Not so Super Markets

Words by Ellie Stephenson

This article is part of PULPCLIMATE week. CLICK HERE to join the facebook group. University of Sydney Students will be marching from Fischer Library at 10:00 AM on the 20th of September.

When facing the imminent dystopia of a world experiencing catastrophic climate change, it’s understandable that people attempt to find solutions which a) don’t change the status quo too much and b) line up neatly with their own ideological goals. In the case of many economists, this involves arguing for so-called ‘market environmentalism’ where their neoliberal faith in markets can be conveniently reconciled with the urgent imperative to stop destroying the planet.

Market environmentalists propose ideas  ranging from truly bizarre to conceivably workable. At their most absurd they suggest the rampant privatisation of nature -- how better to protect rare species than to give someone property rights over them? Of course, even a cursory thought can illustrate why giving people the right to buy up endangered plants and animals is a terrible idea. Expecting environmentalists to outbid logging and mining corporations to protect the environment is clearly a laughably unrealistic and structurally unsustainable model of conservation. Beyond the ignorance of power imbalances displayed by this theory, it’s just practically unviable. Would I pay you if my fish swam through your water? Would I pay the owner of the algae that they eat? Can I sue boat owners in general for creating aquatic noise pollution that disturbs my fish? Extreme market environmentalism fails by simplifying complex environmental systems into transactions which are impossible to enforce.

Of course, most market solutions are less ridiculous than these ones, but they often suffer from similar flaws. More moderate market solutions to environmental problems often propose the creation of markets to change consumption patterns and transform corporate values to be more sustainable. These can vary from cap-and-trade systems like emissions trading schemes (ETS) to corporate sustainability charters. Some proposals also support the idea of ‘ecosystem services’, where the benefits of ecosystems are given monetary valuations to help incentivise people to value them. 

While these ideas have varying levels of usefulness, they share a core assumption that means they are insufficient alone: that market economies and the businesses that inhabit them can be self-motivated to fix the mess they have helped create. The idea that market failure can be overcome by creating more markets -- whether in carbon, in fish, in ecosystems, or in rainforests -- has a couple of key defects. 

Ecosystems services attempt to  commodify nature to represent its value. Problematically, this creates markets for various parts of the environment often requires significant leaps of imagination. These markets do not naturally exist, and they have to be imposed or imagined in creative but silly ways. Working out the monetary value of ecosystems can occur by asking people what they would spend to protect them or by inferring value from ‘revealed preferences’ like how much people spend visiting natural sites. These systems of valuation necessarily undervalue nature. People can appreciate the moral harm of the destruction of the natural world without having the means to pay to stop it. This indicates a more central problem: market valuation weakens the intrinsic value of nature and dilutes moral, rather than economic, reasons to save it. Ultimately, this makes the natural world more vulnerable, because it makes its significance contingent on its market value. 

But what about cases where an actual market is created -- like emissions tradings schemes and fish quotas? Rather than commodifying nature, these impose costs on its over-consumption. While they have some value, there are still significant reasons why they are insufficient. The first is an enforcement problem. Empirically, ETS policies around the world have been difficult to regulate. Companies frequently rely on carbon offsets rather than actual cuts to their emissions, paying other companies to plant trees en masse on tracts of land in the Global South. This illustrates the limited potential for systemic change facilitated by market mechanisms. The market alone cannot adequately incentivise corporations to hugely change the way they do business.

So much of the world’s economy is based on overconsumption and fossil fuels emissions. The world’s petrostates and fossil fuels companies own reserves of hydrocarbons that are vastly bigger than the ‘carbon budget’ that we can use without catastrophic climate change. Financial decisions, investments, and employment are all contingent on these reserves. To avert climate change, major economic change will have to occur. It is unrealistic, then, to expect these highly pollution-dependent economic actors to independently make sufficient change that goes beyond shallow greenwashing. 

Even if market solutions functioned effectively, it’s still necessary to consider whether the solutions allow for environmental justice -- how do they respect the rights and wellbeing of humans? Putting a price on resource use is typically passed on to consumers, and without adequate support for an equitable transition from a fossil fuels-based economy, this can significantly reduce people’s quality of life. Moreover, under market solutions, offsetting and emissions reduction is often a responsibility which overburdens the Global South. Commodifying nature and exposing it to private markets can also reduce the presence of public spaces and make it harder for communities to access their land. Given this, it’s clear that we need more than just markets to facilitate a just economic and environmental transition. 

Nonetheless, do market solutions offer any useful insights into how we might fix the huge problems we’ve created? Firstly, while market solutions are imperfect, climate action is urgent, so we shouldn’t necessarily eschew imperfect but potentially impactful policies like emissions trading schemes. More broadly, market solutions illustrate that we must reform our economy to reflect the true cost of environmental destruction. Putting a price on degradation and working out how we can incentivise significant behavioural change are worthwhile considerations, but they must be paired with social and political change, as well as more profound economic shifts.