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Green capitalism is a form of green politics/conservationism that highlights the economic value of ecosystems and biological diversity and attempts to reduce environmental impacts on the human population. Green capitalism is also referred to as “natural capitalism” (Hawken, Lovins, and Lovins 1999), “free-market environmentalism”(Anderson and Leal 1991), “blue-green environmentalism,” or “eco-capitalism.”This guarantees that the importance of environmental services is mirrored in the operation of markets. It starts from the appreciation that ecosystems perform a wide range of services called ecosystem services that societies depend on. Ecosystem services include provisioning services like the supply of water, food, and energy, regulating services like carbon sequestration and water purification, and also cultural services which include recreational services such as ecotourism and outdoor sports. Green capitalism encompasses the economic concept of capital -assets used to produce goods and services- to include “natural capital (the stock of ecosystems that yields a renewable flow of goods and services that support the economy and provide inputs and direct and indirect benefits to businesses and society). Advocates of green capitalism perceive pollution, loss of biodiversity, and the unsustainable use of natural resources as a form of “market failure.” In other words, environmental degradation is the result of the failure of capitalist systems to account for the financial value of environmental services. (Scales .,2017)
Capitalism, as practiced now is a financially profitable, nonsustainable aberration in human development. What might be called “industrial capitalism” does not fully match to its accounting principles. It liquidates its capital and calls it income. It neglects to assign any value to natural resources, living systems, and social and cultural systems which are the basis of human capital (Hawken, Lovins, and Lovins 1999, 5). The profit motive at the heart of capitalist societies, as a result of the failure to value natural capital, tends to drive environmental degradation, since it is cheaper to pollute than to control emissions and more profitable to use resources now than to save them for the future(Hawken, Lovins, and Lovins 1999, 5).
Green capitalists argue that the value of nature is to be considered in market operations to encourage producers to become more efficient and innovative in the way they use natural resources. Rather than relying on “command and control” strategies or demanding radical cultural, political, and economic changes, the premise is that private property, entrepreneurial business, and economic growth can be good for the environment (Beckerman 1974).
Belief in the power of markets to solve socio-environmental issues is grounded in the ideas of classical and neoclassical economics where, in a world of finite resources and infinite human wants, markets are seen as the most efficient way of allocating scarce resources. According to free-market thinking, individuals and firms will sensibly pursue their wealth. Competition in a free market will therefore stimulate an entrepreneurial spirit of hard work, innovation, and efficiency. This produces more and better goods and services for everyone. Furthermore, resources are allocated to those who need them most (measured by the willingness to pay). Green capitalism takes the idea of the “invisible hand” (i.e., the idea that markets are inherently self-regulating systems that should not be interfered with, especially by governments) and extends it to the environment.
Green capitalism is a relatively recent form of environmentalism and emphasizes the rational use of natural resources. This concept is reminiscent of early twentieth-century “wise use” environmental philosophies in the United States of America which emerged as a result of the development of scientific forestry and the principle that forests could be managed and optimized to satisfy human needs. That means, rather than following romantic and preservationist views on nature, the wise use movement argued for efficiency, waste reduction, and the management of forest resources for multiple activities like logging, recreation, wildlife conservation, and sources of firewood, charcoal, and forest produce.
The concept is that nature provides financial benefits to societies and that any damage to ecosystem function has an economic cost fundamental to green economics. The problem is that these costs are not factored into market exchanges. In other words, the price of goods and services does not reflect their environmental impacts. Environmental economists describe these as negative externalities. In The Economics of Welfare (1920) Arthur Pigou defined an externality as an economic activity whose cost or benefit affects someone who did not choose to incur it. For example, a factory produces consumer goods that are mostly consumed by people far away from the factory and the company owning the factory gets the financial benefit of selling the goods, while consumers get the benefit of purchasing and using the goods. However, the factory also emits pollution that has numerous economic costs. Industrial wastewater released into a river affects people who use the river as a source of drinking water and those like recreational fishers. Atmospheric pollution can affect the health of nearby residents. These third parties gain none of the benefits of production – unless they buy the goods produced or are employed by the factory- and suffer all the costs of pollution.
A solution to the problem of negative externalities is to impose a tax on polluting activities to “internalize” the cost of pollution. These Pigovian taxes make polluting a costly activity. There is thus a strong incentive for companies to reduce pollution to reduce costs and stay competitive. This in turn changes consumer behavior, since they rationally seek to purchase the cheapest and therefore less environmentally damaging products.
As well as Pigovian taxes there are also Pigovian subsidies to stimulate positive externalities. which include government subsidies for installing solar panels and feed-in tariffs for energy generated from renewable sources and battery-operated cars. Such measures are designed to encourage investment in green technologies that might not otherwise happen due to the high start-up costs.
The imposition of Pigovian taxes and subsidies faces several encounters. The biggest challenge is calculating the correct level of taxation necessary to counterbalance negative externalities. For example, carbon taxes have often been too low to stimulate changes in production and consumption. In addition, sectors that generate sizable externalities like the fossil fuel energy sector have often lobbied governments to keep environmental taxes low or block proposals for new taxes. Environmental taxes are also reverting, since poorer households spend a large proportion of their income on acquiring basic resources such as water and energy, and are thus disproportionately affected. Free-market environmentalists also argue that subsidies do not necessarily support the best or cheapest environmental solutions and are thus economically inefficient.
Based on the belief that market-based solutions are more efficient ways to reduce externalities than regulation or taxes (Anderson and Leal 1991)alternative solutions were proposed. The economist Ronald Coase (1960) argued that as long as there were clear property rights over natural resources and transaction costs were sufficiently low, negative externalities could be dealt with through negotiations between those creating the externalities and those affected by them. Citing the previous example of a factory releasing pollutants into a river that affect a fish farm, the Coasian solution would be to assign property rights to the river. If the fish farm owns the rights to the river, the factory will have to compensate it for any impacts, thereby creating a strong incentive to reduce pollution.
Conversely, if it is the factory that owns the property rights, it may accept payments from the fish farm in return for a pollution reduction. These payments would compensate it for the opportunity costs of reduced production or the costs of developing solutions to deal with the pollution. From a Coasian perspective, this delivers the most economically efficient solution without the need for expensive regulation or monitoring. Coase’s basic idea has since been expanded on and interpreted in various ways, including mathematical models of the most efficient and therefore “socially optimum” level of pollution and its correct price.
Examples of free-market environmental policies inclined by Coasian theory include pollution permits and emissions trading. In a “cap and trade” system, a central authority sets an overall limit on the amount of emissions of a particular pollutant. The total cap is then divided into individual units and either allocated or sold to polluters. This gives the polluter the right to emit a given quantity of pollutants. Surplus pollution permits can be sold. The advantage of this system is that polluters who can find quick, easy, and cheap ways to reduce pollution are rewarded by being able to sell surplus permits to those sectors and industries that find it more difficult. The ability to sell surplus permits creates a continual incentive to reduce emissions. Coasian policies move away from traditional “command and control” models where states and international organizations simply set regulatory limits on pollution at the point of emission for example, vehicle exhaust emission standards for pollutants such as nitrogen dioxide and sulfur dioxide. While “command and control” solutions have the advantage of simplicity, once minimum pollution standards are met there are no incentives to go any further.
It can be noted that green capitalism became the mainstream since the emergence of the concept of sustainable development in the 1980s. This represents a significant shift away from the “limits to growth” and “zero growth” environmentalism, which argued for radical political, economic, and cultural changes to drastically cut production and consumption. Green capitalism also fits well with neoliberal economic thinking, which emphasizes individual liberty, minimal involvement of the state, and free markets as the most efficient way to coordinate the diverse needs of people.
Evolving of green capitalism
Accounting for nature and paying for ecosystem services
There have been growing efforts to include the value of natural capital in business activities and government policy. These depend on (i) being able to calculate the value of various ecosystem services and (ii) creating mechanisms whereby those who benefit from ecosystem services pay those who maintain those services. Calculating the economic value of ecosystem services remains technically challenging. Regarding creating financial flows to pay for natural capital, the most advanced attempts to establish such schemes have been under the banner of Payments for Ecosystem Services (PES). These are defined as voluntary transactions that involve the purchase of a well-defined ecosystem service from a service provider, who is paid if (and only if) the provision of that ecosystem service is secured (Wunder 2005). From a green capitalist perspective, the advantage of PES is that they conform to Coase’s view that environmental issues are best left to negotiations between individuals or groups with clear ownership rights over natural resources.
Industrial green evolution
This can be achieved by improving the manufacturing process and using competitive and innovative aspects of market forces. The first step toward green capitalism is internalizing the value of natural capital into the operation of markets. Once pollution has a cost and natural capital has financial value it is expected that the logic of capitalism will drive innovation and efficiency to reduce costs and maximize income. It can be noted that while the first industrial revolution harnessed machinery and new forms of fossil fuel energy to dramatically increase productivity, a green industrial revolution would exploit technology to bring drastic efficiency improvements. Major improvements in productivity and efficiency could allow societies to produce more from fewer resources. It can be seen that in automobiles like ultra-light “hypercars” with fuel-efficient engines could dramatically reduce fuel consumption. To generate far-reaching leaps in productivity, a design principle “biomimicry”( Hawken, Lovins, and Lovins (1999)) that imitates biological processes and structures to improve manufacturing and create new materials can be very well used. For example, the physical properties of spider silk could be mimicked to make ultra-strong and ultra-light materials. The concept of biomimicry can be industrialized using “cradle to cradle” manufacturing, which follows nutrient flows and metabolic pathways seen in the ecosystem. This process includes two types of materials: (i) synthetic technical materials (Should be non-toxic and able to be used continuously in production cycles) and (ii) biological materials, which can be put back into ecosystems and nutrient cycles. There is also the closely related concept of closed-loop manufacturing, which involves planning manufacturing processes around the life cycle of materials so that they are reused with minimum waste.
Green consumerism
It is part of a widespread and generalized trend of “ethical consumption.”Green consumerism emphasizes the ability of “consumer power” to deliver more sustainable patterns of resource use. This is based on the belief that consumer choices are driven by more than just price and are often based on the moral attributes of goods and services. “Eco” labeling works on the assumption that consumers can be provided with information about the conditions of production through the use of labels. This enables them to make informed decisions to reduce the environmental impacts of their consumptive patterns. The expectation is that producers will then react to changing demands in the marketplace by changing production to reduce environmental impact. Green consumerism also emphasizes changes in the amount of goods purchased, owned, and consumed. Green capitalists envisage a distance from economies based on the ownership of goods to “service and flow” economies where resource goods are primarily on loan (Hawken, Lovins, and Lovins 1999).
Green capitalism is based on the premise that market forces and profit motives can drive more sustainable resource use patterns. While green capitalist thinking has had considerable influence on environmental policy-making, it has given rise to a large body of critical work. The strongest critiques of green capitalism have emerged from a broadly Marxian perspective. The critiques argue that any attempts to reduce environmental impacts will need radical economic and cultural changes that are not possible within a capitalist framework
According to Green Marxist theory, the underlying drivers of environmental degradation in capitalist systems are (i) capitalism’s logic of competition, economic growth, and a relentless increase in the productive and consumptive capacities of society; combined with (ii) capitalism’s social relations, which are based on an unequal distribution of wealth, property, and power. Capitalism thereby allows the resources that everyone depends on to be owned and exploited for profit by the wealthy elite. This results in a “metabolic rift” whereby people are increasingly separated – both spatially and socially – from the ecosystems that support them. For example, in eighteenth- and nineteenth-century Britain, wealthy elites claimed that peasant agricultural practices were backward and unproductive and argued that land could be put to more profitable use. As a result, parliamentary land enclosures moved large areas of land from communal management into the private sphere. Peasants lost their rights to carry out subsistence activities such as grazing animals and collecting firewood. So farmers were forced to seek employment in factories in industrialized towns.
Industrialization resulted in air and water pollution from factories and made profound changes in human-environment relations through disruptions in the exchanges of nutrients between society and the environment. (Foster.,2000) The nineteenth-century chemist Justus von Liebig pointed out that urbanization led to a physical separation of food production and consumption. In agrarian societies, food production and consumption are carried out nearby and nutrient cycles can easily be maintained by returning organic waste (and therefore nutrients) to the land. However, with urbanization, food is produced in rural areas and moved to cities to be consumed. Waste, rather than being returned to the soil as fertilizer, is disposed of as sewage, and the nutrient cycle is broken. Marx drew on this idea to argue that capitalism not only robbed people of control over their livelihoods but also robbed the soil of its nutrients. So for Marx, the exploitation of natural resources and the exploitation of people were two sides of the same coin.
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