On March 13th, 1990, Henry Kamm reported in the New York Times, the miserable state of Ermlitz,  a village in East Germany. The piece, as gripping as it was, seemed to be hinged on two contradicting priorities. Kamm was understandably horrified by the pollution in the air and soil, the persistent chemical dust and the rancid smell. Yet, the residents harboured a fear entirely different; a pastor of the medieval evangelical cathedral in Merseburg said, “They don't like to think about the ecological problems that could also mean that their factories will be closed.” This statement appropriately describes the dilemma surrounding economic progress and climate change. It also points out the failure of the Communist regime to sustainably use natural resources.

Work with capitalism, not against it

The communist and the capitalist are separated by the all-powerful profit motive. This very profit motive has been accused of being the primary cause of environmental degradation by many. The belief of ‘greed versus green’ has, in turn, led to an unprecedented expansion of environmental regulations. However, it is these very profits and the distribution of the same in a capitalist society, that allows for the use of these funds to clean the environment. A communist government, on the other hand, is impeded by several structural factors to do the same. In most cases what follows is the ‘tragedy of commons’—a condition where resources are owned communally and overused without any regard to future consequences. Economist Marshall Goldman crisply sums it up with, “The attitude that nature is there to be exploited by man is the very essence of the Soviet production ethic.”

This profit motive can be harnessed for the betterment of the environment. This phenomenon can be further explained by the environmental Kuznets curve (EKC)—a hypothesised relationship between various indicators of environmental degradation and per capita income. The inverted U-shape of the curve shows that with increase in per capita income the surrounding environment will at first degrade, but eventually turn around. An extensive literature survey by Alexandra-Anca Purcel, reveals a long-term relationship between the indicators, and the empirical findings coincide with the EKC hypothesis. The traditional bell-shaped pattern seems to be at work for some developing and transition economies as well. The simple reason for the same could be that a free market is controlled and influenced by the people, and once prosperous, citizens demand a clean environment.  

Attempts to clean the environment have mostly been based on ‘command-and-control’ systems. A ‘command-and-control’ system is based on regulations and quotas, that stifle the growing economies and hence, can never be ideally implemented. Environmental damage is a negative externality, and a command-and-control system requires companies to decrease emissions by installing anti-pollution equipment, thus increasing the cost of the commodity.

The system, however, comes with three major flaws. First, it sets the same standard for all industries; second, it is susceptible to compromises, lobbying and political interference; and third, once this emission standard has been achieved, companies have no incentive to invest in sustainable technology. This has been made abundantly clear by the numerous protocols and agreements that have largely failed to scratch the surface of the climate change conundrum. These have often created an adversarial dynamic between the affluent and the non-affluents blocs (as was illustrated by the Danish text, Copenhagen Summit, 2009) each looking to protect their own ends and maximise profits, while avoiding liabilities.

The last three decades have seen many accords, first of which was the Montreal Protocol that was largely successful in reducing emissions of greenhouse gases, mostly due to the availability of alternate resources. The Kyoto Protocol and the Paris Agreement have not been successful as the industrialised world failed to meet the steep targets, and developing economies would never be able to meet the targets without considerable upfront investment on sustainable technology.

Incentive is key

The question, then, remains. How can we battle climate change? An agreement where the profit-making tendencies of corporations are channelled, and not repressed, may be the answer.

The allure of coal is its price. Yet, the market price of the mineral has so far excluded its greatest cost—environmental degradation. This cost is hardly reflected in its price, and is often paid by the poorest members of the society. It is time the true cost of coal is paid.

Such a change can be targeted by increasing the price of fossil fuels. This change in price will invariably force companies and countries to reconsider their expenditure and invest more enthusiastically in alternate resources. An impact assessment of the same has seen that this method acts as a deterrent to the human emissions and alleviates the heavy dependency on fossil fuels; it can also partially solve the climate crisis by reducing CO2 emission levels by 23%.

The burden of financing research into alternative sources of energy should be borne exclusively by the developed economies. This approach would not only help balance out their liability of being the primary polluters, but also give developing economies the time required to adjust. Simultaneously free markets should be promoted in developing economies, with categorically reduced trade sanctions so that in due time the environmental Kuznets curve is replicated, and the tragedy of commons avoided.

It has been seen time and again that without a full belly, no human being, under any circumstance, can be motivated to consider the damages done to the environment. It is time the power of choice, profits and price are utilised to turn the tide against climate change.