To climate-shame corporations is to hobble economic dynamism.
Shutting down the whole global economy is the only way of limiting global warming to 2 degrees Centigrade, Yvo de Boer, the former United Nations climate chief, warned in the runup to the 2015 Paris climate conference. Thanks to COVID-19 we now have an inkling what that looks like. The conference went further and chose to write into the Paris agreement an aspiration to pursue efforts to limit warming to 1.5°C. The 1.5°C backstory reveals much about the quality of what passes for science and gets enshrined in U.N. climate treaties — and is directly relevant to American corporations that now find themselves on the front line of the climate wars.
Nine weeks before the Copenhagen climate conference, the one where Barack Obama was going to slow the rise of the oceans, President Mohamed Nasheed of the Maldives held the world’s first underwater cabinet meeting. “We are trying to send our message to let the world know what is happening and what will happen to the Maldives if climate change isn’t checked,” Nasheed told reporters after resurfacing. It was part of a campaign by the Alliance of Small Island States claiming that climate change magnified the risk that their islands would drown.
The sinking-islands trope has been endlessly recycled by the U.N. for decades. In 1989, a U.N. official stated that entire nations could disappear by 2000 if global warming was not reversed. Like so many others, that prediction of climate catastrophe came and went. The failed prediction didn’t prevent the current U.N. secretary-general, António Guterres, from declaring last year, “We must stop Tuvalu from sinking.” There was no science behind 1.5°C and the sinking-island hypothesis. Studies show, here and here, that the Maldives and Tuvalu have increased in size. As the 25-year-old Charles Darwin might have told the U.N., coral atolls are formed by the slow subsidence of the ocean bed.
Having incorporated 1.5°C into the sacred texts of the U.N. climate process, the Intergovernmental Panel on Climate Change (IPCC) was charged with coming up with a scientific justification for it. In 2018, the IPCC published its report on the 1.5°C limit. It debunked the sinking-islands scare, reporting that unconstrained atolls have kept pace with rising sea levels. The IPCC had a bigger problem than non-sinking islands. The IPCC’s existing 1.5°C carbon budget — the maximum amount of greenhouse gases to keep the rise in global temperature to 1.5°C — was on the verge of being used up. Like some end-of-the-world cult after the clock had passed midnight, it would find itself in a predicament that promised to be more than a little embarrassing.
Help was at hand. As skeptics had long been pointing out, IPCC lead author Myles Allen confirmed that climate model projections had been running too hot and that they had been forecasting too much warming since 2000. Together with some other handy adjustments, the IPCC managed to more than double the remaining 1.5°C budget. Although it could muster only medium confidence in its revised carbon budget, the IPCC had high confidence that net emissions had to fall to zero by 2050 and be cut by 45 percent by 2030. In this fashion, net zero by 2050 was carved in stone.
That timeline is now being used to bully American corporations into aligning their business strategies with the Paris agreement and force them to commit to eliminating greenhouse-gas emissions by 2050. In fact, the text of the Paris agreement speaks of achieving a balance between anthropogenic sources and removals “in the second half of this century.” The net-zero target has no standing in American law or regulation. Net zero is not about a few tweaks here and there. It necessitates a top-down coercive revolution the likes of which have never been seen in any democracy. This is spelt out in the IPCC’s 1.5°C report, which might as well serve as a blueprint for the extinction of capitalism.
The IPCC makes no bones about viewing net zero, it says, as providing the opportunity for ‘intentional societal transformation.’ Limiting the rise to rise in global temperature to no more than 1.5°C above pre-industrial levels — an ill-defined baseline chosen by the UN because the Industrial Revolution is our civilization’s original sin — requires ‘transformative systemic change’ and ‘very ambitious, internationally cooperative policy environments that transform both supply and demand.’
Thanks to COVID-19, we have a foretaste of what the IPCC intends. It envisages, for example, the industrial sector cutting its emissions by between 67 and 91 percent by 2050, implying a contraction in industrial output so dramatic as to make the 1930s Great Depression look like a walk in the park, a possibility the IPCC choses to ignore. The IPCC places its bets on a massive transition to wind and solar, but no amount of wishful thinking can overcome the inherent physics of their low energy density and their intermittency, which explains why countries with the highest proportion of wind and solar on their grids also have the highest energy costs in the world. One option the IPCC does not favor — a wholesale transition to nuclear power — seems unachievable anyway on the timetable it has in mind. Nuclear power stations typically take well over five years to build, and not many are planned for now. Germany is switching out of nuclear power, the Japanese are, to quote the New York Times “racing to build new coal-burning…plants” and the Chinese are wary of overdoing their nuclear construction because of the risk of accident.
Rather than address the possibility of a sustained slump in economic activity the IPCC’s approach is to say the benefits of holding the line at 1.5°C are — surprise, surprise! — greater than at 2 degrees Centigrade while studiously ignoring the extra costs of the more ambitious target. A few numbers show why. A carbon tax sufficiently high to drive emissions to net zero would range up to $6,050 per metric ton, over 60 times the hypothetical climate benefits estimated by the Obama administration, indicating that the climate benefits of net zero are less than 2 percent of its cost. In a rational world, discussion of net zero would end at this point.
You don’t have to be a Milton Friedman to fathom the incompatibility with free markets and capitalist growth of what the IPCC terms “enhanced institutional capabilities” and “stringent policy interventions.” So it’s easy to understand why the governments of the world have no intention of achieving net zero by 2050. As Todd Stern, one of the principal architects of the Paris agreement, remarked last November, “there is a lack of political will in virtually every country, compared to what there needs to be.”
Led by Britain, several European countries have legislated net-zero targets without having a clue how they might meet them or their economic impact. Indeed, Britain can claim to be the world’s leading climate hypocrite. Having offshored its manufacturing base to China and the European Union, it is the G-7’s largest per capita net importer of carbon dioxide emissions. Before adopting its net zero target, the Committee on Climate Change observed that Britain lacked a credible plan for decarbonizing the way people heat their homes and that government policy was insufficient to meet even existing targets.
If governments — the legal parties to the Paris Agreement — have no collective intention to achieve net zero, why should America’s corporations? There is no environmental, economic, or ethical good when a corporation cuts its carbon dioxide emissions to meet the net-zero target when the rest of the world doesn’t, unless, that is, you’re one of the select few who believes that self-impoverishment is inherently virtuous. Yet corporations are increasingly being held to ransom by billionaire climate activists like Mike Bloomberg and BlackRock’s Larry Fink with the demand that they commit to net zero, make their shareholders and stakeholders poorer, and give a leg up to their competitors in the rest of the world, especially in the Far East.
The arrogation of the rule-making prerogatives of a democratic state by a handful of climate activists raises profound questions on the demarcation between the rightful domains of politics and of business. It also raises profound questions about the future of capitalism. “Capitalism pays the people that strive to bring it down,” Joseph Schumpeter, the greatest economist of capitalism, observed in the 1940s. They won’t succeed, but for the efforts of soft anti-capitalists within the capitalist system.
The moral case for capitalism rests on its prodigious ability to raise living standards and transform the material conditions of mankind for the better. To climate-shame corporations without the sanction of law or regulation will extinguish the economic dynamism that justifies capitalism. Remove its capacity to do so, and we will have entered a post-capitalist era. This is how capitalism ends.