Capitalism and climate change

by | May 5, 2017 | Climate change and sustainable development | 0 comments

by Emily Agace

Society is intrinsically connected to climate change; our way of life contributes exponentially to changing ecological balances. At the centre of this problem are the use of fossil fuels and the consequences of releasing greenhouse gases into the atmosphere. It is widely accepted that oil and gas are exhausted sources of power, which are depleting faster than they are being discovered. With modern industrial societies depending on the established network of infrastructure surrounding oil and gas, the problem is not that we don’t have alternative energy resources; it’s the risk, complication and cost of the transition to different renewable energy sources. I will discuss how a sociological approach will benefit the transition from fossil fuels to renewable energy, and how community investment is a capitalist vision of private enterprise which will actually benefit the climate and not exacerbate the problem.

If we consider the fundamental process of business economics we can see that it is possible and would be much more sustainable to invest in renewable energies. The fundamental economics is that as we produce a product on a larger scale and invest more into that product, eventually we benefit from economies of scale. This will reduce the cost per unit of that product and thus in the long-term increase profits.

This is what occurred in history when oil and gas were first discovered, large businesses pumped huge amounts of money into infrastructure to produce and distribute oil and gas, like pipelines and oil field development. Eventually the costs were reduced and gains have since been exponential. However over the past few decades no oil company will deny that easy oil is gone (Guilford, Hall, Connor & Cleveland, 2011:1967), and that instead it has been harder and more complex to discover and produce oil at an affordable price. Worse yet a study on Energy Return on Investment (EROI) for discovering oil and gas, contends that EROI has fallen on a huge scale from 1200:1 in 1919 to 5:1 in 2007 in America (Guildford et al, 2011:1866). This means that discovering, producing and distributing oil is costing more than the payment received from producing oil and gas. This contributes to the argument that fossil fuels have lost the benefits they had once had because the resource is finite.

If we apply this economic concept to renewables, the same economic process of investment and reduction in costs over time, will result in profits, which are not finite, because the resource will never run out. The point I am trying to make is that we need to understand the sociological reasons behind the gridlock in politics and business and acknowledge that it isn’t only a political concern; it is societies as a whole. I understand that this economic situation is completely based on all things being equal, and is purely theoretical. There are hundreds of other factors, which a government must consider.

Subsidies to consumers of fossil fuels are not uncommon in industrialised countries and there is no evidence that the sheer subsidy volume is decreasing. The International Monetary Fund (IMF) in 2013 released a study, which estimated that direct subsidies were as much as $270 billion for oil and gas (Strand, Beers, 2013:1). This is a large portion of government spending being assigned to make fossil fuels affordable for consumers, and the result of this is that investments in clean energy are discouraged. In light of this information, it causes me to question why we have not moved those subsidies to make renewables desirable investments.

Using a sociological perspective of climate change, citizens are the key to the acceptance of renewable energy infrastructure projects. Using a case study from Germany by Salm and Hille (2016), there is a potential for community investment to push for decreasing dependence on fossil fuels. Large incumbent energy firms have been slow to take interest in renewable energy, and instead citizens in Germany now own nearly half of renewable energy generation capacity. This shows that society can play a very important role in financing the energy transition needed to avoid a climate disaster. The findings of this study concluded that half of 1,990 retail investors would be interested in making various values of investment into renewables. The implication of this study leads to my conclusion, that if we reduced the perceived risk of starting a renewable project through subsidies, then we could expand from the bottom up a network of renewable energy supply from society and ordinary citizens.


Guilford, C. M. Hall, A. S. C. O’Connor, P. Cleveland, J. C. (2011) ‘A New Long Term Assessment of Energy Return on Investment (EROI) for U.S Oil and Gas Discovery and Production’, Sustainability, Vol. 3, pp. 1866-1887.
Salm, S. Hille, L. S. Wüstenhagen, R. (2016) ‘What are Retail Investors’ Risk-Return Preferences Towards Renewable Energy Projects? A Choice Experiment in Germany’, Energy Policy, Vol. 97, pp. 310-320.
Strand, J. Beers, V. C. (2013) ‘Political Determinants of Fossil Fuel Pricing’, The World Bank, pp. 1-51.


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