Editorial: Climate capitalism

This is a guest editorial by C&EN business reporter Craig Bettenhausen.

Around this time last year, I wrote a guest editorial reviewing two recent books about concrete steps for fighting climate change. Shortly after that issue of C&EN came out, publishing agents began offering me review copies of books on a wide range of scientific and business topics.

C&EN doesn’t have a regular column for book reviews, so I decline or ignore most of them. If you like book reviews, please let us know. Our new editor in chief, Nick Ishmael-Perkins, starts soon, so it’s a good time for reader input.

One day, I checked my mail to find that a publisher had proactively sent me a book. Now, I don’t want a deluge of hardcovers to show up on my doorstep, but I did in fact read Pricing the Priceless, and author Paula DiPerna has a lot of interesting things to say.

DiPerna’s book is about financial innovations aimed at reducing climate change and other environmental tragedies. Over 246 pages, the book describes monetary tools that DiPerna says can tweak the economy to mitigate and roll back climate change instead of incentivizing environmental exploitation, as today’s system does.

That sounds dry, but the argument is made vibrant in a series of case studies. One example is a water-saving scheme called Kilimo, which operates primarily in Latin America. Large-scale water users such as a Coca-Cola bottling plant pay into the system, and nearby small farmers can access the funds to install water-efficient irrigation technology.

Farmers also get payments from the system for verifiable water-use reductions—about $2 million across the network in 2023, DiPerna says. A less-depleted aquifer reduces water costs for everyone, and Coca-Cola can claim its expenditures on the system toward its sustainability targets.

Disaster-resilience bonds are another tool described in the book. DiPerna tells the story of California’s Yuba Water Agency, which backs a bond called Yuba I.

The utility’s irrigation system and hydroelectric assets depend largely on water that flows from the Tahoe National Forest. When that forest burns, the watershed loses capacity, and everything downstream gets less water. The state and federal forest services don’t have the budget to implement the forest management methods needed to reduce fires’ severity and impact. The bond provides money for the utility and its partners to fund such projects, which pay off in the form of more water flowing through the utility’s dams and distribution networks.

If environment-backed financial instruments feel illusory, that’s simply because they’re new and we’re still feeling out the regulations and methodologies that assign and track their value and ownership.

In her introduction, DiPerna points out that society has a long history of abruptly assigning economic value to things and then building trade infrastructure around them. She mentions social media influencers, which made me think of Donald J. Trump. Much of his net worth is in the value of his personal brand. It is in many ways a figment, but he has leased it out, borrowed against it to build real estate, and claimed it on his taxes. That hasn’t always been possible.

Structures that imbue environmental assets with economic value are no different, DiPerna argues. A theme throughout the book is that a capitalist economy is fundamentally incomplete if it includes free access to exploit any public good. Our system is failing to respond to environmental crises because it assigns a value of zero to clean water, biodiversity, and the atmosphere’s capacity to hold carbon dioxide.

C&EN focuses on chemistry, not economics. But chemical innovation is far from free. Corporate R&D funds can develop technology with the power to ease pressure on the climate, as our business group explores starting on page 18. The solutions DiPerna outlines—which also include insurance programs, cap-and-trade systems, and raw material export controls—expand the financial toolbox.

Views expressed on this page are those of the author and not necessarily those of ACS.