Behind “approaching peak oil demand assertions,” and “fossil fuel divestment calls”, that frequently appear in the media, is a raging war within capitalism. They are not scattershot, and they reveal parts of a far-reaching motive, promoting green technologies (solar, wind, and battery storage technologies) as a comprehensive energy regime for both power generation and mobility sectors. The end game of this motive is to replenish fossil fuels as the premier means of energy.
Capitalism is devised as a mechanism for efficiently allocating scarce resources, fostering innovation, and improving the quality of life. At its core, it is about leaving economic decisions to the free play of self-regulating market forces. The struggle for market shares generates politics. Green capitalism is an emerging regime of accumulation founded on energy markets, which aims to replace the prevalent fossil fuel capitalist regime with the promise to provide a deeply needed reduction of carbon emissions. To grow green technologies at the expense of fossil fuels, an aggressive, zero-sum conception of green growth, have been brought to the center of green capitalist politics. This is redistributive rather than generative practice and requires new means of accumulation. Moreover, it engages in an explicit policy of ‘picking winning technologies’, or ‘creating champions.’ Substantially, green capitalism is ill-thought-out because maximizing profit and mitigating climate change are inherently in conflict and cannot be systematically aligned.
The advocates of the transition to green technologies pursue a “toolkit” of domestic and international regulatory policies that influence price signals, and public and private resource allocation and consumption decisions, encouraging the deployment and diffusion of new green energy and, ultimately, discouraging the use of fossil fuels.
The first tool is the Impact Investing. It is based on the principle that private capital can intentionally create positive environmental and social outcomes as well as financial returns, in other words, it is a “value-driven approach” to investing, given the limited capacity of government to pursue investment. Partnerships with corporations, investors, non-profit organizations, and governments can ensure adequate financing. To engage in Impact Investing, ESG strategies are used to factor Environmental, Social, and Governance aspects into the investment process, with the apparent goal of generating long-term, sustainable returns for investors. As ESG reporting shifts from niche to mainstream and begins to have balance sheet implications, ESG factors become critical in the assessment of the risks to investor’s assets and liabilities.
Currently, ESG efforts are concentrated mainly on negative screening. As a result, activities that the use of fossil fuels are unequivocally considered to be not meeting ESG criteria. Accordingly, financial players are increasingly compelling the energy industry to prepare against enforced technological replacement, as they quantify and publicize the epochal financial risks of “stranded assets”, which is a multi-trillion-dollar devaluation of fossil resource reserves.
The second tool is the market Instruments’ tool, which has been the oldest and the most, allude to leavers in the green capitalist portfolio, despite its unproven effectiveness. The problem is prevalent in both the design and the recycling of carbon revenues. Implementing a policy that alters the returns to the production and consumption of energy will create an array of winners and losers among fossil-fuel, renewable, energy-efficiency, manufacturing, and other types of firms. Also, the rising globalization amplifies the incentives to free ride, engage in carbon leak, asymmetric bargaining among countries, and internalize domestic political-economic interests. Green capitalism creates an illusion of the carbon pricing being a “free lunch”.
Thirdly, the media establish a positive relationship between green technologies and mitigating climate change, by repeating this over and over. The audience becomes convinced that the root cause of climate change is fossil fuels and not the way fossil fuel is utilized by consumers. On another front, there is a public misconception, still held by a large section of the population, is that green capitalism is about environmentalism, that the principal objective is to get more effective legislation in place to combat pollution, encourage recycling, and protect the countryside from excessive development. Ultimately, public opinion has been formed that the solution to climate change is the green transition.
Finally, through regulations and institutions, the cause of green capitalism can be endorsed. Governments, central banks, and financial authorities have at their disposal tools from three categories: 1) financial policies and regulations, 2) fiscal policy levers and 3) public finance. The green Stimulus agenda becomes a broadly effective tool to subsidize green capitalism.
Yet, the economics of the green regime and existing geopolitical standing on the global stage make this war outcome unsettled. Green capitalism advocates vastly underestimate the gravity, scope, and speed of the energy transition and thus unrealistically imagine that growth can continue if we just tweak the incentives and penalties a bit here and there. Without functional and viable energy storage technologies and, in addition to, its addiction to some highly scarce metals, many experts believe that the green energy regime is in-comprehensive and cannot weather the challenges of scaling up. This surfaces the complexities and difficulties of an energy transition to green technologies and substantiates the imperative of maintaining a flexible and diverse supply of energy technologies.
New products, processes, and business models are an essential element in achieving the emissions reductions needed to reach ‘climate neutrality’ by 2050. Market forces need to drive the evolution of the techno-economic paradigm shift in the intergenerational timeframe window by internalizing any propagating shocks to the global economy.
• Nadhmi Al-Khamis is a Saudi writer specializing in energy and climate change.