Does the Free Market Have Climate Action in Shackles?
As part of the 2024 edition of Hogan Lovells' annual ESG Gamechangers event, a good-natured yet fiery debate was held. This debate brought together experts from the fields of sustainability, economics and politics to argue either side of one question: 'Does the free market have climate action in shackles?'
In the debate hosted by British legal firm Hogan Lovells, six speakers argued for and against the motion: "Does the free market have climate action in shackles?" The debate highlighted the complex relationship between free market economics and climate change mitigation efforts.
The case for free markets
First to speak on the side arguing for the free market was Richard Barker. Richard is a Partner at Counteract, a specialist venture capital group, focused on early stage investment into companies developing solutions to carbon removals.
He opened the argument against the motion by challenging the notion of whether the world's free markets are actually free at all.
He argued that current markets are encumbered by "misinformation, market abuse and increasingly irrational actors".
"You can't tell me that most free markets are truly competitive today," he continued. "Many markets have been engineered to be unfair. Monopoly power can dominate markets and incumbents often hijack and skew government policy in their favour. The lobbying of the oil and gas industry is well documented."
Richard concluded by suggesting that, by addressing these issues and setting markets free, we could properly drive climate action.
Next up was Professor Mirabelle Muûls of Imperial College London's Business School.
“No one can deny that we have a problem on Earth, but we don't need to look at the problem. We need to look at the solution rather than thinking globally about what's happening. So what is the solution?" she asked.
She went on to discuss the importance of carbon pricing, citing some of the research her team has been conducting at Imperial.
"Our research at Imperial College has shown that carbon prices have led to emission reductions to innovation, to more patenting, to more creation of solutions to these problems," she explained.
"And so unlike governments who are slow, who drag their feet to overregulate and stop any thinking and movement, these markets are breathing, they adapt every second."
Fiona Howarth, CEO of Octopus Electric Vehicles, was the last speaker tasked with defending free markets in this debate, which she did with some passion, describing free markets as "the most powerful tool for change at pace".
She pointed out that profit-seeking entrepreneurs and investors have driven innovation in her field of electric vehicles and renewable energy. However, Fiona also noted, like Richard, that current markets are not truly free, citing regulatory barriers in the energy sector.
She concluded with a humorous reimagining of a quote from Buckminster Fuller, the famous 20th-century American architect.
"I heard a quote from Buckminster Fuller the other day," she said. "'Nothing in a caterpillar tells you it's going to be a butterfly.' Well, we have created a butterfly but we've designed a system for a caterpillar today That butterfly is tucked up in its regulatory cocoon. Do you want to regulate this caterpillar or do you want to give it wings and let it fly?”
The case for tighter regulation
Clover Hogan, Climate Activist and the Founder of Force of Nature, was first to the plate to bat for the regulation team, and she came out swinging.
She argued that the free market has failed to deliver on its promises. She highlighted global wealth inequality and corporate dominance, stating that "100 companies are responsible for 71% of greenhouse gas emissions".
Digging into the details, she said: “The free market is not only the reason we're in this mess, but the single greatest barrier to solving it first.
"While it is widely agreed that government regulation is essential, if not the most important tool to addressing the climate crisis, corporations are working hard to undermine it.
“Just last year it was uncovered that 58% of major corporations have put forward climate commitments in opposition to their own lobbying."
Paul Simpson, Partner at ERM, began by presenting a stark picture of recent climate-related disasters.
“Valencia: 220 and rising. Hurricane Helene: 230. Hurricane Milton: 250. Storm Boris: 26. Rio Grande do Sul in Brazil: 176. Over 1000 victims across West Africa. I could go on. These are the people that have died in floods in the last three months with unprecedented rainfall.”
He argued that "the free market has let this happen, made this happen and failed us and failed our futures"
Paul ended with an impassioned advocation of regulation. "Look at the planetary boundaries," he said. "Seven of nine have been passed. Only two remain."
"One of them - the Ozone Layer - we said we saved with regulation. Regulation works. We must have bold, long-term, loud, legal, clear, not lobbied-against regulation, to correct the greatest failure of free markets we have ever seen.”
Then, Kaya Axelsson, Head of Policy & Partnerships at Oxford Net Zero (linked to Oxford University research), came to the stage with a somewhat different tack.
Similarly to Richard and Fiona, she argued that the free market was simply not as free as its name suggests.
After discussing the historic failures of the free market, she reflected, saying: "We confused the means for the ends. We allowed an instrument to become our own prison keeper. The market is our instrument and we must recapture it through policy and regulation.
"We must remember that it is our tool to direct. It is not something that we are shackled by. It is our very invention and as such, we have the power to invent a new system that drives a market towards people, towards planet and towards wellbeing.”
In essence, Kaya argued for a reformation of the free market, but didn't deny its potential to deliver change.
Food for thought
The debate highlighted the complex interplay between free market principles and climate action. Proponents of free markets argued for their potential to drive innovation and efficiency, while critics pointed to their role in exacerbating environmental degradation and inequality.
Both sides acknowledged the need for some level of regulation and policy intervention. The key disagreement centred on the extent of this intervention and whether current markets can be considered truly "free".
As the world grapples with the urgent need for climate action - especially at unfolding events at COP29 - the role of markets will remain a real point of contention and discussion.
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