The ferocious heat of Summer 2022 has shone a spotlight on the issue of global warming and is putting governments and companies under pressure to meet their climate pledges.  

A recent report by the IPCC confirms that we have the technology in place to reduce our impact significantly and limit warming if we act NOW. No one wants to suffer the effects of global warming. So, why have Governments failed to solve the problem? And why do corporations still consistently undershoot their carbon targets

These four economic and social concepts might help you to understand the fundamental barriers which stand in our path to solving this greatest challenge to humanity. 

1. Rivalry Economics 

Our capitalist system is founded on a rivalrous or zero-sum game dynamic. When one player wins, another one loses. An anti-rivalrous or positive-sum game is one where both players win. 

Rivalrous resources are ones which are valuable because they are scarce, for example, oil. Anti-rivalrous resources are valuable because they are abundant, for example, air. However, abundant resources, even life critical ones like air, become worthless when there is enough of it for everyone. 

Example: An oil company will pollute the air with dangerous emissions. Air is not scarce and protecting it does not give the company any economic advantage against its competitors.  

This leads to …

2. The Tragedy of the Commons 

This is a situation in which players with access to a public resource (the common) act in their own self-interest, with the consequence of depleting the resource for everyone else who uses it. 

Example: Let’s say the oil company pollutes the air of a local town and it becomes harmful to the health of local inhabitants. Without public transparency and accountability, e.g. regulation, the company is not incentivised to look after a ‘free’ resource. The oil company has depleted this common resource for the many without bearing the cost of this negative outcome

This can result in a… 

3. Multipolar trap 

A perverse incentive model where the individual advantage gained by a player, works directly against the well-being of everyone else. Players may have a “use it or lose it” mentality; if they’re aware of the inevitability that the resource will be depleted, in a rivalrous zero-sum environment they may think, “I better get my share while I still can.” 

Example: To keep their costs low and profits high and attract the investment dollars of shareholders, the oil company resorts to more air polluting practices which cost less than practices which do not pollute. This action increases negative consequences for the inhabitants of the town.

Ultimately, this leads us to…

4. Pareto Optimality 

Also described as a no-win situation. This describes a scenario where everyone is unhappy but no one player can change the status quo without making at least one player worse off. There is no incentive for any player to make a change. 

Example: The government imposes strict regulations against the oil industry to force all oil companies in that country to mitigate their carbon emissions. This levels the playing field between competing oil companies in that country. Everyone shares the ‘cost’ of the clean-up but also reaps the benefits. BUT if no other governments do that same, or they do but one government refuses, oil companies which are subject to emission rules are disadvantaged against those who are not, AND, the resource remains unprotected anyway. At the same time doing nothing is not an option. Everyone loses as the effects of global warming ultimately impacts everyone.  

The systemic failures outlined above have affected our ability to address climate change on a primary level. We already have plenty of solutions. However, we need to work on our societal and economic values before these solutions can be effectively applied. See our post on  Regenerative Finance which describes how we can do this.

 

“Make the world work, for 100% of humanity, in the shortest possible time, through spontaneous cooperation, without ecological offense or the disadvantage of anyone.” – Buckminster Fuller 1961

As an NGO dedicated to supporting social and environmental good we believe that through education such as this article, we can help to create a positive discourse on approaching solutions differently. We welcome your thoughts and comments.

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