Breakthrough: The Rise of the Eco-Capitalist

By Breakthrough Generation Fellow Genevieve Bennett

I read a very interesting article this morning by Anya Kamenetz at Fast Company on the rise of the young eco-capitalist. Savvy young environmentalists these days are apparently opting not to be forest rangers but rather saving the world through hedge funds, private equity, and consulting.

The global carbon-credit market is taking off, and to a great extent it's being driven by a new generation - a new breed of socially-conscious Ivy-Leaguer looking to leverage the private sector to address the global climate challenge. "The work," writes Kamenetz, "is prestigious, it's trendy, and it's surprisingly well paid." As one young woman interviewed for the piece notes, "I'm making five times what I ever thought I'd be making as a tropical forester." In the U.S., the carbon-credit market doubled in value in 2005, doubled again in 2006, and tripled in 2007. It's projected to reach $1 trillion in value by 2020.

Given then, the incredible momentum of the carbon-credit market model, and the incredible promise of the people driving it, "It should be cause for concern that not a single person interviewed for this article, on either the investment or the carbon-project side, would assert with confidence that the rules currently being written for a U.S. cap-and-trade market will actually reduce overall carbon emissions."

As Camille Rebelo, a recent Yale forestry grad, explains, carbon forestry is a good example of the limits of the market in acheiving socially desirable ends: "People are suddenly starting to see that carbon forestry is not the silver bullet. There's this big idea that it's going to save the world's forests, and I don't think it is. Carbon credits are one revenue stream among many. It's never going to counteract logging or oil-palm conversion."

There has been a notable (and interesting) shift among the environmentalist crowd recently - though it's hard to place my finger on just when - to a very firm faith in the market. Set a cap on carbon, let firms trade emissions credits, and your machine is wound up and ready to hum along until we hit 350 ppm. I won't go into the anticipated benefits of a cap-and-trade model here - you should check out Max Epstein's guest post on the topic, and Zach Arnold's response, for that. The one point I want to stress is that the momentum of the carbon-credit model can belie its actual appropriateness as the core of our solution. Just because a change is finally taking place at a large scale doesn't mean that it's the change we've all been waiting for.

Moreover, a market is only as good as the political structure that creates it. It's a means, not an end in itself. So how do we want to leverage the power of the invisible hand?

When Schwarzenegger was asked to speak at the Yale Conference of Governors on Climate Change in April, the occasion was billed as a "celebration of state environmental leadership." In the end, though, it became as much an indictment of the federal government's failure to act on global warming. For all of Schwarzenegger's free-market nods, California's environmental success has hinged on tough, activist regulations that forced businesses to adapt -- and not the messy, self-interested dynamics of a market. Markets may be the most powerful forces in our society, but they are hard to control. The long-term impact of a market in carbon is impossible to predict.

A final point: I do think there's a third piece of the puzzle which Kamenetz doesn't note, outside of activist regulations or the laissez-faire route. Governments can invest in climate change mitigation schemes too. In fact, the U.S. government can absorb more risk and think more long-term than your average private firm concerned with its quarterly numbers. Public investment can fill in where the private sector can't or won't or shouldn't go - a fact which is central to dealing with the climate/energy crisis, but seems to have gotten trampled in the rush to embrace the market (which, alas, works perfectly for approximately the first week of your Econ 101 class). A carbon-credit model is attractive for its efficiency and the speed with which we can get it going, but I do hope time is taken to think about its shortcomings, and to find ways to address these.

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