Is climate action compatible with capitalism? Bloomberg climate reporter Akshat Rathi thinks so. Last month, Rathi joined MIT Sloan Sustainability Initiative director to discuss Rathi’s new book, “Climate Capitalism: Winning the Race to Zero Emissions and Solving the Crisis of Our Age.”
In his Q&A with Jay, and in a follow-up exchange, Rathi explained the rationale behind climate capitalism and why he feels a sense of optimism.
Some people say that the title of your book is an oxymoron — that, in a sense, capitalism is the root cause of the rapid growth of industrialization.
Capitalism, as it is operated, has contributed to the problem for sure. There’s clearly truth in the fact that a system that only derives profits at the cost of pollution to society has led us to this point.
But as I say in the book, for the first time, humanity has a plan for how to transform at least one major part of the economy — the energy system — over the next few decades. Reforming capitalism might be the only practical way to get to zero emissions quickly.
If you look at where [climate] solutions are scaling, it’s a combination of people, policy, and technology coming together to make the capitalist system work.
Initiatives from private industry can take you to a certain point, [but] if you want to do it at scale and create entirely new markets, you need government policy involved. It has taken a combination of government policy and private capital to scale technologies and create institutions that are finally starting to bend the emissions curve in the right direction.
There are climate capitalisms, plural, right? Meaning, the way Denmark does capitalism is very different from how the U.S. does capitalism, and so on.
Right. How you do government policy can depend on the political context in which capitalism is operating.
In China, you get a nationalistic, export-driven capitalism, where [they] want to create industries to satisfy domestic demand, but also then become export industries: electric cars, wind turbines, and now increasingly, hydrogen. China makes all of those things, and makes them well and cheaply, and provides those solutions first for its domestic market and then globally.
The American form of capitalism is very different because you have divided politics. The only way in which you get any consensus is to have injections of huge amounts of subsidies that would make these green technologies cheaper to buy, rather than punish the companies that are polluting. That also works: We know that if you make those choices happen, people do buy cheaper goods. Economics plays its part — but it has its limits, because how much you can push that system is yet to be tested.
Europe also operates like America, as a federal institution at the top and then states underneath it. But the states are a lot more powerful because they’re sovereign. You can’t always have an EU law that applies across all members, [but] the EU does have the advantage that, across its political parties, there is consensus on climate action.
India is a much harder problem because it’s not a wealthy country — less than $3,000 per capita GDP. It has much weaker governance, much weaker regulatory paths. … But, when things become cheap enough, it can really scale them very quickly. It did that with solar. It’s now doing it with electric two-wheelers. You need to get to a point where you allow for countries like India to then adopt those technologies at scale.
When we talk about the tension between climate and capitalism, one of the things that we try to wrestle with is the growth imperative, which is the fundamental engine of capitalism. But that engine is also part of what’s driving us toward the cliff on climate.
There isn’t one answer to this problem. It’s too big, too complicated, [and] geographically varied. What resources countries have, what politics they have all vary. There isn’t one solution that’s going to solve this.
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You’re getting a lot of people throwing different ideas about what might work. One of those ideas is degrowth. Within degrowth, there are many ways of doing it, but perhaps the most reasonable one is rich countries degrow — they actually shrink their economies, consume less, [to] allow for a finite carbon budget for our climate goals to be used up by developing countries to grow their economies and become richer.
The trouble is that the politics of degrowth are very hard. America doesn’t have carbon pricing federally. You try and get oil to go above $4 a gallon and there’s a revolt. That’s very cheap oil; $4 a gallon is dirt-cheap oil for Europeans [and] for Indians, who are paying a lot more for the petrol they put in their cars.
The political nature of degrowth is difficult, but fundamentally, there is a problem with the idea. There’s a famous phrase you’ll hear at a climate protest, which is “How can you have infinite growth on a finite planet?” It’s true on a material level, but it’s not true in the energy sense. We’re bathed by solar power 24-7.
“Growth” is not just material growth. Growth is how you use your energy. For example, under the current known scenarios of reaching net zero by 2050, we will actually be consuming half the amount of energy we consume today at three times the economy in 2050, because a lot of our growth will come from electrification.
As we know, electrification drives efficiency. Your electric car is going four times the distance for the same amount of energy that you would put in a fossil fuel car. Same thing is true of heat pumps.
There are some material resource limitations, but there’s no limit on the amount of energy we can use. It’s about how to make that system work together. That’s what we need to solve. The argument is to use energy, but use clean energy rather than fossil fuel-based energy to be able to drive the system.
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