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Green capitalism
Ivan R. Scales
University of Cambridge, UK
The basic principles of green capitalism
Green capitalism is a form of environmental-
ism 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 reected in the way that markets oper-
ate. 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 purication), 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) denes natural
capital as “the stock of ecosystems that yields a
renewable ow of goods and services that under-
pin the economy and provide inputs and direct
and indirect benets 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
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
for the nancial value of environmental services:
Capitalism, as practiced, is a nancially prof-
itable, nonsustainable aberration in human
development. What might be called “indus-
trial 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 cap-
ital, the prot motive at the heart of capitalist
societies tends to drive environmental degrada-
tion, since it is cheaper to pollute than to control
emissions and more protable to use resources
now than to save them for the future.
The solution from a green capitalist perspec-
tive is to factor the value of nature into the
way markets operate to encourage producers
to become more ecient 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 eco-
nomic 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 cap-
italism” (Hawken, Lovins, and Lovins 1999),
“free-market environmentalism” (Anderson and
Leal 1991), “blue-green environmentalism,” or
“eco-capitalism.”
GREEN CAPITALISM
Green capitalism’s roots
Belief in the power of markets to solve socioen-
vironmental issues is grounded in the ideas of
classical and neoclassical economics where, in
a world of nite resources and innite human
wants, markets are seen as the most ecient
way of allocating scarce resources. According to
free-market thinking, individuals and rms will
rationally pursue their own wealth. Competition
in a free market will therefore stimulate an
entrepreneurial spirit of hard work, innovation,
and eciency. 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 inher-
ently 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 his-
tory of Western environmental ideas. Its emphasis
on the rational use of natural resources is reminis-
cent of early twentieth-century “wise use” envi-
ronmental philosophies in the United States of
America. These ideas emerged from the develop-
ment of scientic forestry and the principle that
forests could be managed and optimized to satisfy
human needs. Foresters such as Giord 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 eciency, waste reduc-
tion, 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 nancial
benets to societies and that any damage to
ecosystem function has an economic cost. The
problem is that these costs are not factored into
market exchanges. In other words, the price of
goods and services does not reect their envi-
ronmental impacts. Environmental economists
describe these as negative externalities. In The
Economics of Welfare (1920) Arthur Pigou dened
an externality as an economic activity whose cost
or benet aects 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 nancial benet
of selling the goods, while consumers get the
benet of purchasing and using the goods. How-
ever, the factory also emits pollution that has
numerous economic costs. Industrial wastewater
released into a river impacts on other river users
(for example, recreational shers) and also other
businesses (such as sh farms). Atmospheric pol-
lution can aect the health of nearby residents.
These third parties gain none of the benets of
production (unless they buy the goods produced
or are employed by the factory) and suer all the
costs of pollution.
A possible solution to the problem of negative
externalities is to impose a tax on polluting activ-
ities 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 Pigo-
vian subsidies. These are designed to stimulate
positive externalities. Examples include gov-
ernment subsidies for installing solar panels
and feed-in taris for energy generated from
renewable sources. Such measures are designed
to encourage investment in green technologies
2
GREEN CAPITALISM
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 chal-
lenge is calculating the correct level of taxation
necessary to counterbalance negative externali-
ties. 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 aected. Free-market
environmentalists also argue that subsidies do not
necessarily support the best or cheapest envi-
ronmental solutions and are thus economically
inecient.
Alternative solutions have been proposed based
on the belief that market-based solutions are
more ecient 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
suciently low, negative externalities could be
dealt with through negotiations between those
creating the externalities and those aected by
them. Returning to the example of a factory
releasing pollutants into a river that aect a sh
farm, the Coasian solution would be to assign
property rights to the river. If the sh 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
sh 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 ecient 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
ecient and therefore “socially optimum” level
of pollution and its correct price.
Examples of free-market environmental poli-
cies inuenced 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 nd quick, easy, and cheap ways to reduce
pollution are rewarded by being able to sell
surplus permits to those sectors and industries
that nd it more dicult. 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 sustain-
able development in the 1980s that they have
3
GREEN CAPITALISM
become mainstream. This represents a signicant
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 ts well with neoliberal economic thinking,
which places an emphasis on individual liberty,
minimal involvement of the state, and free mar-
kets as the most ecient 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 eorts to include
the value of natural capital into business activ-
ities and government policy. These depend
on (i) being able to calculate the value of
various ecosystem services and (ii) creating
mechanisms whereby those who benet from
ecosystem services pay those who maintain
those services. Calculating the economic value
of ecosystem services remains technically chal-
lenging. With regard to creating nancial ows
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 dened as volun-
tary transactions that involve the purchase of
a well-dened ecosystem service from a ser-
vice provider, who is paid if (and only if) the
provision of that ecosystem service is secured
(Wunder 2005). From a green capitalist perspec-
tive 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.
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 rst step toward
green capitalism. Once pollution has a cost
and natural capital has nancial value it is
expected that the logic of capitalism will drive
innovation and eciency to reduce costs and
maximize income. In the same way that the rst
industrial revolution harnessed machinery and
new forms of fossil fuel energy to dramatically
increase productivity, a green industrial revolu-
tion would harness technology to deliver radical
improvements in eciency.
Hawken, Lovins, and Lovins (1999) propose a
range of ways that a green industrial revolution
might occur. First, radical improvements in pro-
ductivity and eciency could allow societies to
produce more from fewer resources. Looking at
the automobile industry, for example, ultra-light
“hypercars” with fuel-ecient 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 pro-
cesses on ecosystem nutrient ows 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);
4
GREEN CAPITALISM
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 manu-
facturing processes around the life cycle of mate-
rials so that they are reused with minimum waste.
Green consumerism and ecolabeling
As well as changes in the production of con-
sumer goods, green capitalism also needs to be
able to change consumer behavior. Green con-
sumerism 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 con-
ditions 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 pur-
chased, owned, and consumed. Green capitalists
envisage a move away from economies based on
the ownership of goods to “service and ow”
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 prot motives can drive more
sustainable resource use patterns. While green
capitalist thinking has had considerable inuence
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 under-
lying 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) capi-
talism’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 prot 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 nineteenth-
century Britain, wealthy elites claimed that
peasant agricultural practices were backward and
unproductive and argued that land could be put
to more protable 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
rewood. The process was often violent with
peasants forcibly evicted. By seizing control over
the means of agricultural production and sub-
sistence, land enclosure forced peasants to seek
5
GREEN CAPITALISM
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 enclo-
sure 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 rst 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 shing, and
aquaculture have focused on modifying biolog-
ical processes to maximize yields and generate
economies of scale at the expense of biological
diversity and ecosystem function. Together with
the globalization of food systems they have cre-
ated 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-shing.
Their produce is then shipped halfway across
the world, using fossil fuels for refrigeration and
transport, to be consumed by auent Western
consumers. Industrial food systems and global
commodity chains mean that consumers have
very little knowledge or interest in the envi-
ronmental 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 envi-
ronmental 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 indi-
viduals and rms 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 impli-
cations for the way rms and individuals behave,
especially with regards to what they do with
prots and gains in productivity. In theory,
protscanbeusedinavarietyofways.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
6
GREEN CAPITALISM
green capitalist model for a “green” industrial
revolution.
Treadmill theory argues that in reality, cap-
italism’s competitive logic means that prots
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 envi-
ronmental 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 rms, capitalism drives ever-increasing
eorts 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 dene themselves
primarily by the goods that they purchase and
own, creates a signicant barrier for the imple-
mentation of a “service and ow” economy in
which individuals mostly rent goods.
“Green grabbing” and the neoliberalization
of environmentalism
Green capitalism’s emphasis on natural capi-
tal 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 mar-
ket 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 environ-
mental nongovernmental organizations (NGOs),
which play a key role in green capitalism by
providing expert knowledge about the func-
tioning 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 com-
modify 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 ecosys-
tem 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
nancial value suddenly created from ecosystem
services will lead to strong incentives for power-
ful interests to take control of these ecosystems.
Market-based schemes could see rural com-
munities 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 benet 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 crit-
icism. Scholars have drawn on the concept of
7
GREEN CAPITALISM
commodity fetishism to argue that green con-
sumerism 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 pow-
ers, 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 prot. This
means that their exchange values are prioritized
over their use values or the value of the labor that
went into creating them. Furthermore, individ-
uals in mass consumer societies tend to dene
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 pro-
duce 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 con-
ditions. In theory, solutions such as ecolabeling
help to defetishize commodities by providing
consumers with information about the envi-
ronmental conditions of production. However,
Green Marxists argue that by reducing complex
socioecological problems to simple labels and
brands, ecolabeling in fact fetishizes commodi-
ties 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
radical changes, especially in terms of how much
individuals consume.
SEE ALSO: Commodication of nature;
Conservation and capitalism; Ecological
modernization; Ecosystem services;
Environment and consumption; Environmental
certication and eco-labeling; Environmental
valuation; Environmentalism; Neoliberalism and
the environment; Property and environment;
Sustainable development
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