“Climate Week:” what real solutions must do

The greatest threat to any capitalist economy is its own failure to provide for the needs of the population it is supposed to serve.  Just as issues like too few Middle Class jobs, stagnant incomes, and so-called business inversions, among others, demonstrate public discontent with the failures of current economic policies, protests and other events surrounding the so-called “Climate Week” send a message that the economy is not sufficiently addressing environmental issues. 

On the other hand, capitalism is essentially a mechanized, versus manual in the case of socialism, approach to the distribution of a nation’s recourses that should, ideally, lead to the most efficient economy possible.  Like all machines, however, the results are not dictated by what people want the outcome to be, but rather, what the parts, e.g. economic policies and human actors, of the mechanism are designed to do, as well as how the overall machine is engineered to work. 

Consequently, avoiding the impulse to embrace inefficient, unsustainable, and counterproductive socialist policies requires environmental issues like climate change to be addressed by an economy engineered to reward environmentally healthy behavior.  Of course, the reality that human nature forces people to, more often not, favor their immediate interests, e.g. incomes, over their long-term interests, e.g. climate change, means any environmental policies that  create a conflict of interest by harming the economy/people will be counterproductive and costly.

Efforts to pressure investors to invest in renewable energy sources, as they divest away from the coal, oil, and natural gas industries, can be part of the solution.  If the goal is to divest from the commodities associated with oil, coal, and natural gas, such a campaign will only help eliminate long-term investors who are propping up energy prices by staying invested in commodities instead of cashing out at the end of the month as future traders do.  All this does is help decrease fossil fuel prices and encourage more demand for fuel fossils while making alternative energy sources the more expensive alternative.

Because the costs of the environmental damage caused by oil, coal, and natural gas are hidden, the true cost of carbon-based fuel sources is not paid by consumers who drive demand for these goods.  As such, it is necessary to force customers to pay the true cost of hydrocarbons in order to make the oil, coal, and natural gas companies no longer viable investments.  The viability of eco-friendly investments will, therefore, determine if a strategy aimed at investing in sustainable industries can work. 

Unfortunately, divesting from the coal, oil, and natural gas companies is not likely to work in the long-term, because these businesses are able to generate enormous profit and supply their own capital while there will always be investors looking for easy investments.  More importantly, a failure to investment in American and other Western firms will simply shift production overseas, i.e. the West will lose the ability to regulate the industry.  Given the current efforts to punish Russia for its involvement in the Ukraine Crisis, it should be obvious that this strategy would create a huge national security threat.

As a bit of a reality check, people need oil, coal, and natural gas to live, thus the long-term goal must be to make alternative energy sources more affordable and foster a transition away from dirty energy.  In truth, the world is late to the game, so efforts to reduce carbon emissions are likely to have little impact on climate change until long after the world experiences the devastation of global warming.  Asking countries to hurt their own economies by simply trying to force cuts to carbon emissions and/or severely punishing major polluters will do more damage to humanity, which is the paradox of the world’s fossil fuel addiction. 

Although the true cost of fossil fuels means oil is not the cheapest source of energy humanity will ever enjoy, it is likely the cheapest source of hydrocarbons mankind will ever have.  Accordingly, there will always be a demand for fossil fuels.  Unfortunately, around 50 percent of a barrel of oil is now converted into gasoline as compared to when it was being burned off as waste during the production of kerosene.  Aside from the environmental and health problems the practice creates, the burning of fossil fuels is, clearly, very costly in terms of lost opportunities.  What is burned today to go five miles down the road could be someone’s cancer treatment ten years done the road.

In conclusion, the answer to fossil fuel pollution is not to simply eliminate production and prevent investments into more efficient infrastructure, it is to help slowly increase the price of oil as alternative energy sources are make cheaper and more available.  The focus must be on creating viable alternatives to fossil fuels while forcing the economy to realize the true cost of burning fossil fuels over time.

 It is, however, also important to incentivize the oil, coal, and natural gas industries to pursue cleaner production and make it more profitable for companies to use fossil fuels in the production of higher-end products.  Economic policies that do this over time, instead of pitting the environmental movement against the fossil fuel industries, are winning strategy that avoid the stalemate both groups find themselves in.