Figure 7.5 Turning energy investments around from conventional fossils to the solutions in the Giant Leap scenario leads to higher energy cost in the first decades compared to the Too Little Too Late scenario, but dramatically lower cost in the long run. Units: billion USD, at PPP-2017 constant prices. Source: E4A-global-220501.

  A second barrier are the enormous subsidies received by the fossil fuel industry, and their lack of accountability for the damage caused. There is little logic to keep most subsidies (some though are designed to help people on low incomes access energy, and these must be redesigned).

  A third barrier has been to implement a fair price on carbon emissions. For decades, climate and energy politics have been dominated by the idea of pricing carbon emissions. Carbon pricing provides an elegant response to a complex problem: increase the cost of releasing carbon into the atmosphere and let energy markets take care of the rest. While the policy may look good on paper from conventional economic thinking, in practice it has proven weak in the real world. Since the beginning of most carbon trading schemes, the annual supply of pollution permits has most of the time been consistently higher than overall pollution. And after thirty years of policy on the issue, only 20% of global greenhouse gas emissions were covered by some carbon pricing initiatives in 2020. But of these 20%, less than 5% (meaning less than 1% of total global emissions) are currently priced at a level consistent with achieving the temperature goals of the Paris Agreement.15 New thinking is needed to price carbon fairly.

  Pricing carbon is linked to a fourth barrier. In many democracies, politicians with ambitious energy agendas have so far struggled to reach power at the national level (though it is often a different story at the state and city levels). This is despite a plethora of surveys indicating public support for government action to deal with the crisis. The political problems are, of course, that citizens in general oppose more expensive gas or electricity bills, and that energy poverty is a real concern in most countries. Thus, there have been severe political constraints on climate action. Discontent is often rooted not in doubts about the need for climate action but in a distaste for solutions that put too much of the burden on the lower-income groups. Citizens distrust politicians, bureaucrats, and elites and feel that the ruling class treats them with contempt.16 From the French Yellow Vests to demonstrations in Iran, Turkey, Nigeria, Mexico, Jordan, or Kazakhstan, the opposition has been predictable. In a nutshell, “Axe the tax!” slogans have worked wonders for politicians.

  This is why a fee and dividend approach, mentioned in previous chapters, merits further discussion. In the next chapter, we will discuss the full concept of a fee and dividend and how it applies to all global commons—that is, all the natural resources that are at risk of destabilizing as a result of human pressures. But for now, let’s stick with the atmosphere and carbon. We know that the rich consume most of everything. Charging a fee for carbon emissions and then distributing all fees back to every citizen equally is fair and reflects the principle that we are all stewards of the atmospheric global commons. In addition, it has the effect of reducing inequality because heavy users of carbon must pay more. And those that use little receive compensation. A surprisingly large number of economists agree it is a good idea. According to the Wall Street Journal, in 2019, 3,500 economists endorsed a carbon fee and dividend approach to pricing carbon as “the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.”17 The fee and dividend approach also keeps the revenue raised out of the general tax fund. The fees are only for redistribution, not for diverting to a thousand other policy objectives because the heart of the matter is trust. Clarity is critical. It is important that people see where the money is going and that people benefit personally and visibly from changing their behavior.

  Scaling all solutions until we reach net zero by 2050 is not only extremely ambitious but also impossible to accomplish unless we can overcome the barriers mentioned above: the dramatic inequalities in footprints and energy access between high-and low-income countries on the one hand and within-country political constraints on the other.

  This is why the practical and technical solutions above need coordination by trusted and active governments to succeed with reducing both emissions and inequalities at the same time. This means recognizing and redressing existing global inequalities. The world’s largest economies—the US, EU, and China—must ramp up (at least triple) annual domestic investments in renewable capacity at high speed. Together these three emit roughly half of all greenhouse gas emissions from their own territories. In addition, to speed the turnaround in low-income countries where most of the world lives, there is the need to ramp up action in three key international areas:

  Redress carbon footprint inequalities by a massive increase in climate finance.

  New financial architecture for debt resolution and to incentivize green investments.

  Reforms of Special Drawing Rights (SDRs) and trade rules to enable green economic trajectories.

  Expanding on the first point, a massive injection of climate finance is urgently required. Obviously, there is no excuse for the rich countries to renege on their promise from 2012 of $100 billion per year in climate finance. They have consistently underdelivered, and the funds should be paid in full covering all the shortfall. One immediate and costless means of providing this is to expand SDRs, the international liquidity created by the International Monetary Fund. A much larger issuance of at least $2 to $3 trillion per year is needed, and is easily achievable, earmarked for investments in clean energy systems. In addition, there is a strong case for high-income nations to recycle their own allocations of SDRs (which they are unlikely to use anyway) to regional multilateral development banks for such investment.18

  Second, create an international framework for sovereign debt resolution that dramatically reduces the unpayable debt burdens in low-income (<$10,000 per person per year) countries. This restructuring mechanism should necessarily include not just bilateral and multilateral lenders but also private lenders by mandatory regulatory and legal changes. In addition, there must be stricter regulation on private financial markets to prevent any more “brown” and carbon-intensive investments by private lenders and bond holders, and to incentivize green investment.

  Third, the concentration of the necessary knowledge and technology in the global North companies is deeply dangerous for all. It prevents the dissemination of critical clean technologies. The global system of intellectual property rights put in place by the World Trade Organization must end for critical technologies that are essential for leapfrogging toward a green transition in low-income countries. Far from encouraging more invention and innovation, it has led to monopolies of knowledge and “rent seeking” at the cost of the public good. It is preventing the possibility of ensuring that all countries can access the crucial technologies, from vaccines to solar. When low-income countries seek to encourage renewables through subsidies to their own producers, they quickly face cases in the WTO. Avoiding the systematic destruction of Earth’s life support system should perhaps not depend on the whims and profit of a few large companies that control knowledge, particularly when that knowledge was largely created by public research.

  Figure 7.6 Large differences in regional energy footprints: showing the power consumption and CO2 emissions per person for 10 regions in 2020, 2050 in Too Little Too Late and 2050 in Giant Leap. Source: E4A -regional -220427.

  Conclusions

  The collapse of carbon-intensive industries in energy, transport, and food will end the huge demand for global logistics and transport, free up billions of hectares of land, allow oceans to regenerate, and eliminate air pollution. With the right choices, the new energy, transport, and food system disruptions will lead to a net reduction in the materials intensity of human civilization. And provide sufficient energy to the poor.

  While the ultimate demise of the age of fossil fuels is unstoppable, the survival of human civilization in the face of dangerous climate disruptions is not. It depends entirely on the societal choices we make today. Whatever specific tools nations choose, they should aim for those that merge systemic productivity with social and environmental justice. The right choices now could open up an unprecedented era of clean energy abundance by the late 2030s. The new possibilities could empower humanity to solve some of its most intractable problems: in addition to energy scarcity and volatility, the persistence of food insecurity and malnutrition, along with the entrenchment of global poverty and widening inequalities.

  8 From “Winner Take All” Capitalism to Earth4All Economies

  A New Economic Operating System

  So there we have it: five extraordinary turnarounds that can transport us into the next decades of the twenty-first century far more safely and comfortably than our current course. If you feel the ambitions are daunting, you are right. If you suspect we could never accomplish them, think again. Getting humanity back within a safe operating space in this century may be complex and monumental, but like many other complex and monumental undertakings, it can be set in motion by a handful of well-chosen levers, by groups of committed people.

  Those levers are in plain sight and waiting to be pulled. And they all reside in one sector: the economy. You may have noticed them embedded in all five turnarounds discussed in the preceding chapters. Key among them:

  Creation of Citizens Funds to distribute the wealth of the global commons fairly to all citizens.

  Government intervention (subsidies, incentives, and regulations) to accelerate the turnarounds.

  Transformation of the international financial system to facilitate rapid poverty alleviation in Most of the World.

  De-risking investments in low-income countries and cancel debt.

  Investment in efficient, regenerative food and renewable energy systems.

  Traditional economists will take pause here, rightly recognizing these shifts as catalysts for massive economic transformation. Some will also, undoubtedly, fear these shifts will lead to an abrupt end of economic growth and, then, to economic collapse. On these counts, though, they would be wrong. To understand why, it will help to understand a little bit about leverage points and why they often surprise us.

  Donella Meadows, the lead author of The Limits of Growth, famously described leverage points as “places within a complex system (a corporation, an economy, a living body, a city, an ecosystem) where a small shift in one thing can produce big changes in everything.” Seems simple enough, but she also noted another reality: While people often intuitively know where leverage points lie, they tend to push them in the wrong direction, creating a web of unintended consequences. That is, said Meadows, exactly what has happened with growth: “The world’s leaders are correctly fixated on economic growth as the answer to virtually all problems, but they’re pushing with all their might in the wrong direction.”1

  Hence, we end up with global economic policy that was crafted to alleviate poverty but many decades later has morphed into a poverty trap, economically enslaving whole nations, destabilizing democracies, and “crowdfunding” environmental catastrophe. We have watched the purpose of our economy morph from valuing our future to discounting it entirely.

  No surprise, then, that many increasingly angry citizens have intuited that conventional economic thinking is no longer delivering economic security, and agency, for them or their families. And no surprise that we need to upend that conventional economic thinking. But does this necessarily mean an abrupt end to growth or the risk of economic collapse? No and no.

  The energy transformation alone will drive economic growth. How can it not? It is nothing less than a complete reorganization of the foundation of the economic system. It will create economic optimism, investment opportunities, and jobs in all sectors. And if the transformation is managed fairly, where everyone is granted a stake in the future, this will help ensure the necessary political stability to avert the risk of economic collapse. That said, we should be largely agnostic about growth—it depends on what is growing. For sure, economies need to shrink their material footprints by shifting to circular models. And ultimately, the economic focus has to shift to growth in wellbeing. This is beginning to happen. Some local and national governments are experimenting with new economic models. We’ve already mentioned the Wellbeing Alliance of New Zealand, Finland, Iceland, Scotland, and Wales, but also cities like Amsterdam, Brussels and Copenhagen are actively challenging the old values of their economies and finding ways to turn them around.

  But is the cost of avoiding catastrophes prohibitively expensive? Perhaps this is the reason for the hesitancy? Well, first of all, it is not a cost. It is an investment in the future. We estimate the investment needed is roughly 2% to 4% of global income per year. The largest investments are needed in sustainable energy and food security. This estimate aligns well with other studies.2 Indeed, the writer and academic Yuval Noah Harari and his team have pored over various economic and climate reports and found that estimates for the energy turnaround converged around 2% to 3% of annual global GDP. As a comparison, governments directed the equivalent of over 10% of global output to counter the shock of the pandemic.

  If the benefits are so great and the investments so small, relatively, what is holding us back? Ultimately, our mindset; the all-pervasive winner-takes-all worldview.

  The Rise of Rentier Capitalism

  Our economy has undergone massive transformations before, particularly since World War II. What came with that transformation was a gradual shift in mindset—one that led us away from economies organized, however imperfectly, to serve the public good and, since 1980, toward a dominant economy that served a small set of global elites. The wealth of this “rentier” class grows from the ownership of financial assets. In systems terms, a vicious cycle kicked in: As assets begat more assets, they concentrated in fewer and fewer hands. We can see how this shift unfolded through three economic narratives—specifically the narratives of wealthy nations, because it is their metamorphosis that dramatically changed the economic landscape worldwide.

  Narrative one was dominant in the West during the postwar era (1945–1975). Economies were more national than global. Decision-making was a three-way split between business, organized labor, and government. The banking and finance sector served a secondary role; it was a support for the overall economy, not its driver. Key aims included full employment that would then support social safety nets. Infrastructure was supplied by the government, and taxation was on profits, income, and consumption. This economic system drove stability, prosperity, and greater equality in some parts of the world. Some challenges emerged over time: inflation, competition from new industrial nations, labor unrest.

  What followed? Narrative two, the market liberalization era (circa 1980–2008). Dominant Western nations embraced globalization in return for efficiency. Government functions were increasingly privatized. The power of government and organized labor weakened while the power of business expanded. The finance sector rose to dominate the economy, becoming highly deregulated, expanding globally. Government priorities shifted at home to helping the market work well, subduing inflation, and limiting their own direct economic activity. Taxes on profits and capital were lowered. New problems emerged: expanded private debt, weakened infrastructure, short-term financial decision-making, and rising inequality.

  By the time of the 2008 financial crash, it was clear that the second narrative had been tested as a social contract between citizens and governments and failed. What was revealed in that moment of crisis was the identity of most governments’ first priority: to protect asset prices and the financial system. Emphasis turned to the supply of new liquidity, the forcing down of interest rates, and the purchase of shaky assets. Even worse, the costs of the bailout were transferred to the public purse.

  After 2008, attempts were made to reboot the second narrative using debt while imposing austerity on the public sector. Ongoing structural economic forces accelerated inequality, expanded the numbers of the economically insecure, shrank the middle classes, and undermined growth. Perhaps it is no wonder that by 2015/16 different shades of populism were rapidly gaining ground, particularly in the English-speaking world. Yet come the COVID-19 pandemic, trillions of new dollars flowed into the financial system as a priority. Rinse and repeat.

  Narrative three, then, has been the steady rise of a parasitic rentier economy in the name of free markets. Gone is the economy most people think we have—one organized around production, consumption, and exchange. Money is made on money and the shifting value of various assets from stocks and bonds to real estate to intellectual property and crypto. The manipulation of these financial assets now dominates economic decision-making across the globe.

  This “unsustainable monopoly game,” says Dr. Mamphela Ramphele, “needs to be unmasked for what it is—a self-serving platform for those who have gamed the system as both players and referees.”3

  Indeed, the shift to rentier capitalism has cost billions of people opportunity, security, and wellbeing. The toll it takes on social and environmental justice is becoming ever clearer. As it does, calls for a new economic logic have grown louder.

  Rethinking the Commons in the Anthropocene

  Trace economies back further, or look more deeply in the modern world for alternative models, and you will find an economic organizing tool that is the polar opposite from today’s rentier capitalism. It rests on the original narrative—one that focuses on securing a people’s wellbeing by securing their shared commons.

  A simple example. Villagers far up in Nepal’s valleys used to help maintain canals downstream while villagers downstream helped maintain dams upstream. In this way they all got access to a common resource—water. They got a dividend from the systemic benefits, and they pooled efforts into maintaining these cultural and natural assets.