Rapid business-model change is coming. Polluting industries need to get serious about a future without pollution.
There is a lot of talk about the breakdown in trust which is roiling and upending political systems around the world. The most clearly applicable explanation is systemic injustice, which is spreading. Even in wealthy countries, with historically strong middle class economies, more people are losing ground economically, while the wealthiest of the wealthy accumulate ever larger shares of new income.
A recent analysis, for instance, finds that the “poverty line” metric used to determine whether a household has insufficient funding to get by is seriously outdated, and that households of four people with income below $130,000 per year have inadequate funding to meet all everyday needs. About 62% of American households have income below $130,000 per year.
Those left out of the benefits of major surges in technological innovation, or harmed by significant shifts in the overall cost of living, often do not see successful pushback from the established defenders of working people and a strong middle class. This pushes voters toward untested alternatives—who tend to be candidates that use brash language, make big claims about how they will “end” an unfair situation, but who generally offer only haphazard policy platforms which are not well suited to the task.
All of this creates real problems for the work of addressing and eradicating systemic injustice. That, in turn, distorts the political and economic landscape that determines whether polluters prosper and, if so, who pays for the costs of the damage they generate. Such political and economic distortions make it easier to argue that what people need is more of the same.
The old supply and demand law is trotted out to justify producing more oil and gas than is reasonable or affordable, given the steadily mounting hidden costs of pollution ripple effects. A more honest analysis of demand would account for:
- The vast majority of people wanting a speedy transition to clean energy;
- The carbon budget being a geophysical limit, which we cannot simply wave away with rhetoric;
- The increasingly urgent need to not only account for but price hidden costs to avoid unmanageable risk;
- The industries in question require $7 trillion in free help each year to operate;
- The fact that suppliers do not control demand—in a market economy that is working well.
New reporting from the COP30 in Belém cites vehement opposition to reiterating the already agreed mention of a “transition away from fossil fuels”, by countries heavily dependent on oil and gas for exports and revenues. An honest evaluation of what took place in those discussions needs to recognize that:
- two years ago, in Dubai, those same countries agreed to that language, making it part of the body of international law structuring implementation of the 1992 Climate Convention;
- the Convention committed all nations to a collective reduction in climate pollution to 1990 levels by the year 2000, the transition away from fossil fuels should never have been controversial since then;
- the International Court of Justice has found that nations have a legal obligation to combat human-caused climate change, and that failing to do so can be an international crime.
What makes it possible for people in government and industry to behave as if none of this is real? Why should investors buy into a scheme in which the law of supply and demand is treated as a game played by cartels and state-backed monopolies to prevent innovation? The answer, unfortunately, is: distortion.
Markets, whole economies, political systems, and our planet’s climate and biosphere, are all being distorted, to allow a specific way of doing business to win out against more efficient and effective competitors. The costs of this manipulated market dynamic are so pervasive and enormous it is almost impossible to describe them in standard economic language.
Unsustainable practices in food systems, made worse by climate disruption, are bleeding the world economy of roughly $40 billion per day, and leading to millions of deaths per year. Climate pollution is destabilizing ecosystems and watersheds and claiming millions more lives through air pollution.
Trillions of dollars are already being spent on fossil-fueled climate disasters, without those expenditures being tied to value-builing adaptation and resilience. Some of the most valuable real estate in the world is becoming uninsurable, even as banks, cities, counties, and nations depend on those underlying claims of value to shape and sustain their own finances.
In other words, incumbent industries are too comfortable. Like anyone, they are comfortable being comfortable, and so they work to maintain the status quo. None of that changes the fact that the situation cannot go on as it is, that the halcyon days of skyscraping, desert-watering oil wealth are numbered.
There was, for a long time, the hope among many in the political and financial worlds that oil and gas companies, which are very good at innovation in their specific area of focus, would develop ways to operate without polluting. There have been marginal improvements, but nothing at the level necessary to stop heating up the planet.
It is clear that we need to be explicit about the need for an organized, cooperative transition away from fossil fuels.It is clear that this transition needs to be fast, and that those most dependent on the outdated business methods need to be among the most enthusiastic in developing a new way forward.
Industry actors, investors, and national governments, that depend on climate-disrupting pollution should be asking themselves: How long can I reasonably expect that no one will ask me to pay for the damage caused, and will financing be available once that happens? That should be the first step to a deep dive into envisioning a new kind of future, in which revenues and prosperity are not linked to polluting practices.
The countries, companies, and financial institutions that develop the adaptive, clean, innovative business models needed to thrive without climate pollution, will be the beneficiaries of the new efficiencies those practices build into everyday experience.
We repeat here the rough sketch future-building strategy any country might adopt, as we move into the resilience economy:
- Set clear national standards that prioritize investments in co-benefits that reduce geophysical danger and support enhanced human security.
- Shift subsidies away from destructive practices toward practices that deliver similar primary benefits (clean energy vs. polluting, for instance) while also delivering a range of value-building co-benefits.
- Incentivize major investment in resilience-focused enterprise and innovation, rather than large, resource-intensive industries that might provide only marginal benefits.
- Support local small and medium-sized enterprises (SMEs) that provide risk reduction and resilience services at community and regional levels.
- Guide commercial banks in providing services that help those resilience-building SMEs grow, serve more people, and improve quality of life at scale.
- Work with international partners to establish fiscal resilience cooperative frameworks, to make it easier to reallocate capital quickly to the resilience economy.
An insight brief from the Climate Value Exchange.
