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It’s capitalism, not socialism, that will beat climate change

6 May 2019

10:24 AM

6 May 2019

10:24 AM

When John Glenn was asked what went through his mind as he became the first American in space, he said it was the nerve-wracking thought that ‘every part of this rocket was supplied by the lowest bidder.’

It’s a revealing insight. Perhaps even more so than the ‘Blue Marble’ photograph of Earth taken by Apollo 17 astronauts, which inspired early environmentalists. Glenn was acknowledging that market economics made it possible for a government to achieve Herculean feats. True, the Soviets were in the race too, but then their system collapsed completely. Capitalism has staying power – and that’s what we need now in the fight against climate change.

The UK’s Committee on Climate Change (CCC) set an optimistic tone in its report on reaching net zero emissions by 2050. Not only can it be done, the report says, but its impact on the UK’s GDP will be minimal. The committee called for a combination of technologies and behavioural change, all of which were impressively ambitious and perfectly possible.

Meanwhile, protesters and writers have been calling for the downfall of capitalism as the only solution to climate change. MPs, columnists, authors like Naomi Klein and the Extinction Rebellion campaigners have all been waving the Marxist flag – some figuratively, others literally. They believe that capitalism caused this mess, so it must be dismantled. There is something in their premise, but their conclusion could not be more wrong.

Capitalism did contribute significantly to this mess, but it has also proved the most effective way of solving the problems faced by human beings. Since the Enlightenment, it has fed billions, cured diseases, reduced poverty and financed human freedom. As Stephen Pinker, Yuval Noah Harari and Hans Rosling have all pointed out, human history is a journey of problem-solving through the clever use of credit and markets to fund and spread new ideas. This is capitalism. And there is no reason at all why it can’t be harnessed to deliver a zero-carbon global economy.


Besides, some of the most egregious examples of environmental damage took place in the communist economies of the 20th century. In practice, command-and-control governments turned a blind eye to their own environmental pollution because ministers would have to take the blame and finance clearing it up, from Chernobyl to the Aral Sea. Far-left economics, as history shows, is not the way to a better environment and it does not offer a credible solution to reducing carbon emissions.

No one, however, doubts the scale of the challenge. Capitalism – and the remarkable success of market economies – has begun to strangle nature. It needs principled guidance. This comes in the form of policies that encourage investment in doing the right thing, like strong carbon pricing, research and development, and proper valuation of natural capital. Such policies can seem dry and they take time to understand. They are not the stuff of rhetorical emergency declarations. But they are yielding results. In the UK, the cost of wind power has plummeted in the last 20 years. Wind and solar are already achieving subsidy-free status in the right circumstances. With improved incentives, they could go all the way.

Humanity has a good track record in solving pollution when we try. You can already see the benefits of global clean air legislation in Arctic ice cores. Over recent decades, we’ve vastly improved the quality of water, air and food by legislating on pollutants like lead and arsenic and using markets to find alternatives. Think of the improved quality of the sea water on the beaches where we spend our summer holidays.

Carbon is more entrenched in the economy, but we already have the technologies to displace it and even suck it from the air. Directly capturing atmospheric carbon is already being done commercially at $100 per tonne by one Canadian firm. Policy Exchange has put forward a plan to level the playing field for British-based firms who can otherwise be undercut by competitors operating in jurisdictions with more lax environmental standards. The ‘carbon tariff’ would make British-based manufacturing more competitive, incentivise low-carbon technology and compensate consumers with a tax rebate from the proceeds of the tariff. The CCC has already endorsed the first stage of this plan and the Government has welcomed its report.

Technology offers some surprising answers. The company Beyond Meat has just floated on the Nasdaq. It made its name with a burger which, despite a beefy taste and meaty texture, is made of plants. I’ve tried it – it’s incredible. When the Committee on Climate Change recommends ‘behaviour change’, they have this sort of thing in mind.

These are a mere few drops in the ocean, but change is happening. It is guided by good public policy, not simply by ‘emergency declarations’. And it’s certainly not helped by claiming that capitalism needs to be killed off. Capitalism beats the alternatives on all fronts.

First, you can export it. We can invent the things we need and then supply them to the world. It is not so easy to export a declaration (though global agreements like Kyoto and Paris are essential).

Second, a market can try thousands of solutions at once, gravitating towards those that work best. This is crucial when you consider climate change’s complexity. You can’t beat it with a centralised system that requires ministers to approve and pay for each new idea. This is true in research, development and especially in deployment. Consider two technology roll-outs of recent years. Smart meters, commissioned by the government, are foundering. Smart phones, sold by entrepreneurs from California to Seoul, reached billions of pockets within a decade. Markets with the right incentives can change everything.

To solve this global challenge, we need clear heads, not panic. The CCC says government must work with businesses to address the thorniest problems. That is what entrepreneurs are good at. British entrepreneurs created the miracle of the industrial revolution, which began to get us into this mess. Their modern inheritors can lead us out of it.

Benedict McAleenan is a Senior Adviser to Policy Exchange’s Energy and Environment Unit.


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