Combating the climate crisis is the ultimate long-term challenge. Can society rapidly overhaul energy production, transportation, heavy industry, agriculture and more in order to prevent truly catastrophic global warming?
The jury is still out, and time is running short. And there are very real questions whether such a quest can succeed within the constraints of an economic system that is famously focused on short-term incentives.
The stock market, corporate governance and executive compensation all incentivize quarterly performance. As a result, it’s often hard for companies to walk away from products and services that are good for the bottom line in the short term but bad for global warming in the longer term, or to invest in low carbon technologies that may take years to pay off.
But increasingly, making money and bending the curve on planet warming emissions is not an either-or proposition. Akshat Rathi, a Bloomberg News climate reporter, writes in his new book Climate Capitalism that there is a growing body of evidence that suggests short-term profit incentives can deliver long-term change.
“Even in the economic system that exists, which has worsened climate change, there can be modifications made, and capitalism can tackle the climate problem while delivering profits,” he told me.
Such win-win thinking can often come off as Pollyannish. But Rathi backs up his argument with reported stories from around the globe, making the case that the very profit motive that got us into this mess can help get us out of it, too.
I recently spoke with Rathi, who is based in London. This interview has been condensed and edited for clarity.
We’ve still got rising emissions and rising fossil fuel production. Doesn’t that represent a failure of capitalism to address this problem?
The way to answer that question is to split it into two time frames. In the current time frame of the past year, yes, emissions hit a new record. Oil and gas profits hit a new high. And many of the oil and gas companies are actually backtracking on their climate goals.
In a 10-year time frame, the direction is very different from what it was in 2014. The Paris Agreement has been signed. We avoided going down the 5 degrees Celsius route, and we are now on a 3 degree Celsius route. Oil and gas companies, which were investing heavily in the production and exploration of oil and gas, are now taking those profits and returning those to shareholders.
So the year-to-year matters, because that’s what capitalism on a quarterly basis cares about. But businesses also have to think about the long term. And so if you are a company looking forward, you want to be in a place where you’re mitigating climate risk, and ideally you’re actually taking advantage of what the transition provides as an opportunity to create new businesses and new plants.
Who’s poised to make a bunch of money from this transition? And who is going to lose out?
Countries that are not acknowledging the kinds of climate risks they are facing are set to lose the most. That probably is going to be the oil and gas producing countries. If you look at the Middle East as a region, they are highly vulnerable to climate change. They are far behind on what they need to do to address the problem, and the very product that they are providing is going to start to lose steam at some point.
The winners are places that take a look at what’s needed in this century and then make a big bet and support it in the long term. You can see China as a clear example. They made the bet in 2000, and then by 2008, they were like, “OK, now we’re going to actually build an industry.’” And now Europe and the U.S. are worried about cheap Chinese batteries ruining their own auto industries. So you need long-term thinking in a time when long-term thinking is not very fashionable. Without it, you’re going to be losing out.
Can capitalism combat climate change and improve the lives and livelihoods of impoverished people in the developing world, too?
The ability to be able to move trillions of dollars of investor money sitting in rich countries to developing countries is not working out, and without that, there is no way to make this transition. So, it currently looks terrible.
But if you do find the solutions in those places, those solutions have the ability to scale faster and be more resilient than in other places.
Do you think the conservative backlash against E.S.G. investing is having an impact on the business world’s efforts to fight climate change?
So far we haven’t seen that make a huge impact. But rhetoric matters. The U.K. is a global leader in cutting emissions and is continuing to do all the policy changes that are needed to be on net zero.
And yet because the Prime Minister is saying that we need to slow down, that’s having an impact on investor decisions — whether to make the investments that would be needed for the transition, for batteries, for electric cars. So what is said does matter. And given the pace at which change needs to be made, any kind of friction is only going to make the transition harder.
Tesla is losing its aura of invincibility
Elon Musk was in a defiant mood last week after an arsonist set fire to a high-voltage power pylon and brought production at Tesla’s factory near Berlin to a standstill.
“They can’t stop us,” Musk, the company’s chief executive, told workers.
But there are proliferating signs that Tesla may not be as unstoppable as it once seemed. The company’s car sales are no longer growing at a torrid pace. Chinese automakers and established brands like BMW and Volkswagen are flooding the market with electric cars. And Tesla has been slow to respond with new models.
Musk’s many outside ventures, and his penchant for making polarizing political statements, have raised questions about how focused he remains on managing Tesla. Wall Street is increasingly concerned: Tesla’s share price has lost one-third of its value this year even as major stock indexes have hit record highs.
In an interview with the former television anchor Don Lemon that streamed online on Monday, Musk brushed off the drop in the company’s share price as part of the cycle.
“The stocks go up and down, but what really matters is are we making and delivering great products,” he said.
Musk can take much of the credit for goading other automakers to focus on electric cars, proving that they could be practical, profitable and fun. Tesla’s Model Y sport utility vehicle was the best-selling car of any kind in the world last year.
But Tesla has not added a mass-market vehicle to its lineup since the Model Y went on sale in 2020. Chinese automakers like BYD, SAIC and Geely Auto are bringing out dozens of new models. While Tesla is working on an electric car that would cost around $25,000, it is not expected to go on sale in large numbers until 2026.— Melissa Eddy and Jack Ewing
Source link: https://www.nytimes.com/2024/03/19/climate/making-the-case-for-capitalism.html