Eco-capitalism


Eco-capitalism, also known as environmental capitalism or green capitalism, is the view that capital exists in nature as "natural capital" on which all wealth depends. Therefore, governments should use market-based policy-instruments to resolve environmental problems.
The term "Blue Greens" is often applied to those who espouse eco-capitalism. Eco-capitalism can be thought of as the right-wing equivalent to Red Greens.
Critics of eco-capitalism, such as eco-socialists, view continued economic growth and commodification of nature as an inevitability in capitalism, and thus criticize bright-green environmentalism.

History

The roots of eco-capitalism can be traced back to the late 1960s. The "Tragedy of the Commons", an essay published in 1968 in Science by Garrett Hardin, claimed the inevitability of Malthusian catastrophe due to liberal or democratic government's policies to leave family size matters to the family, and enabling the welfare state to willingly care for potential human overpopulation. Hardin argued that if families were given freedom of choice in the matter, but were removed from a welfare state, parents choosing to overbear would not have the resources to provide for their "litter", thus solving the problem of overpopulation. This represents an early argument made from an eco-capitalist standpoint: overpopulation would technically be solved by a free market. John Baden, a collaborator with Garrett Hardin on other works including Managing the Commons, founded the Political Economy Research Center in 1982. As one of the first eco-capitalist organizations created, PERC's ongoing mission is "improving environmental quality through property rights and markets". The most popular eco-capitalist idea was emissions trading, or more commonly, cap and trade. Emissions trading, a market-based approach that allows polluting entities to purchase or be allocated permits, began being researched in the late 1960s. International emissions trading was significantly popularized in the 1990s when the United Nations adopted the Kyoto Protocol in 1997.

Eco-capitalist theorists

  • Terry L. Anderson, a graduate of the University of Montana who received his Ph.D. from Washington University in St. Louis, and who serves as the co-chair of the Hoover Institution's Property Rights, Freedom and Prosperity task force, has advocated that free markets can be both economically beneficial and environmentally protective. Anderson specializes in how markets impact Native American communities and their economies. Anderson is a co-author of Free Market Environmentalism, a book that explores how free market ideas could be used to solve environmental issues, based on Anderson's conclusion on a few case studies.
  • Bruce Yandle, a graduate of Mercer University, attended Georgia State University where he earned an MBA and PhD. Yandle is the dean emeritus of Clemson University's college of business. He is prominent in the field of eco-capitalism for his story of the "Bootlegger and the Baptist". Yandle's theory of the Bootlegger and the Baptist posits that ethical groups, religious institutions and business captains can align their organizations in the interest of regulation and economic growth.
  • Paul Hawken is the architect of the United States first natural foods company, Erewhon Trading Company, where all products were organically composed. Hawken founded the research organization, Natural Capital Institute, and developed Wiser Earth, a program focused on providing a platform for all to communicate about the environment. Hawken has authored hundreds of publications, including four best selling books. In his writings, Hawken stresses that many viable ecological options exist for businesses that will benefit the environment, while simultaneously bringing about economic profit. One idea discussed in his book, Natural Capitalism: Creating the Next Industrial Revolution, is the possibility of developing lightweight, electricity-powered cars as an alternative to current transportation modes. Hawken attributes the hesitancy of adopting these options to lack of knowledge of these alternatives and high initial costs. Hawken is now the head of OneSun, Inc., an energy corporation concentrated on low-cost solar.
  • Lester Brown began his career as a tomato farmer in New Jersey, before earning a degree at Rutgers University and traveling to a rural India for a six-month study of the country's food and population crisis. Brown has primarily focused on finding alternatives which he contends would provide solutions to the world's population and resources problem. With financial support from Rockefeller Brothers Fund, Brown created the Worldwatch Institute, the first dedicated to researching global environmental problems. In 2001, Brown founded the Earth Policy Institute, an organization that outlines a vision for creating an environmentally sustainable economy. Brown has authored over 50 books and received 25 honorary degrees. In his publications, Brown posits that the key to an eco-friendly economy is an honest market. He advocates for replacing harmful aspects of the environment, like fossil fuels, with renewable energy. In June 2015, Brown retired from Earth Policy and closed the institute.

    Think tanks

  • Property and Environment Research Center
  • Foundation for Research on Economics and the Environment

    Transition to eco-capitalism

The ideology of eco-capitalism was adopted to satisfy two competing needs:
  1. the desire for generating profit by businesses in a capitalist society and
  2. the urgency for proper actions to address a struggling environment negatively impacted by human activity.
Under the doctrine of eco-capitalism, businesses commodify the act of addressing environmental issues.
The following are common principles in the transition to eco-capitalism.

Externalities: Correcting of a free market failure

A central part of eco-capitalism is to correct for the market failure seen in the externalization of pollution. By treating the issue of pollution as an externality it has allowed the market to minimize the degree of accountability. To correct for this market failure eco-capitalism would have to internalize this cost. A prime example of this shift towards internalizing externalities is seen in the adoption of a system for carbon trading. In a system like this people are forced to factor the pollution cost into their expenses. This system as well as other systems of internalization function on large and small scales. On a corporate scale, the government can regulate carbon emissions and other polluting factors in business practices forcing companies to either reduce their pollution levels, externalize these costs onto their consumers by raising the cost of their goods/services, and/or a combination of the two. These kinds of systems can also be effective in indirectly creating a more environmentally conscious consumer base. As the companies who are creating the most pollution face falling profit levels and rising prices their consumers and investors are inclined to take their business elsewhere. This migration of investment and revenue would then be expected to make its way to business who have already incorporated the minimization of pollution into their business model thus allowing them to provide lower prices and higher profit margins attracting the migrating consumers and investors.

Green consumption

At the conception of the ideology, major theorists of eco-capitalism, Paul Hawken, Lester Brown, and Francis Cairncross, saw an opportunity to establish a different approach to environmentalism in a capitalist society. These theorists posited that consumers as well as producers could shoulder the social responsibility of environmental restoration if "green technology, green taxes, green labeling, and eco-conscious shopping" existed. The resulting "shopping our way to sustainability" mentality encouraged the development of organic farming, renewable energy, green certifications as well as other eco-friendly practices.
A 2015 report from the Nielsen Corporation lends credence to this theory. According to the report, consumers have more brand loyalty and are willing to pay higher prices for a product that is perceived as being sustainable. This is especially true among Millennials and Generation Z. These generations currently make up 48% of the global marketplace and still have not hit their peak spending levels. As these generations' preferences continue to shape how businesses operate and market themselves, they could drive a continued shift toward green consumption.
According to the Annual Review of Environmental Resources, "the focus of policy makers, businesses, and researchers has mostly been on the latter, with relatively little attention paid to consuming less". A review of how to encourage sustainable consumption from the University of Surrey shows that, "Government policies send important signals to consumers about institutional goals and national priorities." Governments can pull a variety of levers to signal this including product, trading, building, media, and marketing standards.

Carbon trading

Creating perhaps the first major eco-capitalist endorsement, many political and economic institutions support a system of pollution credits. Such a system, which assigns property rights to emissions, is considered to be the most "efficient and effective" way for regulating greenhouse gas emissions in the current neoliberal global economy. Especially in the case of tradable pollution credits, the resulting market-based system of emissions regulation is believed to motivate businesses to invest in technology that reduce greenhouse gas emissions using positive reinforcement and punishment.

Full cost accounting

explains corporate actions on the basis of the triple bottom line, which is best summarized as "people, planet, and profit". As a concept of corporate social responsibility, full cost accounting not only considers social and economic costs and benefits but also the environmental implications of specific corporate actions.
While there has been progress in measuring the cost of harm to the health of individuals and the environment, the interaction of environmental, social, and health effects makes measurement difficult. Measurement attempts can be broadly categorized as either behavioral in nature, like hedonic pricing, or dose-response which looks at indirect effects. A standardized measurement of these costs has yet to emerge. This should not be confused with the full-cost method used by organizations searching for oil and gas that "does not differentiate between operating expenses associated with successful and unsuccessful exploration projects".