Force Capitalism to Stop Climate Change
Central banks should stop pretending to be neutral about saving the planet
It is clear to everyone that decarbonization is happening far too slowly.
Even the best-performing high-income countries are not reducing their emissions fast enough to achieve the Paris Agreement objectives
—not even close.
And one big reason is that even though
renewables are now routinely #cheaper than fossil fuels,
they are still not nearly as #profitable.
Returns on fossil fuel investments are around three times higher than returns on renewables,
largely because
fossil fuels are more conducive to #monopoly power while
the renewable sector is highly #competitive.
️
Commercial banks allocate capital on the basis of #profitability, not social and #ecological #objectives.
The result is that we get massive investment in sectors such as SUVs, fast fashion, industrial animal farming, private jets, and advertising
—even though we know they are ecologically destructive and must be reduced
—but we suffer critical underinvestment in areas that are clearly necessary for the ecological transition,
such as public transit, agroecology, or building retrofits, because they tend to be less profitable.
Remarkably, there is currently
no plan for phasing down fossil fuel investments.
This is a structural problem, and we need to face up to it.
Waiting for capital to speed up decarbonization in line with the Paris Agreement is a strategy that’s doomed to fail.
https://foreignpolicy.com/2024/08/16/climate-change-central-banks-credit-guidance/