The market will not solve the climate crisis

The book, which has attracted significant international attention, went largely unnoticed in Sweden until a recent article in Aftonbladet – despite raising questions that are highly relevant in today’s Swedish debate, particularly around the financing of new nuclear energy.

In the book, Christophers argues that the global economy is transitioning too slowly towards sustainability because the returns on green investments are too low. The price of renewable energy may be falling, but investors are not swayed by low costs – what matters is the prospect of profit. Capital is allocated where returns are high and stable, not where prices are low and uncertain. His central thesis is that if we rely on the market, there will simply be too few investments in renewable energy.

“Since the late 2010s, many governments have ended subsidies for renewable energy, assuming that private companies would carry forward the transition initiated by public support. But the problem is that investment is driven by profit, not price. Running solar and wind farms remains a marginal business that depends heavily on state support,” says Brett Christophers.

In the book, he presents evidence showing that the shift away from fossil fuel power has progressed far too slowly. In 1985, fossil-fuelled power plants produced 64% of the world’s electricity. By 2022, that figure had only dropped to 61%. And despite the rhetoric about markets, it is public subsidies that continue to prop up the green energy sector. The world’s largest producer of wind and solar power, US-based NextEra Energy, has openly admitted it is “highly dependent” on government support.

“Electricity is a prime example of a resource that is fundamentally ill-suited to market pricing and trading. The elaborate market structures built to manage the transition from fossil fuels to renewables are not fit for purpose. And because we still lack effective storage solutions, renewable energy is being wasted on a massive scale – in 2020, for example, nearly one-fifth of the wind energy generated by Scottish wind farms was curtailed,” says Brett Christophers.

There is broad agreement that one of the most important steps to combat climate change is to produce clean electricity and electrify as much as possible. The financial barriers to doing so are no longer the main issue. Christophers’ message is clear: actively shaping the future is too important a task to be left to the market.

“We cannot expect the market and the private sector to solve the climate crisis when the profits that sustain them remain unattractive. The solution, as I see it, is for the state to take greater responsibility for directing the transition. Only the state has the financial power, logistical ability, and administrative capacity to deliver the trillions of dollars in annual investment in solar and wind energy required to stop the planet from burning,” says Brett Christophers.