Carbon credits, Emissions Trading Schemes, CO2 pricing — market-based solutions and pricing mechanisms have been the primary tools used to combat the effects of climate change. By pricing fossil fuel use to include all the externalities — that is all the social costs it comes with — then it would be clear that fossil fuels’ real price tag is too high, become non-competitive on the market, and eventually disappear.

But there is often the worry that raising energy prices would be politically challenging. Fossil subsidies can help soften the blow. This however leaves us on a self-defeating path with no way out. If the logic is that by raising fossil fuels’ price they would become expensive and unattractive, the effect is immediately negated with subsidies. But in a climate strategy where the key to ending fossil fuel use is by phasing it out with its “true” price, the price of fossil fuel cannot be lowered because the systemic damage caused by its use incurs a high cost. 

Pricing externalities, especially when they involve assigning value to human lives, can involve highly political dimensions. For example, the IMF prices mortality risk according to a country’s income, with an assumed elasticity that declines as income rises. Put in lay terms, people in poor countries are willing to die for less money than those in rich countries. But these communities do not value their lives any less than those in Europe, and valuations based on their current poverty perpetuate the long history of inequality imposed upon them.This approach overlooks the historic and ongoing injustices faced by many countries in the Global South, particularly those trapped in cycles of debt and disadvantage. Prices aren’t neutral. They come with long histories of negotiations and power.

How much is our future worth?

Tax revenues from higher fossil fuel prices can theoretically offset some of the damage; we should however be sensitive to the limitations. One should not confuse compensation with loss. If we treat the two as synonymous, with price increases to pay for damage, including loss of life, are we not, in effect, accepting economic complicity in this harm?

How much money a human life is worth can never be adequately addressed by pricing mechanisms. What matters is preventing the damage and loss of life in the first place. And we are currently caught in an ideology of price that freezes action while the consequences of inaction grow rapidly. Homes, livelihoods, and lives are increasingly at risk. Governments are not businesses—they are policymakers with a responsibility to use tools beyond pricing mechanisms to shape the future of society.

Relying solely on price mechanisms overlooks the fact that governments have other tools. For instance, consider the global ban on DDT for agricultural use in 2001—a harmful pesticide once widely used but prohibited through decisive regulation. Similarly, public schools ensure that everyone can access their right to education, regardless of economic background. In the same way, fossil fuel use can be restricted through regulations, such as the fossil fuel non-proliferation treaty, while public investments in clean energy can make it widely available to households, ensuring affordability and equitable access across all income levels.

Taking collective ownership of the green transition

Over-reliance on pricing renders the market as the main area for action. The market is the arena of the private sector. Given the scale of the climate and environmental challenges, and the existing wealth inequalities, ownership of the green transition in the market can only belong to a few large financial actors; most people simply do not have the financial means to buy any meaningful stake in these projects. Even in a purely hypothetical scenario, where every person owns a share in a green project, ownership is fractured into an individual basis, where some will sell their shares. If we can learn from historical example, the division of commonly held lands into private ownership in Indian Country in the US reduced indigenous tribes’ sovereignty; the fractionation led to sales of native land and even when stubbornly held onto, the fractionation entailed significant administrative burdens that hindered communal economic development.

While the private sector’s cooperation in the implementation of climate resilient technologies and processes is necessary towards a green transition, it is known that private finance will be insufficient to tackle the scale of climate and environmental challenges. A recent report from Finance Watch found that even with an extremely optimistic hypothesis, capital markets can only meet a third of the EU’s essential financing needs. 

Rather than stepping up to bat, in the recent conclusions concerning EU commitments for COP29, the plan is however to shift the responsibility to the private sector: [The] private sector will have to undertake the largest share of the required investment in net-zero, resource-efficient and climate-resilient development” (my italics).

Insufficient private financing as the primary investor for climate-resilient development creates a scenario where essential needs are forced to compete for limited funding. Not only does this climate of austerity further risk missing the limited timeframe we have to avert climate catastrophe, but mobilisation of private financing requires sufficient profit as return on investment, and ultimately, these returns are extracted from citizens. 

Purchasing power has decreased sharply in the past few years, and 48% of Europeans fear they will soon be in a precarious situation. A private financing led approach not only strains resources but also deepens social inequality—a situation that far-right movements have been quick to exploit. Such a policy poses a long-term threat to the democracy we value.

Public investment is the most effective tool for ensuring a green and just transition. The counter-cyclical impact in government spending is not insignificant as Europe’s economy remains fragile, with deepening economic woes in Germany. While concerns are often raised about the sustainability of public debt, the greater risk lies in not acting boldly enough. Trust in public institutions—vital for both democracy and economic stability—has eroded due to a series of crises, including the ongoing cost of living crisis. People’s sense of both physical and economic security has been shaken, and austerity measures have only deepened this distrust. 

The green transition is about how each and every one of us will survive in the future. Without public ownership, there is little protection against corporations extracting profit from our most basic needs for survival. 

Our collective future is at stake, and it is much more than the sum of individual existences. Our future demands more than market tweaks, and we desperately need a plan to end fossil fuel use. Now more than ever.

Vienne Chan, 2024