05 August 2013

Neoliberalism and the “carbon bubble”

In an earlier post I argued that overcoming neoliberalism is the key to saving humanity from climate apocalypse, based on the thought that the necessary political actions (examples: “heavy-handed interventions by the state into the economy, including a massive expansion of the public sector, and coercive intervention into the financial industry, agricultural industry, and manufacturing industry”) are incompatible with neoliberalism. In this post I want to address another consideration that leads to the same conclusion: the carbon bubble.

The math behind the notion of the carbon bubble is probably most familiar to climate activists from an article published a year ago by Bill McKibben in Rolling Stone entitled “Global Warming’s Terrifying New Math”. This article is a call to arms in which he declares that the the fossil fuel industry “is Public Enemy Number One to the survival of our planetary civilization”, which means that the task of the climate movement must be to destroy the industry’s political power. The piece went viral, and subsequently led to his Do the Math tour and 350.org’s “Fossil Free” divestment campaign.

Here is McKibben’s story: We need to keep warming under 2C degrees. This means the fossil fuel industry will have to leave roughly 80 percent of existing reserves in the ground. But this is equivalent to “$20 trillion in assets” (give or take) which the industry would have to write off. That would be devastating to the industry, which is therefore using its great political power, gained through the enormous sums it spends on lobbying and campaign contributions, to prevent climate action. This political influence is uniquely responsible for stopping political leaders from saving the climate (and humanity with it). So the enemy is the fossil fuel industry and its lobbying power, and climate strategy must focus on breaking the industry’s hold over politics.

This story is easy enough to understand, and is in line with the popular thought that “money in politics” is the most fundamental problem we face. But if this were right, then climate campaigners ought to have made much more progress with Obama and the Democratic Party than they actually have. In the 2012 election, the fossil fuel industry largely turned its back on Obama, contributing $13 million for Romney and the RNC compared to under a million for Obama and the DNC (New York Times). Why, then, does Obama, who clearly knows enough about the need for climate action, continue to push his “all of the above” energy strategy which includes development of “unconventional” fossil fuels, including fracking, deep sea drilling, and tarsands mining (while Obama is stalling on Keystone XL, mining in Utah was given the green light), thereby flaunting the demands of his environmentalist base, and all for the sake of an industry that bet against him in the elections? This calls for an explanation which McKibben’s analysis does not provide.

I think part of the answer lies in the “carbon bubble”, a term which McKibben applies to the $20 trillion worth of carbon reserves which must be forsaken. He notes that this constitutes a carbon bubble which “makes the housing bubble look small by comparison”. But let’s think through that analogy just a bit more. When the housing bubble burst, the damage wasn’t limited to the real estate industry. The entire global economy crashed and fell into an ongoing state of crisis. Similarly, if the carbon bubble should burst in the same way as the housing bubble (as it would if the US government were to suddenly signal a willingness to keep those $20 trillion of carbon in the ground), that would threaten more than just the fossil fuel industry. As financial and economic analysts have noted, the abrupt destruction of those trillions in assets would send shock waves through the financial system and beyond, leading to another “major economic crisis”.

If dealing with climate change means triggering an economic crisis, then we are up against the interests of the entire capitalist economy, and not just the fossil fuel industry. And while I agree with McKibben that a sufficiently powerful climate movement could drive a wedge between the state and the lobbying power of the fossil  fuel industry, it is simply not possible to drive a wedge between the state and the entire economy. The overriding purpose of the state under capitalism is to ensure the health of the capitalist economy as a whole. If real climate action were a guarantee of renewed economic crisis, then the chances of achieving it under capitalism would be nil.

At this point it may seem that we face a stark choice: climate apocalypse, or the end of capitalism. But the deadline for climate action will pass us by long before any minimally plausible strategy for overcoming capitalism could come to fruition. Indeed, unless we develop other alternatives, the most likely way capitalism is going to end is through the destruction of the global economy by climate change. This would unfortunately also involve the destruction of most of humanity. If overcoming capitalism were the only route to climate survival, then we would be left with inescapable political despair.

So we are left with the task of dealing with climate change under capitalism. This requires a strategy for deflating the carbon bubble without violently popping it, which would allow a transition to a green economy without thereby throwing the economy into crisis. The task of executing this strategy must fall to the state.

Some serious thought on this topic can already be seen in some of the less hidebound regions of the policy world. For example, via the New America Foundation, here is one attempt to face the economic danger posed by the multitrillion dollar carbon bubble head on:
The resulting shock to hydrocarbon energy companies, which make up roughly 11 percent of the S&P 500 index, would pose a systemic risk to domestic and global markets. ...  
It is imperative, therefore, for the United States to convene domestic and global stakeholders to manage this market transition [to a green economy] to avoid such an unacceptable disruption in global markets, index funds, and Americans’ retirement security. Washington should work with industry, scientific leaders, and other key stakeholders to negotiate a framework and predictable timetable to minimize the downside risk, to find non-emitting uses for hydrocarbons, and to turn the transition into another driver of innovation while redirecting investment flows into other market segments. 
When these suggestions are held up against the status quo of current climate policy, some key elements stand out: a serious industrial policy; the large-scale redirection of capital coordinated by the state; a reconfiguration of the fossil fuel industry coordinated by the state. These measures would have the effect of providing a gentle landing to the fossil fuel industry, and carefully transitioning capital out of the carbon bubble and into stable (and climate-friendly) investments.

However, here we are once again confronted with the need for government intervention into private industry and the marketplace which would (as I wrote in that earlier post) “shock the neoliberal conscience”. The neoliberal mind (for example, Obama’s mind) has a strong commitment to deregulation, and can hardly contemplate being so bold as to impose the necessary strategies on private industry and investors. This commitment has only intensified as the crisis has dragged on. But this is not an ahistorical feature of the capitalist state (for example). In our quest to avoid climate apocalypse, then, the real enemy is not the fossil fuel industry (not systemic enough), nor capitalism in general (not specific enough). Rather, as I argued in that earlier post, the real enemy is neoliberalism. Our only realistic hope is to force its transformation into a new kind of capitalism in which the state has a renewed capacity to intervene in the market, to discipline industry and investors and to direct their activities. Only then will real climate action become possible.

Now, although I’ve been critiquing McKibben’s analysis here, that should not be construed as a rejection of his leadership of climate activists and organizers. The critique is on the level of strategy, and not on the level of tactics or campaigns. Those working to curtail the fossil fuel industry, including McKibben and his followers, should continue to do so as they are able. And they should certainly continue to develop new leaders willing to engage in a serious political struggle against the dire threat of climate change. But ultimately all of this will need to be placed in the context of a broader strategy that takes on the real enemy: neoliberalism. It is our task to develop that strategy and build a movement around it.


  1. I think this is a great text, because it asks a basic question which practically none of the existing alternative movements can deal with, let alone the mainstream. The question is, how to achieve a form of state-led industrial planning that does not seek to expand total industrial output, but instead to shrink, reorient and transform it? In other words, this means something like Fordism in reverse. A similar kind of unified planning is required, but it must be deployed to curb the pattern of growth that has been typical of military-industrial-consumer societies. This is not to say there can be no new mobilization of human effort, no growth of productivity, but it has to be on other bases and with other results than capitalism has ever been able to provide so far.

    Interestingly, the only theorist I know who is proposing a comprehensive plan - namely Lester Brown - believes that only global emergencies will provide the political force required to make such a change. He thinks that a transformation can only be achieved through a mobilization comparable to what the US did during WWII. Recently he has been suggesting that a likely cause will be food crises, due notably to the draining of the world's non-renewable aquifers in addition to droughts. I am very curious what you think about his work. The most of important of his bookd can be downloaded here:


    For the role of the state in WWII, and how Brown thinks this could be repeated under new ecological urgencies, you can also watch this video:


    Go straight to 1:11:45 for that particular question.

    I am really curious what you think about it.

  2. I think that the notion of a WWII industrial mobilization towards a green economy is right on, and I referred to that idea in the previous post. But unless we overcome neoliberalism first, no crisis, and certainly not a food and water crisis, is going to bring about such a mobilization. As Brown notes, the WWII mobilization involved FDR banning the manufacture of new private automobiles, but no neoliberal is going to bring such coercive power down on private industry, even if an actual war broke out. And war is in fact the only possible response to a food and water crisis (and this time it probably would be a war to end all wars, and not in a good way), unless we first overcome nationalism, which will require a global left.

    And "shrinking total industrial output" is not really part of the scenario I'm trying to sketch out. Rapidly retooling the entire global economy will, in the short term, require an increase in industrial activity (and this will probably be an essential source of political support for the transition, in the form of promises of "green jobs").

  3. Yes, I get you on the last point, I think the only "shrinkage" would be in some of the industrial concentration, because ecologically oriented development is by nature more dispersed. But still, technology will go on developing, people will work, your point is well taken.

    As for the political part, I don't know what kind of political forces Brown mobilizes if any - and that would be good to find out - but I suspect it is as abundantly clear to him as it is to us that neoliberalism will not allow these kinds of changes. And I think the reason he has started exploring early collapse scenarios - like major famines - is because he's not convinced that any left or ecological political movement is going to sweep neoliberalism away. I must say, after the past 5 years I am not convinced either. The class structure in the developed world works just about perfectly to contain and neutralize the pressures for change. This is why it actually makes sense to explore, and then prepare for, scenarios in which widespread perception of an existential threat could provoke a massive change in consciousness and a massive mobilization.

    The dangers loom very large. For example, for multiple reasons that mostly have to do with the US - unequal trade under NAFTA, destruction of the local agricultural economy, the gigantic market for illegal drugs up north, the ready availability of guns and money-laundering opportunities - our closest neighbor, Mexico, is on the edge of ungovernability. This could provoke major movements of population, as climate change is generally expected to do everywhere. So far, the US reaction is nationalist and racist - look what's going on right now around the so-called immigration reform bill, which would militarize the border to an unprecedented degree if it could ever overcome the racist opposition it faces both in Congress and in the civil societies of many southern states. This does not bode well for the future. What we need is not an enemy, as in WWII. We need a positive reaction to what is perceived as a more-or-less self-generated existential threat. Brown is the only one I know who has realized this, and has taken at least some political steps in preparation. I would be glad to hear about other theorists with such ideas, and in general, I'm totally interested what other people think about all this.

  4. No movement has tried to do away with neoliberalism, so the fact that no one has succeeded is not surprising. Seriously, if a food and water crisis is our only hope for a movement to overcome neoliberalism, we are utterly doomed.

  5. Neoliberal subjectivity is one of intense competition. In the event of a serious resource crisis, there will indeed be "a massive change in consciousness and a massive mobilization": market competition over dwindling resources will give way to protectionism (as countries that can't afford to compete in the global market try to hold on to what they alreaady have), then to war. That is how neoliberalism will end if we don't come up with a different solution first.

  6. I agree with Shu Yundo and I would extend that judgment to what I see as a far more likely scenario for the end of neoliberalism—not an environmental deus ex machina but neoliberalism's own economic contradictions destroying it. A careful look at the political economy of the last five years shows the global economy leaping from one crisis to the next, barely escaping complete disaster each time. (I've chronicled many of these since 2011: here, here, here, here, here, here.)

    Neoliberalism was not restored after the crisis, it has been artificially propped up by state intervention, and there's no reason to believe the theoretically vacant economic analysts who announce the recovery every time increasing volatility expresses itself as an uptick in some indicator or other. It seems clear that the slow-motion degradation of neoliberalism as an economic system is grinding down its legitimacy as an ideological system; the class structure may contain pressures for change, but it certainly is not neutralizing them. They're building up alongside the economic dysfunctions, and one or the other is going to blow up sooner or later. If there isn't a progressive path for discontent to surge into (and right now there isn't), then Shu Yundo's scenario of global conflict becomes likely.

  7. Should there be another persuasive post you can share next time, I’ll be surely waiting for it.
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