applied in developed  countries would be canceled out as the rest of the world was caught in the trouble of  balancing development and the environment. 


In conclusion, market-based solutions fail to target such inevitability even though some of  the methods are temporarily effective. The limited effectiveness of market-based methods leans toward delaying the problem and shifting the problem from one country to another. While strong actions toward the center of the problem are in urgent  need. 

Written by Jessie Zhou


1. Christopher Wright, Daniel Nyberg “Climate Change, Capitalism, and 

Corporations” 2015, Cambridge university press 

2. Panayotou T., “Empirical tests and policy analysis of environmental degradation at  different stages of economic development,”. 1993, ILO Working Papers  992927783402676, International Labour Organization. 

3. Naomi Klein, “This Changes Everything: Capitalism Vs. The Climate” 2015

Sustainable Investing

How do we stop climate change?