Capitalism Created the Climate Crisis and Capitalism Will Solve It E-Book

Kentaro Kawamori

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 286

Veröffentlichungsjahr: 2024

Beschreibung

Creative and practical free-market solutions to climate change

In Capitalism Created the Climate Crisis and Capitalism Will Solve It: The Market Forces Catalyzing a Climate Technology Renaissance, distinguished author Kentaro Kawamori delivers a fascinating and timely exploration of the interplay between capitalism and climate change. He explains how the capitalist system helped to contribute to the current crisis of global warming and how that same system will help to end it.

In the book, the author discusses the enormous impact of the climate crisis and how the government, the modern finance industry, the fossil fuel industry, and others combined to accelerate the warming of the world. He then considers the roles those same players will play to reverse this effect in the coming years.

You’ll also find:

• Discussions of how climate tech innovations will transform the economy and how technology disruptors will become involved in the process
• The ways the energy industry will change to incorporate the realities and consequences of a warming climate
• Explorations of the incentives created by free market structures and how to include climate stakeholders in the discussion

An engaging and exciting new resource for anyone interested in the intersection of economics, business, and the environment, Capitalism Created the Climate Crisis and Capitalism Will Solve It contains practical and thoughtful climate prescriptions for a world desperately in need of them.

Leseprobe

Table of Contents

Cover

Table of Contents

Title Page

Copyright

Dedication

Acknowledgments

Introduction

Notes

PART I: Where We Are Today

1 Collision Course

The Power of Capitalism

The World Begins to React

A Look Back to Move Forward

Elements in Place for Solutions

Rise of Alternative Energy Sources

The Power of Finance

Applying the Brakes

The Big Picture: A Chapter Roundup

Notes

2 A Primer on Climate Change Today

What Is Climate Change?

A Look Back at Climate Change

By the Numbers

Capitalistic Opportunities

The Big Picture: A Chapter Roundup

Notes

3 The Growing Power of Climate Stakeholders and Externalities

Coping with Climate Externalities

Capitalism Enhancements

Climate Propaganda

Greenwashing

Accurate Environmental Data

Marriage of Capitalism and Sustainability

Geopolitics in the Mix

A Shortage of Talent

The Big Picture: A Chapter Roundup

Notes

4 Fossil Fuels

Dominant in Our Lives

Beyond the Basics

What's the Truth?

Crucial Interdependencies

The Big Picture: A Chapter Roundup

Notes

5 The Supply and Demand Dilemma

The Greening of the World

Stressed Markets

Financial Regulators

Fiduciary Responsibilities

Market Demands Lead to Innovations

The Value of Information

A Circular Economy on the Horizon?

Conflicting or Commendable?

The Big Picture: A Chapter Roundup

Notes

PART II: How Capitalism Will Solve the Climate Crisis

6 The Principles of Stakeholder Capitalism

The Power of Innovation

Great Economic Value

The Role of Entrepreneurs

The Link to Solving the Climate Crisis

Accountability

Tough Shift

The Social Media Effect

The Wealth Gap

The Big Picture: A Chapter Roundup

Notes

7 The Role of Modern Finance, Wall Street, and Private Equity

Capital Is Essential

Government Guarantees

The Rise of Climate Tech 2.0

The Big Picture: A Chapter Roundup

Notes

8 Governance, Promoting Capitalism, and Efficient Free Market Economies

Strong and Definitive Policies

Stark Climate Reality

Standard Protocols

ISSB Debuts Its Baseline

SEC Climate Rule

The Missing Piece

Public and Private Partnerships

Subsidies and Penalties

Sorting Through the Incentives

Capitalist Economics

Governments and Militaries

The Big Picture: A Chapter Roundup

Notes

9 How Climate Tech Will Transform the Economy

Mix of New and Old Technologies

The Technology Disruptor

Decarbonizing Technologies

The Big Picture: A Chapter Roundup

Notes

10 Energy Transition

Electrification Phenomenon

Fossil Fuels

Natural Gas: The Transition Fuel

Radical Twists on Old Ideas

The Big Picture: A Chapter Roundup

Notes

11 A New Hope

Reporting Standardization

One Step at a Time

Food Choices in a Changing Climate

Power in Paradise

The Importance of Leadership and Action

Notes

Addendum I: My Climate Journey

Notes

Addendum II: For More Information

Glossary

Index

End User License Agreement

List of Illustrations

Chapter 2

Figure 2.1 Energy consumption

Figure 2.2 Energy-related CO

2

emissions

Chapter 4

Figure 4.1 Global emissions by sector

Guide

Cover

Table of Contents

Title Page

Copyright

Dedication

Acknowledgments

Introduction

Begin Reading

Addendum I

Addendum II

Glossary

Index

End User License Agreement

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KENTARO KAWAMORI

CAPITALISM CREATED THE CLIMATE CRISIS AND CAPITALISM WILL SOLVE IT

THE MARKET FORCES CATALYZING A CLIMATE TECHNOLOGY RENAISSANCE

Copyright © 2024 by Kentaro Kawamori. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permission.

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Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Further, readers should be aware that websites listed in this work may have changed or disappeared between when this work was written and when it is read. Neither the publisher nor authors shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

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Library of Congress Cataloging-in-Publication Data is Available:

ISBN 9781394201556 (Cloth)ISBN 9781394201563 (ePub)ISBN 9781394201570 (ePDF)

Cover art: Maggie DuffyCover design: Maggie Duffy

To my family, friends, and all the entrepreneurs and those who support them building the future of climate solutions and a new energy economy.

Acknowledgments

This book is the culmination of my interactions with all the great people in my life who have helped me get to where I am today; there are so many of you. Thank you for being a part of my life and continuing to shape my journey.

Introduction

WE HAVE CREATED the perfect storm. Consumerism—the insatiable demand for more goods and services—powers our economic system of capitalism, which needs reliable, affordable, and easily available energy to produce the products that can be sold for profits. Most of our energy generation in its current forms creates excessive greenhouse gases (GHGs), including carbon dioxide and methane, that become trapped in our atmosphere and, like a blanket, warm our planet to excess.

The result is climate change, the long-term shifting of temperatures and weather patterns coupled with more extreme weather-related events and changes that threaten the livability of our planet.

Among all the negativity, though, there is positive news. Capitalism is purpose-built to provide the breeding ground for solutions to the climate crisis using the same creativity, tenacity, and drive that led to the crisis. Given the right set of incentives, we will turn capitalism into the driving force for the good of the planet.

Industrialization in the 17th century coincided with the beginning of the global temperature rise due to industry emissions and a growing population. Despite this long history between human activity and a warming planet, most of us still seem unwilling or unable to materially change our demands, perhaps from ignorance to the issue or lack of interest in getting involved. Even if we individually embrace sustainability, on an absolute basis, the global consumption of every resource will increase radically as planet Earth becomes home to nearly 10.5 billion people by 2100. 1 Future generations will face potential resource constraints and even depletion at our current trajectory.

For those individuals who still refute climate science, they will have trouble denying temperatures these days might seem a bit colder or hotter, and the weather is wetter or drier than they remember. They'll likely agree that the cost of goods and services has risen and on some days the air isn't quite as clean as it used to be.

Welcome to a world where our climate is changing and the world is reacting. Those reactions range from talk about climate shifts, carbon footprints, and severe weather events to companies raising prices to compensate for the cost of increased climate disruptions, global firms working to reduce GHG emissions, and groups in and outside of government brainstorming for solutions to the challenges.

While the climate crisis has recently seen a positive uptick in awareness, most historical climate talk did not result in immediate concerns for the general public. However, with regional climate activity becoming increasingly relevant in today's headlines, many need to rethink that “who-cares” attitude. In the last few years, Florida dealt with traumatic coastal flooding from severe hurricanes, Northern California coped with tremendous devastation from wildfires, and India sizzled under brutal heat. Earth's global surface temperatures have risen faster since 1970 than in any 50-year period over the past 2,000 years, according to the latest report from the nonprofit United Nation's Intergovernmental Panel on Climate Change.2

The days of ignoring climate change and its effects on our daily lives have come and gone. People across the world have awakened to the crisis and started to demand action; for example, a majority of adults in the United States want the country to prioritize developing renewable energy sources instead of expanding the production of fossil fuels like oil, coal, and natural gas, according to a recent poll from the Pew Research Center.

On the other side of the Atlantic, sentiments favoring our planet's sustainability run deep. The European Union (EU) in September 2023 revised upwards its renewable energy targets, with passage of a law requiring 42.5% of EU energy to be renewable by 2030.3 That's almost double the 2022 level of 23%.4

European climate law also stipulates EU countries must cut GHG emissions by at least 55% by 2030. The goal is climate neutral—net zero GHG emissions—by 2050.5

And, let's not forget COP28, the UN Conference of Parties that met in late 2023 in Dubai to discuss what the world can do about the climate crisis. Accomplishments at the conference included a mid-term review (global stocktake) of progress countries are making toward commitments as part of the 2015 Paris Agreement and a decision to operationalize the Loss and Damage Fund adopted at COP27. The latter provides financial assistance to help developing countries cope with climate change issues.6 Both developments are continued steps toward the nations of the world finding common ground on how best to combat climate shifts and their impacts on biodiversity and human life.

Capitalism Created the Climate Crisis and Capitalism Will Solve It isn't a book about pointing fingers or directing blame, bashing the oil and natural gas industry, or capitalism itself. Rather this book is about looking more closely at the past to better understand where we are today and gain insights into finding future solutions.

To state the obvious, no one wants an unlivable planet. But so much of the talk and writing about climate is tainted with misinformation, disinformation, whitewashing, greenwashing (the environmental version of whitewashing), and outright lies. Sorting through all that makes it even more difficult for corporations and individuals to know what's the truth.

In these pages, readers will gain a clear picture of how and why capitalism created the climate crisis, why it perpetuates, and how with the right mindset and direction—a marriage of public and private interests—and the help of capitalism we can better understand the vast opportunities that lie ahead of us.

The book is divided into two parts. The first looks at the state of our climate, why we should be concerned, and how we got to where we are. That includes a discussion of fossil fuels—good and not so good, how capitalism and governance helped perpetuate disposable commerce, and how climate risk equates to financial risk in this new era of accountability. In Part II, I'll cover why capitalism is the key to solving the crisis, explore how modern finance is powering the next wave of innovative solutions that enable the world to decarbonize, examine the energy transition revolution, and finally share why I am hopeful for our future climate state of affairs.

As a consultant to numerous energy firms and a former C-suite executive at a Fortune 500 oil and gas firm, Chesapeake Energy Corporation, I've witnessed firsthand the challenges and opportunities within the traditional energy sector. As an entrepreneur and CEO of Persefoni AI Inc., I now lead the way in developing critical solutions in support of democratizing carbon accounting. My combined experiences in energy markets and climate technology give me a nuanced understanding of how market forces can be harnessed to spur climate action. Capitalism's inherent drive for innovation and efficiency can be an invaluable tool in developing and scaling up climate technologies.

While working at energy firms in the oil and gas and utilities sectors, the picture of capitalism on a collision course with sustainability became clear. I saw firsthand how the conversation in the industry began changing. Fueled by everything from social protests led by Greta Thunberg and environmental activists in boardrooms, the industry began the transition to new forms of energy and readily acknowledged its role in the climate fight.

I recognized we couldn't solve the problem without better understanding the problem itself. That meant we needed a better way to measure carbon emissions against a common climate baseline. Today, that's known as carbon accounting, or sustainable finance. Measurement, though, is just the beginning of the journey to decarbonization.

In 2019, I left Chesapeake, and the next year Persefoni was born. We named the company after the Greek goddess Persephone. Her story is one of sadness and redemption. Among other things, she is the goddess of spring. It is the themes of rebirth and bloom associated with spring that we wanted reflected in the company's name, an inherent optimism that things will get better.

Whatever your background or expertise or your level of climate knowledge, Capitalism Created the Climate Crisis and Capitalism Will Solve It will clearly lay out the issues and problems, along with a path to solid solutions. Whether someone believes or not in the possibility of a silver bullet to reverse the effects of a warming planet overnight, it's highly unlikely any solution will happen without what's discussed in this book. Together we can make a difference for our planet.

A final note: a degree of fear, stress, and pessimism creeps into nearly every discussion on climate. In these pages, I choose to be hopeful. The book's tone doesn't belabor the negative; rather, it focuses on a future in which we successfully rise to the challenge and first mitigate, then reverse, the damage to our planet.

I believe capitalism can be a powerful engine for climate action, but only if we design the right incentives and frameworks. Are you ready to explore how we can achieve this together?

Notes

1

.  United Nations. (2023). Our growing population.

https://www.un.org/en/global-issues/population

(accessed 20 December 2023).

2

.  United Nations. (n.d.). Climate action fast facts.

https://www.un.org/en/climatechange/science/key-findings

(accessed 12 November 2023).

3

.  European Commission. (2023). Renewable energy targets.

https://energy.ec.europa.eu/topics/renewable-energy/renewable-energy-directive-targets-and-rules/renewable-energy-targets_en

(accessed 22 November 2023).

4

.  European Commission. (2023). Eurostat statistics explained.

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Renewable_energy_statistics

(accessed 29 December 2023).

5

.  European Commission. (2023). European climate law.

https://climate.ec.europa.eu/eu-action/european-climate-law_en

(accessed 29 December 2023).

6

.  COP28 UAE. (2023). COP28 presidency united the world on loss and damage. COP28 UAE press release (30 November).

https://www.cop28.com/en/news/2023/11/COP28-Presidency-unites-the-world-on-Loss-and-Damage

(accessed 24 January 2024).

PART IWhere We Are Today

1Collision Course: Consumerism, Capitalism, and Climate Crisis

“By all empirical measures, no economic system other than capitalism has created greater prosperity for citizens or contributed to more breakthrough technology and economic advancements in the history of human civilization.”

I was on stage at TechCrunch's “TC Sessions: Climate 2022.” It was mid-June and I was surrounded by an overwhelmingly left-leaning crowd on the University of California–Berkeley campus when I began to share my mantra:

Capitalism created the climate crisis and capitalism will solve it.

I had expected at least some fallout from this progressive crowd, but instead, there was only silence, so I continued.

Global consumerism—the world's endless demand for goods and services—powers our capitalism. Governments, in turn, provide rules and regulations that support this economic system of private ownership for profit. Capitalism needs access to cheap, reliable energy to produce products and eventually profits. Generating that energy—primarily through burning of fossil fuels—generates greenhouse gases (GHGs) that act like a blanket in our atmosphere, hold in more heat from the sun, and warm our planet to excess.

The bottom line: we as consumers have brought together the perfect set of ingredients that today manifest as Earth's climate crisis. This long-term alteration of temperature and weather patterns is fueled by trapped GHGs including carbon dioxide and methane (also sometimes known under the broad umbrella carbon or CO2). The results are more frequent and severe heat waves, droughts, natural disasters, hurricanes, wildfires, and rising sea levels that can lead to flooding and the loss of coastal habitats. Rapidly melting polar ice caps also shrink animal habitats.

The long-term effects of these climate shifts are devastating, and not just on weather, sea levels, and animals. Estimates are that unaddressed climate change could cut global economic output by $23 trillion by 2050, according to Swiss Re, a leading global insurer based in Zurich, Switzerland.1

Consider these climate statistics:

Earth is 1.1 degrees Celsius (°C) warmer today than in the late 1800s. A rise of 1.5°C above preindustrial levels is considered the maximum upper limit to avoid the worst fallout from climate change.

2

2023 was Earth's hottest year on record.

3

Previously 2020 and 2016 statistically tied as the hottest, continuing a long-term warming trend.

4

June, July, and August 2023 was the hottest summer since 1880 when global record-keeping began.

5

Earth's atmosphere contains more carbon dioxide today than at any time in human history; 422.33 parts per million (ppm) as of December 30, 2023.

6

That compares with 290 ppm from 1800 to 1870.

7

Summer Arctic sea ice extent is shrinking by 12.2% per decade due to warmer temperatures, affecting ocean circulation and water temperatures.

8

The Power of Capitalism

As the numbers reflect, our climate is in trouble, with consumerism and its need for energy to produce goods the leading culprits. But before anyone—no matter their politics—assumes all it takes to save our planet is an anti-capitalistic agenda, consider that capitalism also is purpose-built to provide the breeding ground for solutions to our climate challenges.

We as consumers and the governments that we elect can take control of and learn to alleviate the climate problem with the same creativity, tenacity, and drive that led to the crisis.

Capitalism at Work

Tesla, a publicly traded company, and SpaceX, a private company as of this writing, are examples of companies at the forefront of leading the change in their respective industries. Tesla, cofounded by Elon Musk, almost singularly reshaped the automotive landscape with its first commercial EV, and so much so that by 2022 nearly all major automobile manufacturers have competitive EV lines. The popularity of Tesla sparked the competition needed among manufacturers to propel EVs into the mainstream of the auto industry, while bringing innovations like self-driving mode and remote software updates for onboard computer systems.

Tesla is capitalism at work, where a company sees an opportunity and builds toward it. The market rewards the company for its innovation while competitors seeking similar rewards flock to the new idea. Through competition, a market that was previously written off has become not just mainstream, but the future of the auto industry.

Similarly SpaceX helped reshape and resurge space exploration from what was primarily run by government agencies—NASA in the United States, for example—into now private companies. Founded in 2002 also by Musk, SpaceX has changed the way people think about the potential for space travel and the possibility of the colonization of other planets.

The ideas of space travel and the concept of colonizing other planets aren't new. What is new, though, is that SpaceX is advancing how these ideas can be achieved and with reusable space delivery vehicles. The company's work ultimately will drop the unit economics to a point where more innovation from the private sector propels the idea of space travel into mainstream reality for many.

Life-Changing Outcomes

I am pro-capitalism; I'm also an entrepreneur. I see the world through both lenses and I firmly believe that through the combination of capitalism, entrepreneurship, and, where warranted, government intervention, many of the most challenging problems we face today—including climate change—can be solved.

Capitalism's contributions toward quality of life, economic growth, and incomes worldwide have been profound. No economic system has created greater prosperity for citizens or contributed to more breakthrough technology and economic advancements in the history of human civilization.

Though exact numbers vary among data sources, the positive effects of capitalism on poverty levels are indisputable. In the early 1800s, 75% to 80% of the world's population experienced extreme poverty. By 2018, that number had fallen to about 10%.9 In other words, capitalism brought vast swaths of human civilization out of poverty. It will bring human civilization out of climate despair. The move is already under way.

Finally, my skeptical audience in that California auditorium began to understand the complexities of the relationship between capitalism and climate change, that capitalism isn't all bad, and in fact can give hope to our climate's future.

The World Begins to React

The world—from boardrooms to governments and individuals—is reacting to what's happening with our climate. Those reactions range from climate-related headlines that dominate the news to more frequent severe weather events, the latest on greenhouse gas emissions, word of companies raising prices to compensate for the cost of increased climate regulation, and the latest on investors demanding globally responsible firms that work to reduce carbon emissions. Governments are spearheading landmark environmental legislation, too.

Until relatively recently, unless someone was a staunch environmentalist, a lot of the talk about climate change seemed a bit distant to really care. After all, if someone lives in Florida, why should it matter if the Arctic ice sheet melts? Or, if an Ohio manufacturing company relies on raw materials from wildfire-prone areas like California or Canada, or if a technology employer relies on remote talent from India?

Today those climate-fueled changes make a big difference not only in quality of life but also to our capitalistic, profit-based economy's all-important bottom lines. In 2022 and 2023, Florida was pummeled with traumatic coastal flooding and multiple catastrophic hurricanes that wiped away cities and threatened to bankrupt insurance companies.10 Since 2017, 11 companies that used to offer homeowners insurance in the state have liquidated.11 Californians battled colossal wildfires that devastated towns and economies. Some insurance companies have stopped writing policies or reduced their offerings in California12 as climate risks outweigh profits. Meanwhile, India and its people have suffered through increasingly brutal, deadly heat.

In 2023, Canada also saw wildfires that burned a record 45.7 million acres.13 In addition to destruction caused directly by those fires, huge swaths of North America were blanketed with heavy and choking particulate air pollution that blocked out the sun and affected tens of millions of people.

A few decades ago, events like these stacking up in rapid succession were rare. Not so anymore. The days of ignoring the climate crisis and its effects on our daily lives have expired. “The era of global warming has ended; the era of global boiling has arrived,” UN Secretary General Antonio Guterres said in July 2023.14

Even those who shade climate science have trouble denying that no matter where they are in the world, temperatures these days seem a bit colder or warmer, and that the days are wetter or drier than they remember. They'll likely agree that the cost of goods and services has gone up.

The climate crisis is true, it's real, and capitalism will solve it. As more people and companies recognize our climate emergency, sustainability has gained traction in boardrooms and on Wall Street. Consumers now demand environmental, social, and governance (ESG), also known as socially responsible, investing for their own portfolios as well as from the companies they invest in. Estimates suggest that ESG-aligned assets under management are projected to reach $10.5 trillion by 2026, representing 20% of the total market. That's a significant increase from $4.5 trillion in 2021.

ESG: What Does It Mean?

ESG is an acronym for environmental, social, and governance. In investment terms, ESG is also known as sustainable investing, socially responsible investing, and impact investing.

Environmental

. Could relate to a company’s impact on the environment or the risks and opportunities associated with the impacts of climate change on the company, its business, and its industry.

Social

. Can focus on the company’s relationship with people and society, or whether the company invests in its community.

Governance

. Can relate to company operations and executive compensation.

Source: Investor.gov.15

A Look Back to Move Forward

Climate change is not a new phenomenon; greenhouse gasses have been building in Earth's atmosphere since the Industrial Revolution began in the 18th century.16 Scientists have been predicting or measuring the changes for hundreds of years.17

In 1824, French mathematician and physicist Joseph Fourier determined something in our atmosphere was acting like a blanket to keep Earth warmer than it should be.18 A little more than two decades later, in 1856, amateur scientist Eunice Foote discovered that blanket was made up of carbon dioxide and water vapor, and that this trapped escaping infrared radiation (heat) in our atmosphere, warmed the planet.19

It wasn't until 1938 that another amateur scientist, Guy Callendar, first recorded actual estimates of global warming. A steam engineer by trade, he discovered temperatures globally had climbed 0.3°C in the previous 50 years. Callendar blamed industry carbon dioxide emissions for the rise, but scientists basically ignored him.20

While the links between human activity and climate change haven't materialized in systematic change, history warrants a closer look in our quest to embrace sustainability.

Modern Capitalism

To more clearly understand how we contribute to our changing climate, let's look at capitalism itself and the market incentives created by it.

Capitalism as an economic system has evolved significantly over time thanks mostly to innovations in technology and financing. Although capitalism's exact origins are the subject of debate, the roots of modern capitalism can be traced back to the 16th and 17th centuries in Europe when merchants began to develop more sophisticated systems of trade and finance and accumulated wealth through trade and investment. As the ideas of private property and the pursuit of profit became more prominent, feudalism transitioned to capitalism, a system in which production, distribution, and exchange are based on market forces rather than feudal relationships or state control.

Over time, capitalism has undergone many changes, spread to other parts of the world, and taken on multiple forms. In terms of its forms, for example, communist China's capitalism differs from its more democratic form in the United States because of the dominance of the Communist Chinese Party and state-owned enterprises, though it does allow for some private profits.

Today, capitalism is the dominant economic system in the world. This evolution to modern capitalism led to a symbiotic relationship with the fossil-fuel industry as the need for dependable, cheap energy also mushroomed.

Tenets of Modern Capitalism

Private property, including the means of production like factories, land, and other resources, is owned and controlled by private individuals or corporations, rather than by the state or feudal lords

.

A market-based economy based on the production, distribution, and exchange of goods and services is primarily determined by the supply and demand of the market

.

The pursuit of profits through growth and expansion with economic self-interests is maximized through consumerism

.

There is innovation and creativity not only in product and delivery but also in finance

.

Source: Our World in Data.21

The Rise of Climate Science

In the grand scheme of all human knowledge, climate science is a very new discipline. Although scientists first identified the greenhouse effect in the 1800s, they didn't begin to study the impact of human activities, such as burning fossil fuels and deforestation, on the Earth's climate until the 1900s. It wasn't until the 1980s that the term climate change became more widely used as research showed that human activities were contributing to rising temperatures and other changes in the Earth's climate.

The bottom line is the biggest long-term risk to our global economy is climate change. Without mitigating action taken now, the world's total economic value will shrink and the physical risks resulting from climatic events will rise to over $100 billion per year in the United States. By the end of this century, the increase in global temperatures could cause damages equal to 7% to 11% of annual global GDP per year according to a study reference by the White House.22

Elements in Place for Solutions

It's taken people, companies, and economies plenty of time to digest the negative effects of rampant alterations in climate. But as more governments and consumers see the environmental threat to their ways of life, they also are waking up to the potential for solutions.

Capitalism, with its strong motive for profit, innovation, and technological progress, will be the force to change things yet again, and spearhead climate correction in the process. After all, economic history shows that most innovations come in response to events, specific problems, and new technological opportunities.23

As consumers react to what's happening to our climate, and demand more sustainability, capitalism-led innovation will be the driving force behind change. Governments will establish rules and regulations that reflect the demands of their constituents, and companies will rally their innovation teams to find sustainable solutions that deliver.

For example, where once unapproachable costs made alternatives to greenhouse-gas-producing fossil fuels less attractive and more expensive, that's changed as consumer sentiments favor sustainability. Two-thirds of adults in the United States want the country to prioritize developing renewable energy sources instead of expanding the production of fossil fuels like oil, coal, and natural gas, according to a recent poll from the Pew Research Center. The same study found that almost half (48%) of all Americans ages 18 to 29 want the United States to phase out greenhouse-gas-producing fossil fuels and “exclusively use renewables.”24

Rise of Alternative Energy Sources

With the introduction of consumer-driven sentiments that favor net zero (zero greenhouse gas emissions) as well as financial incentives, governments, countries, and companies are exploring and building out alternative energy sources to meet consumer demands. Some are more feasible today than others.

I'll look in-depth at alternative energy sources to fossil fuels later. In the meantime, though, here are a few synergistic solutions already producing results:

Electric vehicles (EVs).

Globally in 2022, electric vehicles made up 10% of all passenger vehicle sales, 10 times the number sold a decade ago. EVs made up 6% of sales in the United States that year, but a whopping 80% of those in Norway, and 22% in China.

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Wind and other renewable energies.

In the European Union, renewable energy accounted for only 12.5% of energy needs in 2010. By 2021, those numbers climbed to 21.8% thanks to incentives from the EU's Renewable Energy Directives.

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The 2022 invasion of Ukraine by Russia, a main EU oil and natural gas provider, further accelerated the EU move away from fossil fuels.

Solar energy.