Making a case for capitalism

Combating the climate crisis is the ultimate long-term challenge. Can society quickly overhaul energy production, transportation, heavy industry, agriculture and more to prevent truly catastrophic global warming?

The jury is still out and time is running out. And there are very real questions about whether such a quest can succeed within the constraints of an economic system that famously focuses on short-term incentives.

The stock market, corporate governance and executive compensation all drive quarterly performance. As a result, it is often difficult for companies to abandon products and services that are good for the bottom line in the short term but bad for global warming in the longer term, or to invest in low-carbon technologies that can take years to bear fruit. out.

But increasingly, making money and bending the curve on global warming is not a matter of either-or. Akshat Rathi, climate reporter for Bloomberg News, writes in his new book Climate capitalism that there is mounting evidence to suggest that short-term profit incentives can drive long-term change.

“Even in the existing economic system, which has exacerbated climate change, changes can be made, and capitalism can tackle the climate problem and deliver profits at the same time,” he told me.

Such win-win thinking can often come across as Pollyannis. But Rathi backs his argument with stories from around the world, arguing that the very profit motive that got us into this mess can also get us out of it.

I recently spoke with Rathi, who lives in London. This interview has been condensed and edited for clarity.

We still have rising emissions and rising fossil fuel production. Doesn’t this mean that capitalism has failed to tackle this problem?

The way to answer that question is to break it down into two time frames. In the current time frame of the past year, yes, emissions reached a new record. Oil and gas profits hit a new high. And many of the oil and gas companies actually are to return to their climate objectives.

Over a period of ten years, the direction is very different from what it was in 2014. The Paris Agreement has been signed. We avoided the 5 degrees Celsius route and are now on a 3 degrees Celsius route. Oil and gas companies, which invested heavily in oil and gas production and exploration, are now taking those profits and returning them to shareholders.

So the annual figures matter because that’s what capitalism cares about on a quarterly basis. But companies must also think about the long term. And so if you’re a business looking forward, you want to be in a place where you’re mitigating climate risk, and ideally you’re actually taking advantage of what the transition presents as an opportunity to create new businesses and new factories.

Who’s ready? make a lot of money with this transition? And who will lose?

Countries that fail to recognize the types of climate risks they face are likely to lose the most. These will probably be the oil and gas producing countries. If you look at the Middle East as a region, they are very vulnerable to climate change. They are way behind on what they need to do to address the problem, and the product they deliver is going to lose steam at some point..

The winners are places that look at what is needed in this century and then take a big bet on it and support it in the long term. You can see China as a clear example. They took the bet in 2000, and in 2008 they said, “Okay, now we’re actually going to build an industry.” And now Europe and the US are worried about it cheap Chinese batteries are ruining their own auto industry. So you need long-term thinking at a time when long-term thinking is not very fashionable. Without it you will be lost.

Can capitalism combat climate change and also improve the lives and livelihoods of poor people in the developing world?

The ability to move trillions of dollars of investor money that is in rich countries into developing countries is not working, and without that there is no way to make this transition. So things look terrible right now.

But if you find the solutions in those places, those solutions can scale faster and be more resilient than in other places.

Do you think conservative opposition to ESG investing is impacting the business community’s efforts to combat climate change?

So far we have not seen this have a huge impact. But rhetoric is important. Britain is a world leader in cutting emissions and continues to implement all the policy changes needed to reach net zero.

And yet because the Prime Minister is telling us to slow down, that impacts investors’ decisions – whether to make the investments needed for the transition, for batteries, for electric cars. So what is said matters. And given the pace at which change must be implemented, any friction will only make the transition more difficult.

Tesla loses his aura of invincibility

Elon Musk was in a defiant mood last week after an arsonist set fire to a power pylon and brought production to a standstill at the Tesla factory near Berlin.

“They can’t stop us,” Musk, the company’s CEO, told workers.

But there are increasing signs that Tesla may not be as unstoppable as it once seemed. The company’s car sales are no longer growing at a breakneck pace. Chinese car manufacturers and established brands such as BMW and Volkswagen are flooding the market with electric cars. And Tesla is slow to respond with new models.

Musk’s many outside ventures and his penchant for making polarizing political statements have raised questions about how focused he remains on managing Tesla. Wall Street is growing increasingly concerned: Tesla’s share price has lost a third of its value this year, while the major stock indexes have reached record highs.

In an interview with former television host Don Lemon that streamed online Monday, Musk brushed off the decline in the company’s stock price as part of the cycle.

“Inventories go up and down, but what really matters is whether we make and deliver great products,” he said.

Musk can take a lot of the credit for pushing other automakers to focus on electric cars, proving they can be practical, profitable and fun. Tesla’s Model Y SUV was the world’s best-selling car last year.

But Tesla hasn’t added a mass-market vehicle to its lineup since the Model Y hit the market in 2020. Chinese car manufacturers such as BYD, SAIC and Geely Auto are releasing dozens of new models. While Tesla is working on an electric car that will cost around $25,000, it is not expected to come to market in large numbers until 2026.– Melissa Eddy and Jack Ewing