When it comes to responding to climate change, the left broadly agrees on the need for a change in production, investment, and support for those affected. But, how you see the world and the economy affects where you think the policy focus should be, what is feasible under certain economic conditions, and ultimately the level of hope you feel is warranted that the worst predictions can be avoided without fundamental change to social, economic, and societal organization.
Those from the classical economic tradition – specifically the tradition that runs through Marx – have specific critiques of the current policy debate on climate change. The focus of these critiques is on the nature of investment under capitalism and the real limits to its ability to invest enough and in the correct way to avoid climate catastrophe.
The classical tradition is also concerned that the broad left's policy response does not address the fundamental challenges capitalism places in the way of achieving sustainability. These are not semantic arguments, but are fundamental disagreements with how we can achieve the necessary investments.
There are two sides to the Green New Deal policy program. On the one side is Modern Monetary Theory (MMT) and the other is the "degrowth" movement. MMT is about spending more money on the things we need to transition to a climate future (among other things). Degrowth is about shifting production to where there is less focus on economic growth of the economy at large and more of a focus on producing only what we need.
The general classical/Marxian critique of the degrowth movement based on where "growth" comes from in the economy – namely the value producing labour. This critique of degrowth can get complicated, but it relates to how the degrowth folks (mis)understanding of how value is created, measured, and reproduced.
The degrowth proponents focus almost entirely on exchange values as a driver (and thus a measure) of growth. They point to Gross Domestic Product as a flawed measure of and focus of economic policy. There is no question that GDP is flawed. However, it seems strange to suggest that GDP is a component of economic policy that drives investment decisions of firms.
The classical tradition makes a distinction between exchange value, use value, and is focused primarily on value creation and profit seeking of firms. It is this activity of profit seeking of capital that affects GDP. If owners of firms think that they can make profit making things, then they will make thing and thus drive growth. The production of things drives growth here, not the focus on growth as a policy.
Degrowth is concerned mostly with reducing purchasing of climate damaging things and diverting attention of consumption and production to stave off catastrophic climate change. This would have to result in a change in economic activity by simple "output" (GDP) measures and focusing on other measures of economic, social, and environmental activity.
The main critique from the classical/Marxian tradition is that more – not less – economic activity needed to transition to climate-positive production, economic, and social processes. Any transition takes time and has overlapping old and new processes that operate simultaneously. This requires continued production and labour of the old system while building the alternative with new production and labour, resulting in an increase in economic growth.
The other concept embedded in the degrowth movement's thinking is efficiency – or the idea that there are efficiencies that can be implemented that have not been implemented. Basically, the idea that current production levels can be sustained with fewer resources through a transition and spread more evenly around the world. Classical economics outlines that capitalism is rather good at finding economic efficiencies and if there was a more efficient way of maintaining living standards at current costs, it would have been implemented already. Indeed, it is likely that the opposite is true, costs will have to rise substantially – and the general economic efficiency of the economy – will be reduced in the transition to a new climate-friendly economy.
Either way you look at the degrowth movement, it results in looking at things in terms of immediate transition to a new process without additional work involved. This is just hard to square with the amount of work currently going on that needs to be replaced and/or transitioned to something much less carbon intensive.
This problem is much easier to understand when value is considered as labour invested instead of the value of things purchased and consumed. The economy is not a thing that operates outside of the work that is put in. A reduction in growth of the economy – including the creation of energy and the production of things – would simply be labouring/doing/working less.
In addition to the labour/value issue with degrowth is the socialist critique of resource extraction and imperialism. Current first-world owned production is outsourced to lower-waged labour in "developing" countries – usually using more environmentally destructive processes. If the global supply of goods and services is to be transitioned to environmentally friendly processes then that imperialist production will have to be replaced with local production and much of the outsourced production moved back to the imperialist country to make way for new local production in the "developing" nation.
Socialist also call for increased standards of pay and investment in energy efficient local production to replace the imperialist export production process. On the whole, both will likely result in increased economic growth for those economies.
In the end "degrowth" in response to climate change requires value creation – which inevitably means growth in production.
2. Faster (instead of more) investment to reach carbon neutral
There is a math trick1 that is used by governments when they announce "new" climate targets. New initiatives and targets to reach "carbon neutrality" by 2030 or 2050 are proclaimed every year. However, what is usually happening is that they need to invest more quickly to reach lower targets because they have not done anything since the previous announcement. The same work in a shorter time actually takes more investment. Changes that have not been made need to be made, the difference that those investments would have made now need to be found, the carbon released that was not supposed to be needs to be made-up for, and all the rest of the remaining investment needs to still be built.
The impression from these government announcements is that of strengthening regulations and investing more each year to do better, but in fact it is the opposite. The seemingly better/tougher targets are simply a result of an increasing slope of the path/curve to the original targets (like to get to "carbon neutral" by 2050). In essence, the better tougher target is just resulting from failing to actually reduce CO2 emissions.
The slope will be near-vertical come 2050 at this rate of (zero carbon emissions) change and the governments will announce 100% of their change in one year to reach their target they set in 2016. But, to reach the level of investment needed to reach a target over such a short time span will be exponentially more expensive than if the investment was done from the start 30 years ago.
3. It takes time to do things
Many policies looking to deal with climate change and greenhouse gas emissions seem to conveniently ignore time in their calculations. Left out is the time required to transition from the old polluting to the new less polluting process and the time necessary for a transition that is just and fair to those affected by the change. This ignoring of time results in an underestimation of the amount of investment, production, and support for workers/communities needed to replace current with new energy generation and use infrastructure. Electrifying everything, for example, is not just about energy generation, it is about building new infrastructure in mining, building, wiring, upgrades, production, and decommissioning, never mind increase the total amount of electricity generated and changing use patterns. This all take quite a lot of time.
While statements of "time running out" are out there, there is little acknowledgment of the amount of time different policy frames take to even start to work. For example, private market indicators do not work to drive fast changes for "impending" crises, especially when there is a lot of capital tied-up in debt for the current expensive infrastructure. For similar reasons, "subsidies" are hard to implement to drive markets as they still rely on private markets responding quickly.
As we wait for the need for change to register in private markets we are very subtly pointing subsidies in the direction of (what we hope) is the desired outcome of a low carbon future.
While this might work eventually – though I doubt it – it will be too late to be meaningful.
This limitation is well known in accounting circles when costing long-term returns on an investment versus the upfront costs of the replacement of infrastructure. Replacing fixed capital (those inefficient CO2 belching machines) before the original "end-of-life" of that investment being reached is much more expensive and takes a lot more time than just building new infrastructure from scratch where none existed.
In Marxian terms, this is the consumption of capital vs costs of investment in inorganic/fixed capital has a large time component because that infrastructure is purchased through debt – debt that was to be paid through the use of the capital the debt paid for.
It costs a lot to adjust the time component of investments and will not be done through free market means easily or cheaply. It will take time transition whether we include it in our calculations or not, but without including it we will likely miss our window to make the change happen in time and within predicted budgets.
4. Subsidies nudging markets
Publicly financed profit subsidies that attempt to drive the private market in a certain direction are expensive and have a dubious track record. The failure of market nudging by government is both because of the cost of financing them and because the person you are trying to nudge usually has deep pockets to fund political opposition to things that cost them market share or profit.
There is a near exponential growth in subsidies needed to sustain investment moving towards an outcome that is far away from a "market" equilibrium. Every dollar spent moving a step away from the un-subsidized equilibrium must be spent again sustaining this new level of investment. And, then another dollar needs to be spent again pushing beyond this new point to get to the actual desired investment level.
One of the clearest examples of this is the long-term care sector in Canada. Public money subsidizing yields for private property investment firms to build long-term care housing continue to result in under-supply and low-quality infrastructure. And yield subsidies have had to increase because they always compete with the yields of the alternative investments. Competing with higher returns elsewhere is the reason that the subsidy regime is an expensive and misapplied tool for needed public policy outcomes.
Public subsidies are better spend building the productive assets that we need. The goal must be to replace current polluting infrastructure with new infrastructure that does what we need. It is much too slow and inefficient to try to do this through nudging.
5. Public ownership of international freight
Transport is a huge contributor to green-house gas emissions. However, the regular call for public ownership of this kind of transport – usually lumped-in with investment/ownership of public mass transit – can have unintended consequences that undermine its green policy credentials.
When production is not planned and/or not publicly owned, socializing the costs of freight transport results in an incentive that pushes away from relocating production to be near consumption – something that is necessary to reduce emissions from trade. It is clear that allowing the private market to decide where things should be made under free trade rules, comparative labour costs, and international differential costs of environmental regulation compliance is not climate friendly. It simply results in offshoring to the lowest cost production. Subsidizing costs of transport make this worse. This can be counter-intuitive to some on the left as it is the opposite of greening personal transport through other types of transport infrastructure like public mass transit.
It is not that public ownership of transport should always be opposed, but it is not the tip of the spear for reducing transport's effects on climate change. The implementation of technology required to green transport can only be achieved through regulation and reducing the need for transport – irrespective of ownership. It is likely that the amount of money and/or capital needed to transition shipping will result in decimation of profits from the sector. So, the outcome is likely national ownership anyway. But, perhaps the first step should not be to socialize the losses and subsidize current levels of international trade.
Integral to the discussion of supply chains is also imperialism – or, the global system that supports economic dependence in the Global South on capitalist production for export. Offshoring of production from the advanced capitalist countries is driven by companies seeking-out profits through reduced input costs, subsidized through capitalist states. We must deal with this contradiction whenever we talk about subsidizing transport.
6. Intellectual property rights of climate saving technology
An essential component of the decommodification of energy infrastructure is permissive intellectual property (IP) rights of energy generation, transmission, local distribution, storage, and use technologies as well as global economic support for training in the Global South.
The pandemic has exposed how important it is to have a universal implementation of redundant new technologies everywhere and all at the same time. Investment in climate-friendly transitional technology cannot happen only in one place, but capitalism cannot manage it under a monopoly ownership of IP and current free trade rules. Unlike the vaccine, there is likely not a dozen ways to make energy in an efficient and green way – making it even more important to release IP rights over this technology.
7. MMT, inflation, and spending real money
There are historical disagreements2 between classical, Keynesian, and neoclassical economic theory on the cause of inflation. The understanding of what causes inflation directly impacts the discussion on how, how much, and where money must be directed when investing in private vs public production and use.
The classical view (backed by data2) is that investment of public money in new production under capitalism will not lead to inflation only if capital has room to raise the level of total reinvestment of net profits. Under capitalism, we can only spend up to the total amount of surplus value extracted as net profits from productive enterprise. Spend any more than that and you decrease the true value of money. Because of this limit, under capitalism, we must admit that there may not be enough money to actually fund transition to avoid climate catastrophe without taking on large money debts. This means finding an alternative to capitalist modes of investment are likely going to be necessary to avoid catastrophic climate change bankrupting our global economy.3 4
8. The necessity of de-commodification to include true costs of production
Decommodification of green infrastructure will be necessary to make sure there is investment in the correct areas. However, we must also include longer periods of time in finding the true costs of production even if that production is publicly owned. Current methods of costing production does not take into account the fully scale of impacts that production causes in the future. The limited time horizon is because of the way political and business reporting and decisions making has been structured within capitalism – a system of economic reporting applied to public firms as much as private firms.
We also have little way of measuring our direct impact on the environment, so-called "externalities", under a capitalist accounting system. Current methods of attempting to include the value/costs of these "free" or external inputs from nature are failing to result in the changes necessary to avoid climate impacts.
The commodification ("costing") of carbon, marketization of these carbon credits, and the spending of them does not result in fast transition to zero carbon production. It also does not result in a just transition for workers as it relies on market signals to mediate the transition and ignores the time required for an individual worker to be retrained, find an appropriate job, and fill it. And, burning fossil fuels are not priced appropriately for their effects – as doing so may even cause an economic crisis of its own.
This all results in skepticism that neoclassical and Keynesian economics (and thus their investment policies) can result in true market costing of borrowing from the future/climate.5
9. The physics of energy generation and Carbon Capture and Storage
With regards to dealing with global warming, a huge part of the problem with our current drive to change energy production is the efficiency of energy production. We need to produce energy – especially in the form of intense heat for many production processes – in more efficient ways that eliminates CO2 or methane release.
Efficiency of production of energy is essential when talking about the physics of carbon capture and storage (CCS). In this context, CCS is not a solution. All current CCS technologies require the generation of more energy to capture much less than 100% of carbon emitted from the fuel.
And, none of the supposed carbon capture technologies have been successfully tested at scale.
Current estimates are that you lose between 20 and 30% efficiency in the production process to capture between 80 and 90% of the CO2 released. The reason is that the resulting gasses from the combustion of the coal/oil/gas have to be compressed and cooled to pass by chemical scrubbers to extract the CO2 out of the air. This takes a lot of energy, the production and replacement of the scrubbers take energy, and the process is not 100% effective at CO2 removal even in theoretical models.
Producing more energy to capture atmospheric CO2 results in diminishing returns. If you have to produce 30% more energy to capture 90% of the CO2 released, then that energy better be produced with green energy. However, if you can invest in new energy generation at that scale, why not just replace the CO2 emitting source of energy generation and continue the investment to close the polluting generation.
That way you replace 100% of the CO2 emitted instead of just 80-90% and do not have to yet again retrofit generation (after you close the plant) to electricity production instead of carbon scrubbing.
The fight to reduce CO2 emission and warming is razor thin at this point, building in reducing efficiency of our energy production does not make a lot of sense in that transition.6
10. Efficiency of energy use
To stave-off climate change, we must not just produce energy more efficiently and greener, we must use energy in more efficient ways.
The necessity of the inclusion of efficiency in discussions about energy transition is about reducing the growth of energy use.
There is a lot of talk about this with regards to consumer products, but we must include production of consumer products, inputs for energy generation (mining, transport), use of products, and the overproduction of products – all of which wastes energy. Energy efficiency is about investment in upgrades and transition, but also production and use – all of which cannot happen without massive investments and broad planning. The "free" market is simply not equipped to produce these kinds of outcomes.
Building new infrastructure should be done with energy use in mind, and application of new technologies should be broad to reduce the over-reliance of cheap dirty energy around the world.
The rate of change of a function with a single fixed end-point increases as you squeeze it. The rate will increase as the starting and end points come closer together, and to make up for the squeeze something (in this case, the end-point that can move) has to give and move to a lower position.
Shaikh, A., Capitalism. 2016. Part 2, Chapter 10 and Part 3, Chapter 15. This is summarized quite well here: http://www.socialisteconomist.com/2018/12/modern-monetary-theory-and-inflation.html
This is a basic Marxian economic critique called "Profit On Transfer" – that is profit via a kind of theft. Not sure what to reference here except Marx's Theories of Surplus Value. Beyond exploitation of workers, Capital steals (borrows, actually) from the future via profit on transfer from nature when it pollutes during production. It is debatable whether capitalism can function if it costed these "externalities" appropriately, but it certainly is not costing them appropriately right now.
This is inherent in all climate models, but somehow missing in many conversation about energy (heat) production as we transition to electrical energy generation through other means. Efficiency of production, transmission, and distribution of energy will become important as we reach thresholds of runaway warming. CCS is not an answer without a catalyst that can work millions of times faster and as efficient than a plant at absorbing CO2 per energy released.