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Green capitalism is a form of environmental- ism that emphasizes the economic value of ecosystems and biological diversity and attempts to reduce human ...
Green capitalism Ivan R. Scales University of Cambridge, UK

The basic principles of green capitalism Green capitalism is a form of environmentalism that emphasizes the economic value of ecosystems and biological diversity and attempts to reduce human environmental impacts by ensuring that the importance of environmental services is reflected in the way that markets operate. It starts from the recognition that ecosystems perform a wide range of services that societies depend on. This includes provisioning services (e.g., the supply of water, food, and energy), regulating services (e.g., carbon sequestration and water purification), and also cultural services (e.g., recreational services such as ecotourism and outdoor sports). Green capitalism extends the economic concept of capital (assets used to produce goods and services) to include “natural capital.” The United Nations Natural Capital Declaration (UNEP 2012, 3) defines natural capital as “the stock of ecosystems that yields a renewable flow of goods and services that underpin the economy and provide inputs and direct and indirect benefits to businesses and society.” Proponents of green capitalism see 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: Capitalism, as practiced, is a financially profitable, nonsustainable aberration in human development. What might be called “industrial capitalism” does not fully conform to its accounting principles. It liquidates its capital and calls it income. It neglects to assign any value to the largest stocks of capital it employs – the natural resources and living systems, as well as the social and cultural systems that are the basis of human capital (Hawken, Lovins, and Lovins 1999, 5).

As a result of the inability to value natural capital, the profit motive at the heart of capitalist societies 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. The solution from a green capitalist perspective is to factor the value of nature into the way markets operate to encourage producers to become more efficient and innovative in the way they use natural resources. Rather than relying on state or international regulation (so called “command and control” strategies) or demanding radical cultural, political, and economic changes, green capitalism is based on the premise that private property, entrepreneurial business, and economic growth can be good for the environment (Beckerman 1974). 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.”

The International Encyclopedia of Geography. Edited by Douglas Richardson, Noel Castree, Michael F. Goodchild, Audrey Kobayashi, Weidong Liu, and Richard A. Marston. © 2017 John Wiley & Sons, Ltd. Published 2017 by John Wiley & Sons, Ltd. DOI: 10.1002/9781118786352.wbieg0488

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Green capitalism’s roots Belief in the power of markets to solve socioenvironmental 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 rationally pursue their own 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. Although green capitalism is a relatively recent form of environmentalism, it draws on a long history of Western environmental ideas. Its emphasis on the rational use of natural resources is reminiscent of early twentieth-century “wise use” environmental philosophies in the United States of America. These ideas emerged from the development of scientific forestry and the principle that forests could be managed and optimized to satisfy human needs. Foresters such as Gifford Pinchot rejected the romantic and preservationist views of nature promoted by early conservationists such as John Muir and Henry Thoreau. Instead, the wise use movement argued for efficiency, waste reduction, and the management of forest resources for multiple activities (e.g., logging, recreation, and wildlife conservation). One of the most important ideas at the heart of green capitalism is that nature provides financial benefits to societies and that any damage to ecosystem function has an economic cost. The

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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. 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 impacts on other river users (for example, recreational fishers) and also other businesses (such as fish farms). 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 possible 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 in order 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. These are designed to stimulate positive externalities. Examples include government subsidies for installing solar panels and feed-in tariffs for energy generated from renewable sources. Such measures are designed to encourage investment in green technologies

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that might not otherwise happen due to the high start-up costs. The imposition of Pigovian taxes and subsidies faces a number of challenges. 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. This is compounded by the fact that economic sectors that generate sizable externalities (the fossil fuel energy sector, for example) have often lobbied governments to keep environmental taxes low or block proposals for new taxes. Environmental taxes are also regressive, 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. Alternative solutions have been proposed based on the belief that market-based solutions are more efficient ways to reduce externalities than regulation or taxes (Anderson and Leal 1991). 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. Returning to the 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 reduction in pollution.

These payments would compensate it for the opportunity for 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 influenced 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. Although the various ideas underpinning green capitalism have a long history, it is only since the emergence of the concept of sustainable development in the 1980s that they have

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become mainstream. This represents a significant shift away from the “limits to growth” and “zero growth” environmentalism of the 1960s and 1970s, 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 places an emphasis on individual liberty, minimal involvement of the state, and free markets as the most efficient way to coordinate the diverse needs of people.

Emerging forms of green capitalism Accounting for nature and paying for ecosystem services There have been growing efforts to include the value of natural capital into 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. With regard to 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.

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A green industrial revolution: harnessing the competitive and innovative aspects of market forces to improve manufacturing processes Internalizing the value of natural capital into the operation of markets is the first step toward green capitalism. 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. In the same way that the first industrial revolution harnessed machinery and new forms of fossil fuel energy to dramatically increase productivity, a green industrial revolution would harness technology to deliver radical improvements in efficiency. Hawken, Lovins, and Lovins (1999) propose a range of ways that a green industrial revolution might occur. First, radical improvements in productivity and efficiency could allow societies to produce more from fewer resources. Looking at the automobile industry, for example, ultra-light “hypercars” with fuel-efficient engines could dramatically reduce fuel consumption. In order to generate radical leaps in productivity, Hawken, Lovins, and Lovins (1999) advocate biomimicry, a design principle that imitates biological processes and structures in order to improve manufacturing and create new materials. For example, the physical properties of spider silk could be mimicked to make ultra-strong and ultra-light materials. The concept of biomimicry can also be extended to industrial processes through “cradle to cradle” manufacturing, which models processes on ecosystem nutrient flows and metabolic pathways. Cradle to cradle manufacturing involves two types of materials: (i) synthetic technical materials, which must be non-toxic and able to be used continuously in production cycles without losing their integrity (i.e., there is no “downcycling” to lower quality products);

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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 and ecolabeling As well as changes in the production of consumer goods, green capitalism also needs to be able to change consumer behavior. Green consumerism emphasizes the ability of “consumer power” to deliver more sustainable patterns of resource use. It is part of a broader trend of “ethical consumption.” 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 impacts. In addition to changes in the types of goods purchased, green consumerism also needs to deliver changes in the amount of goods purchased, owned, and consumed. Green capitalists envisage a move away from economies based on the ownership of goods to “service and flow” economies where resource goods are primarily rented (Hawken, Lovins, and Lovins 1999).

Critiques of green capitalism 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. Ultimately, these critiques argue that any attempts to reduce environment impacts will need radical economic and cultural changes that are not possible within a capitalist framework.

Capitalism and the metabolic rift between societies and the ecosystems that support them 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 a 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 nineteenthcentury 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. The process was often violent with peasants forcibly evicted. By seizing control over the means of agricultural production and subsistence, land enclosure forced peasants to seek

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work in order to support themselves. However, given the changes in agricultural production and increased mechanization during the eighteenth and nineteenth centuries, work was increasingly unlikely to be found in rural areas. Workers were forced to move to growing industrial towns to seek employment in factories. The changes brought about by land enclosure and urbanization not only led to social upheaval but also had serious environmental consequences. While industrialization led to obvious environmental impacts such as air and water pollution from factories, Foster (2000) argues that there were more profound changes in human–environment relations through disruptions in the exchanges of nutrients between society and the environment. The nineteenth-century chemist Justus von Liebig was the first to point out that urbanization led to a physical separation of food production and consumption. In agrarian societies, food production and consumption are carried out in close proximity 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 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. The concept of metabolic rifting has since been expanded spatially and ecologically by Marxist scholars, most notably by Foster (2000). They argue that processes such as agro-industrialization, industrial fishing, and aquaculture have focused on modifying biological processes to maximize yields and generate

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economies of scale at the expense of biological diversity and ecosystem function. Together with the globalization of food systems they have created vast commodity chains. For example, prawn farms in Asia not only clear mangroves to create their ponds, but often use wild-caught species as feedstock, leading to problems of over-fishing. Their produce is then shipped halfway across the world, using fossil fuels for refrigeration and transport, to be consumed by affluent Western consumers. Industrial food systems and global commodity chains mean that consumers have very little knowledge or interest in the environmental impacts of their consumptive actions. The metabolic rift is therefore not just spatial and physical but also social and cultural.

The treadmill of production and the continuous expansion of capital Schnaiberg’s (1980) concept of the “treadmill of production” combines insights from environmental sociology and technology studies to understand how and why capitalism tends to push production and innovation down certain paths. According to the treadmill of production, the competitive logic of capitalism means individuals and firms must always invest, innovate, and grow or risk being outcompeted. In other words, they must always be running to stay in the same place. Capitalism’s competitive logic has major implications for the way firms and individuals behave, especially with regards to what they do with profits and gains in productivity. In theory, profits can be used in a variety of ways. For example, they might be used to raise worker wages and improve working conditions. The productive gains provided by innovation also open up various possibilities, including the option of producing the same amount of goods with fewer resources. The latter is the basis of the

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green capitalist model for a “green” industrial revolution. Treadmill theory argues that in reality, capitalism’s competitive logic means that profits will always be reinvested back into increasing production. Any productive gains provided by innovation will be used to produce more with the same resources rather than producing the same with fewer resources. This has important environmental implications, since every “turn” of the treadmill involves the extraction of resources and the addition of pollutants. Furthermore, the treadmill of production in turn fuels a treadmill of consumption. By stimulating competition between firms, capitalism drives ever-increasing efforts to sell us goods and services through branding and advertising. This inevitably creates mass consumption societies where more and more goods are manufactured, purchased, and disposed. The cultural values of mass consumer societies, where individuals define themselves primarily by the goods that they purchase and own, creates a significant barrier for the implementation of a “service and flow” economy in which individuals mostly rent goods.

“Green grabbing” and the neoliberalization of environmentalism Green capitalism’s emphasis on natural capital involves commodifying material substances and processes that have never previously been commodities, for example, carbon dioxide and carbon sequestration. This leads some critics to consider green capitalism as just one part of a much broader neoliberal encroachment of market relations into various spheres of human life. Critics argue that green capitalism is leading to fundamental changes in environmentalism. This is especially the case with international environmental nongovernmental organizations (NGOs), which play a key role in green capitalism by

providing expert knowledge about the functioning and value of ecosystem services. They have thereby gone from being at the margins of global capitalism (and often critiquing the practices of trans-national corporations) to acting as facilitators in the expansion of capitalism. There are concerns that attempts to commodify natural capital will lead to individuals and groups being dispossessed of their land by more powerful state and corporate actors. This is because market-based environmental solutions are based on establishing property rights over the environment. Any scheme that seeks to create payments for environmental services must be based on a clear agreement of the precise ecosystem service being purchased, as well as who will be paid for delivering it. However, many ecosystems have multiple, complex, and often contested values as well as ownership rights. For example, many forests in sub-Saharan Africa are in theory owned by the state but in practice managed by rural communities according to customary rules. There are worries that the financial value suddenly created from ecosystem services will lead to strong incentives for powerful interests to take control of these ecosystems. Market-based schemes could see rural communities dispossessed of their rights to land so that ecosystem services can be secured. Critics argue that much like the “land grabs” that occur through the enclosure of agricultural land, green capitalism will lead to “green grabs,” where land is acquired to benefit from the revenue streams created by payments for environmental services (Fairhead, Leach, and Scoones 2012).

Ecolabeling and the fetishization of commodities Green capitalism’s emphasis on consumer power has also come under considerable criticism. Scholars have drawn on the concept of

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commodity fetishism to argue that green consumerism will only ever be a niche activity and may also act as a barrier to meaningful changes in consumption. In the common usage of the word, the term “fetish” is used to describe a strong and also unusual desire for an object or activity. It is also used in anthropology to describe objects believed to have magical powers, for example, religious idols. According to Marxist theory, capitalism encourages both forms of fetishism with regard to commodities. This occurs because commodities are primarily produced for the purpose of making profit. This means that their exchange values are prioritized over their use values or the value of the labor that went into creating them. Furthermore, individuals in mass consumer societies tend to define themselves through conspicuous consumption, so that consumer goods are purchased less for the functions they perform and more for their status-enhancing properties. Capitalism is particularly good at fetishizing objects because of its social relations, which separate workers from the objects that they produce and separate consumers from workers. This means that consumers do not know where the goods they consume are produced, by whom, and under which social and environmental conditions. In theory, solutions such as ecolabeling help to defetishize commodities by providing consumers with information about the environmental conditions of production. However, Green Marxists argue that by reducing complex socioecological problems to simple labels and brands, ecolabeling in fact fetishizes commodities in new ways by selling the idea to consumers that they are “saving the environment” simply through their consumptive choices. Critics argue that green consumerism’s emphasis on consumer power in fact hides the need for more

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radical changes, especially in terms of how much individuals consume. SEE ALSO: Commodification of nature; Conservation and capitalism; Ecological modernization; Ecosystem services; Environment and consumption; Environmental certification and eco-labeling; Environmental valuation; Environmentalism; Neoliberalism and the environment; Property and environment; Sustainable development

References Anderson, Terry L., and Donald R. Leal. 1991. Free-Market Environmentalism. New York: Palgrave Macmillan. Beckerman, Wilfred. 1974. In Defence of Economic Growth. London: Jonathan Cape. Coase, Ronald H. 1960. “The Problem of Social Cost.” Journal of Law and Economics, 3: 1–44. Fairhead, James, Melissa Leach, and Ian Scoones. 2012. “Green Grabbing: A New Appropriation of Nature.” The Journal of Peasant Studies, 39: 237–261. Foster, John B. 2000. Marx’s Ecology: Materialism and Nature. New York: Monthly Review Press. Hawken, Paul, Amory Lovins, and L. Hunter Lovins. 1999. Natural Capitalism: Creating the Next Industrial Revolution. Boston: Little, Brown and Company. Pigou, Arthur C. 1920. The Economics of Welfare. London: Macmillan. Schnaiberg, Allan. 1980. The Environment: From Surplus to Scarcity. Oxford: Oxford University Press. UNEP. 2012. The Natural Capital Declaration and Roadmap. Nairobi: United Nations Environmental Programme. Wunder, Sven. 2005. “Payments for Environmental Services: Some Nuts and Bolts.” CIFOR Occasional Paper, 42: 24.