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Climate economics: Corporate greening falls short

Gail Whiteman is unconvinced by an argument that naked greed and market forces will drive businesses to cut their emissions.

Climate Capitalism: Capitalism in the Age of Climate Change

Hill & Wang: 2011. 400 pp. $27.95 9780809034734 | ISBN: 978-0-8090-3473-4

Sustainability is no longer a fringe topic. Corporations are routinely taking steps to reduce their carbon footprints and investing in green business measures. Yet important ecological thresholds are still being breached. Companies are the main engines of socioeconomic change, and many are actively creating market advantages from sustainability. Why then are emission cuts still so abysmally small?

Instead of sorting through this dilemma, Climate Capitalism is filled with positive stories of how profit-seeking firms are helping save the planet. Through engaging examples, the book seeks to demonstrate that capitalism and “naked greed” are “powerful motivations for solving the problem of climate change”. Both authors have first-hand experience of helping organizations to improve their green credentials: Hunter Lovins' consultancy advises the United Nations and the US retail giant Walmart on sustainability, and Boyd Cohen, a former professor of sustainable entrepreneurship is chief executive of a carbon-management company. But their book is not a critical analysis.

Floating houses in the Netherlands remain a small experiment as scaling requires regulations and improvements to business models. Credit: ASAHI SHIMBUN VIA GETTY

Many business leaders recognize that economic forces are insufficient for resolving the complex challenges that face Earth systems. Chief executive of the global transportation and logistics company TNT, Peter Bakker, has told me: “As a company we can reduce our carbon footprint dramatically. But the world's still driving off a cliff. We need a system change.” Senior business consultants say that they need more than good examples. They want to know how they can overcome barriers to change inside and outside a firm and how to let companies know if what they are doing is having a significant effect on the world's resources. How should companies judge their impacts on ocean acidity, for example? Or on atmospheric pollutants other than carbon dioxide?

Science can help. Cutting emissions is essential, but Earth's natural processes are multi-dimensional and interlinked, making it difficult to measure the specific effect of emissions cuts. A useful tool is the 'planetary boundary' concept of Swedish environmental scientist Johan Rockström and his colleagues. In 2009, they derived limits to seven key Earth systems — such as climate change, ocean acidity, stratospheric ozone levels —that, if breached, would be detrimental to human survival (J. Rockström et al. Nature 461, 472–475; 2009). Lovins and Cohen nod to this work, but don't discuss how to bring it into the boardroom.

The case studies in Climate Capitalism are appealing, but the descriptions are based more on media reports than on research, so some projects are exaggerated. For example, the book describes the 'floating houses' piloted by the Dutch company Dura Vermeer as “popular with locals in the Netherlands and foreigners, alike”. In fact, they remain a small-scale experiment mainly in one city, Maasbommel. Scaling them up to floating communities has proved difficult owing to a lack of regulations and good business models, problems not discussed in the book.

The most regrettable dearth of analysis is in the chapter on carbon markets. The authors argue that the market will work wonders, if we let it. They acknowledge that some carbon-offset schemes are scams and that the European Union's Emission Trading System (EU ETS) had problems at the beginning, then quickly go on to call for carbon markets to be rolled out widely. There is no alternative, Lovins and Cohen say, because a carbon tax is not appealing to US politicians.

Not so. Economic studies suggest that a carbon tax may be more cost-efficient than a cap-and-trade system (B. B. F. Wittneben Energy Policy 37, 2462–2464; 2009). It provides a clear price signal, requires less bureaucracy, which reduces costs, and accrues revenue straight to the government that collects it. Most importantly with such an approach, there is no upper limit on emissions reduction. So why rule out a carbon tax as one of the tools of climate capitalism? Carbon taxes have indeed been successful elsewhere, for example, in British Columbia, Canada.

Nor are the market-based solutions as great as Climate Capitalism makes out. As a result of intense lobbying, some big polluters, particularly in the utilities sector, made windfall profits from the EU ETS without reducing emissions. Carbon-market fraud is also on the rise. One estimate suggests that such crime has cost the EU at least €5 billion (US$7.3 billion) since 2007 (M. K. Dorsey and J.Whitington Carbon Market Europe 9, 7; 2010). In January, the Commission suspended EU ETS transactions for a week after a series of frauds.

Naked greed is not a motivating force for sustainability; it is a disruptive one. Although the positive examples that Lovins and Cohen present are inspiring, they are not enough. Binding international agreements and new governance mechanisms that address our integrated environmental issues — including, but not restricted to, emissions cuts — will compel businesses to engage more deeply with science.

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Correspondence to Gail Whiteman.

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Whiteman, G. Climate economics: Corporate greening falls short. Nature 473, 149–150 (2011). https://doi.org/10.1038/473149a

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