The future for global market systems, responding to both climate change and deepening inequality, must lie in the continued expansion, elaboration, and exponential growth of ecological markets.
There are enormous opportunities for sustainable economic growth and for-profit, a future of doing both good and well. This requires a fundamental change in globally self-destructive business and pollution as usual.
In the 21st century, economic growth must mean ecological improvement and the restoration of natural capital within the context of the pursuit of social and ecological justice. This will be the high-profit center for the 21st century.
Capitalism in the 21st century should be guided by three basic principles
First, new ecological market rules that make the price system send clear market signals for sustainability.
Second, the valuation and monetization of sustainable ecological value on balance sheets as paid-in capital and as cash as key instruments for sustainable investment and growth.
Third, a legal redefinition of fiduciary responsibility to make the pursuit of profit conditioned by achieving ecological improvement in the context of social and ecological justice.
For example, the displacement of carbon pollution by renewable energy and the ownership of the renewable energy infrastructure by energy users after-tax equity is exhausted, purchased by energy users through the ongoing stream of renewable energy income. This is not charity, but the building of ownership, self-managed political economy.
In sum, Joseph Schumpeter’s market process of creative destruction, of innovation in pursuit of profit, must be turned toward ecological ends, and, at the same time, lead toward a global convergence on social and ecological justice for all.
An ecological growth system is a repudiation of unrestrained industrial business and pollution, as usual, a system monetizing polluting externalities into profits, where consequences of oil spill disasters contribute to growth. Pollution as usual will inexorably lead to ecological catastrophe and self-destruction transforming civilization into a Mad Max future. Unrestrained, the increasing concentration of wealth will mean a handful of billionaires becoming trillionaires will control a global economy where billions of workers are reduced to lives as casual, poorly paid, insecure laborers leading to predictable risings from below.
Ecological opportunity not self-destruction looms
Global transformation guided by ecological economic growth and social and ecological justice means an enormous reduction in pollution, depletion and ecological damage, and an enormous increase in sustainable economic activity and wealth. The goal is to build a global ecological civilization that is democratic, sustainable, peaceful and just.
A sustainable economy can both reduce pollution by an order of magnitude, and, at the same time, be an order of magnitude larger. What matters is the quality and consequences of economic growth in terms of ecological and social consequences. What we do and how we do it is what matters.
We can, for example, eliminate fossil fuel and nuclear fission pollution by renewables and by fusion power. To build the global sustainable infrastructure for not just energy, but for industry, agriculture, aquaculture, forestry means trillions of dollars in productive investment. The 21st and 22nd centuries can, in retrospect, be viewed as the time of a great transformation from industrial to ecological civilization, the era of the great rebuilding.
A prosperous and sustainable global civilization of 9 billion people must be built around the twin pillars of ecological economics and social and ecological justice. We must have both or we will have neither.
Humanity has become a world-shaping self-conscious participant in the fundamental co-evolutionary process of sustainability where the ecosphere responds to all influences in ways that improve conditions that supports the prospects for all life. This is what has enabled the ecosphere to respond to periodic mass extinctions and once again thrive. The challenge for humanity is to successfully pursue a healing response to ecological excess before geophysical climate forces foreclose our options leading to irresistible collapse.
Eventually, the ecosphere will successfully respond to dramatic anthropogenic climate change. The Eocene thermal maximum of 56 million years ago was driven by enormous global volcanism raising carbon dioxide concentrations to levels that melted all the ice and made the arctic subtropical in hothouse earth. This eventually led to the growth of enormous mats of tiny Azolla in the warm Arctic Ocean that returned atmospheric carbon dioxide and the climate to levels that transformed hothouse earth into a temperate climate. The planet will take care of itself without us. The choice we face is to respond now to the threat of climate change before unleashing geophysical forces that will persist for hundreds of thousands of years of hothouse earth.
Fundamental change is already in motion
Fundamental change, even in the midst of a global pandemic, is already in motion. In parallel with the Paris accords, plans from Boris Johnson, Joe Biden, Xi Jinping are pouring forth for the elimination of energy sector carbon pollution by 2035 and net-zero carbon emissions by 2050. In 2020, in the U.S., for example, renewable energy generation already exceeded that of uncompetitive coal. Morgan Stanley predicts that U.S. coal generation will be eliminated by 2033.
The Deloitte Renewable Energy Prospects for 2021 projects “further expansion into new technologies, including advanced batteries and other forms of storage, offshore wind, and green hydrogen technology... especially as green hydrogen production and storage, move toward commercialization, we may see more power-to-x projects to store, convert, and reconvert surplus solar and wind power into carbon-neutral fuels and chemicals.”
As a renewable developer, I am working on projects to build utility-scale solar arrays connected directly to transmission lines combined with energy storage flow batteries able to provide grid voltage and frequency control as well as peak power resources. The next step is the solar energy to power onsite electrolyzers turning water into green hydrogen powering on-site combustion turbines responding to peak grid demand.
This will provide power for electric car fast charging, for steel electric arc furnaces, and for concrete electrolysis. MIT’s Department of Material Science and Engineering using electrolysis has developed a new way to produce clinker for Portland cement. Cement production amounts to 8% of global carbon dioxide emissions.
This is just the start, not just for eliminating carbon pollution, but to remove and sequester gigatons of carbon from the atmosphere and ocean to return global atmospheric carbon dioxide toward preindustrial levels of under 300 parts per million.
A sustainable economy will mean the sale of digitized information on a renewably powered global grid in an infinity of forms from data, designs, entertainment, code for nMRA vaccines for human diseases, 3D printing programs using sustainable inputs for customized products, and software for ever-improving robotic workers and self-driving cars.
This enormous emerging productive power unleashed raises fundamental questions about the need for a fair share of the social product through mechanisms such as a Basic Income or Negative Income tax and full employment job-sharing where layoffs without pay are the last, not the first choice.
Enormous profits are forthcoming from industrialism transformed into zero pollution zero waste ecological systems where are outputs become inputs in additional processes. The fruits of this unparalleled productive capacity and wealth production must be fairly shared through an intelligent and democratic balance between rights and responsibilities.
For example, the right to a Basic Income is balanced by the responsibility for making broadly defined useful social contributions. The challenge is for a global convergence on sustainable norms through technology transfer and sustainable investment and shared local ownership. The future rushing at us, is for companies like Amazon to reduce employment in warehouses to a cadre of robot wranglers and technicians as robots will pick and package orders, load and unload trucks, and, if allowed, have drones deliver instead of people.
The basic principles that can drive an ecological and just global market systems
First, new ecological market rules, law, and regulation that makes markets send clear price signals for sustainability. Sustainable goods and services must be cheaper, gain market share and become more profitable. This can be accomplished not only by using a mixture of ecological taxes on pollution, depletion, and ecological damage but by regulatory and legal mandates to require an annual reduction of unsustainable practices, for example, slashing fossil fuel carbon dioxide pollution and its displacement by renewable energy, higher efficiency and natural carbon dioxide sequestration in soil and biomass on land and sea.
Carbon taxes, while beloved by economists are suboptimal means for ecological change. First, the price elasticity of many of the worst ecological products like gasoline makes it clear that rising prices alone is insufficient. And, as the Yellow Vest (Gilets Jaunes) protests in France made clear, climate change fixes based on raising prices on the already economically distressed will be met with resistance.
Far superior are measures mandating, for example, the elimination of sale gasoline-powered vehicles by a date certain. Renewable electric power to run these vehicles is around $1.00 per gallon equivalent. The first costs for new vehicles drop as battery costs decline, and, can be supported by tax credits in the interim. Similar non-taxation measures can mandate an increasing renewable energy portfolio standard for electric supply within the context of plunging costs and zero fuel costs for renewable energy systems.
New industries are arising through the power of chemical and genetic engineering. For example, replacing meat with vegetable-based substitutes, developing plants with increased capacity to sequester carbon in their roots, grow faster and have resistance to pests and respond well to natural insecticides. Natural carbon sequestration through agriculture and aquaculture in soil and biomass has great promise. Costal kelp plantations can provide enormous amounts of carbon sequestration, food, biofuels and employment. Second, the monetization of ecological value and sustainability on balance sheets as paid-in capital and as cash as a means to create wealth and investment capital for trillions of dollars needed for investment in global ecological transformation. The ecological value will drive global wealth creation, investment, and the pursuit of justice and fairness. New regulatory assets such as Sustainability Credits (SCs) based on the ecological value of displacement of one metric ton of carbon dioxide, initially by renewable energy, will become a key driver and market force for ecological wealth creation.
Globally, 34 billion tons of anthropogenic carbon dioxide emissions can be the source of trillions of sustainable wealth and investment capital based on the value of carbon displacement as determined by the U.S. National Academy of Sciences at $100 per metric ton.
The yearly total potential value of carbon dioxide displacement alone is $3.4 trillion in SCs reaching zero carbon emissions as planned in 2050. This is further magnified by the normal practice of investment banking to loan nine or ten dollars for each dollar of their capital for total yearly investment potential of $34 trillion.
The exponential growth of ecological capital unleashed by monetizing ecological value is stunning and in the service of low-risk ecological improvement and social justice. Low risk in that the technology is reliable with declining capital cost minor maintenance costs, no fuel costs with demand based on mandated reduction in greenhouse gas emissions.
Morgan Chace projects the cost for net-zero global emissions from 2020 to 2050 is $50 trillion, an amount that could be clearly financed in large part by SCs.
Rapid global ecological market transformation can be based on the valuation and monetization of ecological value. The reward for displacing carbon dioxide (and other emissions) should be the creation of a balance sheet asset, like the sustainability Credit (SC) based on the ecological value per metric ton. SCs should be applied to the range of greenhouse gas and other pollutants with appropriate measures for each. Eliminating carbon dioxide, methane, NOX, and CFC emissions should be reflected by an appropriate credit based on ecological value.
Sustainability Credit process and management
The Sustainability Credit is straightforward. The kilowatt output of a renewable energy facility is metered and certified. An investment bank approves the creation of a Sustainability Credit (SC) for each metric ton of carbon dioxide displaced.
The SCs are monetized as paid-in capital and as cash on the books of investment banks with the capital targeted for investment in approved ecological projects. SCs represent the new gold, with an inherent ecological value. It could be argued that the bank should pay the SC producer for the Sustainability Credits. In practice, this means little. The current federal funds rate for loans to banks is close to zero. The bank loans the SC dollars at 5% while it is making $10 worth of loans for each $1 dollar in SC capital in the traditional investment bank fashion. SCs must be used for productive investments advancing ecological economic growth and are therefore non-inflationary and sustainable.
The trillions created by SCs are managed by the Federal Reserve or other central banks in the same way they manage the money supply through interest rates control, changing the Federal Funds rate for loans to banks, raising or lowering the bank reserve requirements, buying or selling bonds, and controlling the value of SCs.
Third, which is the logical step informed by ecological market rules and ecological value is a legal and binding redefinition of fiduciary responsibility. The pursuit of profit or economic growth must mean the pursuit of ecological improvement in the context of social and ecological justice. Such an ecological definition of fiduciary responsibility will be enshrined in law, constitutions, corporate charters.
Smart business and profitable business must be an ecological business that supports ecological improvement and social and ecological justice. This is shaped by market rules and the price system that builds and expands a circular sustainable zero pollution - zero-waste economy as a smart bottom-line business. An increase in monetary capital must reflect ecological improvement and the regeneration of the ecosphere of natural capital.
The three principles, new market rules, monetizing ecological value, and ecological fiduciary responsibility are the basis for creating dynamic global markets that will reduce dramatically environmental externalities, expand global wealth much fold while repairing the ecosphere, and lead to a global convergence on sustainable and just norms for all.
We cannot build an ecological civilization based on the needs of a handful of billionaires in a world riven between the poor and the ultra-rich, between the sustainable and the polluting.
An ecological market system embraces ecological economic growth and justice as forces to drive global wealth creation, regeneration of the living world, at the same time there is an enormous increase in monetary capital amidst a global convergence on sustainable norms. CSR (Corporate Social Responsibility) combined with ecological growth will become crucial metrics for profit and social and economic transformation in the 21st century.
In an ecological civilization, most of the world’s people will live better, more secure lives. An ecological market system will mean that the connection between economic growth and increasing pollution will be broken as ecological economic growth means ecological improvement and social and ecological justice in a virtuous cycle of investment, work, and social and ecological justice. Business people can become the ecological champions of the 21st century.