Markets and The Viability of Market-Based Solutions

43 with the available natural resources, is not even a theoretical and empirical possibility.

Whereas opponent of the growth imperative argument Hahnel points out that not the growth imperative, but other non-economic factors within capitalist systems are to blame for environmental degradation and that the key to implementing a greener capitalism lies exactly in these factors, I have argued that these factors still relate to the growth imperative. Capitalism should be seen as an institutionalised social order, meaning that there is no actual divide between the economic and social realms in that they are both interconnected and seek to achieve the same goals within the capitalist framework. As explained in the first chapter, one of the defining features of capitalism is the accumulation and expansion of one’s capital through the process of gaining a profit – the growth imperative. I tried to illustrate that Hahnel’s argument does not hold up when one considers that the alternative explanations he offers are all still driven by this growth imperative.

44 surprise that green capitalism frameworks are built around the premise that market-based solutions are a necessary factor in trying to secure environmental sustainability. As discussed in the previous chapters, it is often assumed that markets are well-equipped to resolve market imperfections by internalizing the externality. In this section, I would like to explore the viability of market-based solutions and argue that focusing on such solutions is another important reasons I believe a green capitalist framework to be insufficient in securing environmental sustainability.

As mentioned before, proponents of the green capitalism framework believe that only competitive capitalism provides the sufficient incentives for creating the technological innovations that are assumed to be invented within the foreseeable future and are able to secure global environmental sustainability. With the expected scarcity of natural resources – especially non-renewable resources like fossil fuels – in the near future, it is expected that the market will adapt the prices in accordance to this scarcity, which essentially entails that the prices for products that include such resources would rise. As explained in the previous chapter, the theory of Schumpeterian innovations predict that entrepreneurs seek to find ways to produce more efficiently as a result of this incentive. Capitalism is a highly competitive system in which producers are constantly trying to outcompete each other with the goal of achieving long-term survival for their own business ventures.

Thus, in times of scarcity, producers and entrepreneurs need to come up with creative new ways to produce, transport and consume their goods in order to keep afloat their businesses under these circumstances. Thus, as I discussed in the previous chapters, a capitalist market mechanism is seen as a necessary part of their frameworks to achieving environmental sustainability, because only the incentives that stem from such a system are seen as sufficient to leading the process of technological innovations.

In the previous chapter, I have already discussed my problems with trusting a framework that is build up around notion that certain types of technologies will be invented and fully workable within the next few years. However, I believe there to be another problem with the overarching argument that only a competitive capitalist market system provides the necessary incentives to create the technological innovations that the green capitalism framework assumes will come about . My main problem is with the assumption that the market system provides a fair system for allocating the necessary resources to creating these inventions. I will argue that this is not the case. One of the reasons why I believe green capitalism as a framework is not capable to secure environmental sustainability, is because it fails to challenge the underlying social institutions of capitalism. What I mean by this in relation to the market mechanism is that one should take into account who is funding current research on environmentally-friendly technologies.

To illustrate this point, one could ask why “engineers working in the mainstream of their

45 profession fail to provide the analyses so many environmentalists feel are needed”, even though the framework of green capitalism focuses more on questions surrounding these technological innovations, and not on questions related to social institutions (Hahnel 2011: 233). I believe that it is not fair to assume that capitalist markets, as we know them today and as they would be implemented in a green capitalism framework, would adequately distribute the necessary funds and resources to the right parties for environmental innovations. It can be argued that corporate, government and educational actors often discriminate against scientific research agendas that focus on environmentally friendly technologies, while “funds are lavished on research agendas that will expand corporate profits” (Hahnel 2012: 234). This point can most clearly be illustrated by the corporate funds that are provided by fossil fuel companies towards research that supports the denialism of the damage that their businesses are causing the global environment as a way to safeguard their profits (Farley 2012: 53).

Large polluting businesses are thus funding the research that does not paint them in a negative light, meaning that there is no true free self-regulating market system in place that allows for the fair allocation of resources for research in relation to securing environmental sustainability.

To summarise my argument above, I do not believe that the current market mechanism in a competitive capitalist setting – the setting that green capitalism is based around – will provide an adequate and fair distribution of the necessary resources for carrying out the technological innovations that the green capitalism framework relies upon. While it is true that the expected scarcity of non-renewable natural resources will be visible in market prices, I have argued that this does not necessarily mean that this system will foster the innovations that are needed. Funds provided by corporate, governmental and even educational actors will not always go to environmentally-friendly research programs, but to those programmes that can ensure the most corporate profit in the short-run. Thus, one reason why I argue against the viability of the market mechanism in a green capitalist framework is that I do not believe it necessarily fosters the technological innovations that are necessary to make the system work as proponents argue it should work.

The second reason why I believe the market mechanism to be an unviable system in a framework that seeks to achieve environmental sustainability has already been shortly introduced above in my discussion of Hahnel’s argument against in relation to the growth imperative argument.

Whereas Hahnel does not necessarily believe the growth imperative to lie at the heart of our current environmentally-related issues, he does believe that there are forces that cause perverse incentives and biases within the capitalist market mechanism. I will build on his line of argumentation in this next section. I do not believe market-based solutions in a green capitalism framework are not viable has to do with the fact that the proposed solutions are not able to do enough to secure environmental sustainability.

46 Proponents of green capitalism suggest that market-based solutions to environmentally-related problems would work in multiple ways. First, a building block of green capitalism are new types of markets that sells limits on the use of natural resources as a means to revaluate the value of GDP – this process, the proponents argue, would take into account the value of nature in the measurement of GDP, while others suggest that GDP should be decoupled from emissions altogether. Second, markets would ideally function in such a way that consumer demand for green products would reward businesses for their green initiatives as a way to promote greener production and consumption (Kenis and Lievens 2015: 4). Because there are unwanted externalities – in this case: pollution, emissions and degradation of the environment – and the usual response within any capitalist framework is to follow the belief that the market will internalise these externalities and resolve the problems that would have stemmed from them. I have introduced this line of thinking in light of Coase’s theory in the first chapter of this thesis.

However, I will argue that this is not the case, and that market-based solutions are not able to help the framework of green capitalism in securing environmental sustainability. First, let us look at the first argument that trading limits on the use of natural resources and the decoupling of emissions from the GDP would be a good way to help steer the system towards more environmental sustainability. The decoupling of emissions from the GDP would entail that a growth of GDP would no longer lead to absolute or relative growth in the use of natural resources. I have introduced the mechanisms of absolute and relative decoupling in the first chapter. As argued in the section above, an increase in economic growth usually leads to an increase in the use - and thus depletion and pollution – of natural resources. As I have discussed earlier in this chapter, natural resources have physical capabilities that make it impossible for them to help reach infinite levels of efficiency. It can be concluded that permanent decoupling of GDP is impossible for non-substitutable natural resources, because their efficiency gains are limited by their physical limits. To illustrate the minimum requirements for resources governed by their physical realities, Hickel and Kallis provide the examples of: the photosynthetic limit to plant productivity, minimal land and water requirements for agricultural output and the upper limits to energy and material efficiencies that govern minimum throughput that is required for economic production (Hickel and Kallis 2020: 275).

Even if trading limits on the use of natural resources became a more widespread policy, one could ask themselves how successful the measure would be. Currently, there is already a limit amount of carbon markets in place. However, as shown by Kenis and Lievens, as well as Bond, these markets do not accurately represent the cost of the damage that is being done to the natural environment as a result of carbon emissions, because they show that the prices are set too low to actually incentivise the positive changes necessary to avert environmentally-related disasters, and that properly increasing the prices would lead to severely disturbed market workings (Kenis and Lievens 2016: 229, Bond 2013:

47 59). Thus, trading limits on the use of natural resources and the decoupling of GDP from emissions are both not able to help green capitalism secure environmental sustainability.

Finally, I will shortly discuss consumer demand and the functioning of the market in relation to environmental sustainability. Two of the defining features of any green capitalism framework are corporate social responsibility and consumer demand for ‘green’ products as a way to incentive businesses to keep up with their environmentally-friendlier practices. The problem with this idea has already been shortly touched upon earlier in this chapter, when I discussed Hahnel’s argument that the notion of consumer sovereignty and economic democracy on the marketplace is a false reality, since richer individuals have more ‘dollars to vote with’ and thus have an unequally large share of influence on the marketplace in comparison to those who are poorer. He also argues that, apart from the biases already stemming from the previously described system, further biases are created by large corporations that exercise their influence over the wants, needs and desires of consumers as a way to increase their profits. Not to mention the process of greenwashing that I discussed in the previous chapter, where businesses are not completely honest about their sustainability practices, but instead try to convey an image of environmentally-friendly practices as a way to increase profits.

To summarise my arguments of this section: I believe market-based solutions to not be a viable option for securing environmental sustainability. First, I argued against the notion that a system of competitive capitalism is necessary when it comes to allocating the funds and resources, and providing the right incentives to create the technological innovations that green capitalism has built its framework around. I have argued that there is an unequal divide between the extent to which more profitable, but less environmentally-friendly research projects and more environmentally-friendly ones receive funding, resources and support. Second, I argued that it is impossible to reach a state of environmental sustainability with the help of markets that trade limits on the use of natural resources and revaluating the value of GDP to include the value of nature, because the system simply does not counter the destructing forces of the growth imperative mentioned in the previous section. Finally, in line with Hahnel’s argument, I have shown that the idea of consumer sovereignty as a way to reach sustainable production practices does not work. All in all, I have concluded that the market-based solutions of green capitalism are not viable when it comes to securing environmental sustainability.