Climate Change, Capitalism, and Invisible Hands of the Market: A Critical Review


By Dr. Kalim Siddiqui, The author explores the relationships between capitalism, colonialism, and the climate-related problems confronting the world today.

I. Introduction

Climate scientists have warned that climate changes will have very severe consequences, as rising levels of greenhouse gas emissions continue to heat the planet. An important contributor to climate change is global energy infrastructure which is currently dominated by oil, natural gas, and coal. Producing and burning these fossil fuels to create energy is responsible for more than three-quarters of all greenhouse gasses emitted into the atmosphere; the remaining a quarter are by corporate industrial agriculture. The Financial Times carried a report in October 2021 indicating that global banks had extended US$119 billion since 2016 to agribusiness companies involved in deforestation. Over 70 per cent of global carbon emissions can be traced to just a hundred corporations (The Financial Times, 2021).

Moreover, the severity of the climate problems has been documented by the Intergovernmental Panel on Climate Change (IPCC), the most authoritative global research on climate change entitled Global Warming of 1.5°C, published in 2018. The report argues the urgent need to limit the rise in the global average temperatures to 1.5°C above pre-industrial levels as of 2100 (IPCC, 2018).

It is expected that global net CO2 emissions will fall by about 45% by 2030 and zero emissions by 2050.

According to the IPCC report, the target of 1.5°C will substantially reduce the risks of extreme heat, drought, the rise of sea levels, and loss of biodiversity and, as a result, it would positively impact people’s livelihoods and food security. It is expected that global net CO2 emissions will fall by about 45 per cent by 2030 and zero emissions by 2050. CO2 is the most significant greenhouse gas contributing to climate change, accounting for nearly 75 per cent of all greenhouse gases. There are also two main greenhouse gases, namely methane and nitrous oxide, contributing nearly 17 per cent and 6 per cent respectively to total greenhouse gases (IPCC, 2018).

It is hoped to phase out oil, coal, and natural gas consumption by 2050. And fossil fuel consumption for producing energy will fall to zero. According to data from the International Energy Agency (IEA), global CO2 emissions were 36 billion tons in 2021. There was a nearly 70 per cent emissions increase in the last 40 years.

Livestock farming is estimated to account for 20-25 per cent of all greenhouse gas pollution. In the 20 years to 2020, global meat consumption rose by 58 per cent. It is estimated that, by 2030, greenhouse gases from livestock farming could use half the world’s entire carbon budget to avoid more than 1.5°C of global warming. The methane greenhouse gas emissions have grown far more rapidly, posing as much of a climate change threat as carbon dioxide, even though methane lasts for a shorter time in the atmosphere than carbon dioxide. The net result is that we are almost certain to fail in our target to limit global temperature rise to 1.5°C and, if we do not act soon, a temperature rise of 2.5-3°C and the devastation of our civilisation (see figure 1). Worse, the impact will be much higher in the equatorial and tropical regions, where most of the world’s poor live.

According to the IPCC, China is the largest provider of fuel subsidies in absolute terms, followed by the US, Russia, India, and the European Union. The total subsidy provided by the United States to the fossil fuel industry was $662 billion in 2020, mostly in the form of implicit subsidies. In contrast, the Joe Biden administration’s commitments to climate finance were just $5.7 billion (and are only supposed to be increased to $11.4 billion by 2024). Indeed, the IPCC estimates that global climate finance from both public and private sources totalled only about $640 billion that year. This highlights the extent to which government intervention is skewing prices and, therefore, market incentives in favour of fossil fuels, rather than against them (IPCC, 2018).

Despite recent absolute reductions, the advanced economies are by far the greatest emitters in per capita terms.

Since the Ukrainian war, some coal plants have been restarted, thus increasing coal’s share in the energy mix. Further, they argue that developing oil and gas infrastructure in Africa is fine, as long they use European suppliers.

On the international forum regarding negotiations on climate change, the advanced economies have succeeded in shifting the terms away from any notions of historical responsibility and climate debt, instead focusing only on current emission levels. There is also no recognition of the need to compensate poor countries most impacted by climate change already and have suffered extensive loss and damage due to rising sea levels, more extreme climate events, loss of biodiversity, and decline in food output (The Guardian, 2017).

Growth in the standard of living means more use of materials, including energy. More resource use means more adverse impacts on climate and people. Capitalism is geared to grow or die. The expansion of globalisation under neoliberalism represents current waves of market expansion. Karl Polanyi’s study The Great Transformation focuses on earlier market expansion, i.e., at the end of the eighteenth century and the after the First World War. Polanyi warned that the destruction and over-reliance on market mechanisms could cause immense damage to society and nature. The increasing commodification of nature has accelerated climate change in recent decades. Extraction of fossil fuels has been increasing and, by bringing oil into market systems without protective measures, Polanyi argues we run the risk of destroying the social and natural dimensions of our world (Polanyi, 1944).

In response to the threats of climate change, carbon markets have been created to reduce greenhouse gas emissions and protect society. However, carbon markets do not represent a genuine policy reverse to climate change and they will not be able to protect society. Carbon markets increased commodification while ignoring fundamental contradictions. The de-growth is seen as a check to increasing commodification and intends to address the severe environmental crises created by prioritising economic growth (Chomsky and Pollin, 2020).

The current neoliberal era has unleashed the same crises described by Polanyi more than 75 years ago. Crises linked to market expansion have not only been recognised by academics. Market expansion continues to contribute to greenhouse gas emissions and global climate change (Dale, 2010), further expanding the market mechanism and increasing corporate domination and inequality (Oxfam, 2021). At present, the key to a transition to renewable energy, the only long-term solution to global warming, will be to find a way of storing energy. Renewables, unlike fossil fuels, cannot be used at will, as they cannot provide a continuous flow of energy – wind, sun, or even water. While water can be stored in large reservoirs, wind and sun cannot, unless converted to chemical energy in batteries (Monbiot, 2022).

II. Climate Change and Environmental Crisis

In 2021, the UN Climate Change Conference in Glasgow discussed how such climate responsibility is determined. The logical method is based on CO2 emissions generated by economic activity within countries. Of course, such methods of calculation make the US, China, and India the three largest emitters of carbon dioxide, which accounts for more than half the global total emissions. China and India have dramatically increased emissions, especially since the turn of the century, while most advanced economies have shown lower increases and, in some cases, even slight declines (Ghosh et al., 2022).

Figure 1 Global Average Surface Temperature 1880-2020.

Source: New York Times, January 26, 2023.

The developing countries have shown much faster rates of increase in carbon emissions since 2000. For instance, by 2019, carbon emissions had increased in China by more than 3 times, in India by 2.7 times, in Indonesia by 4.7 times, and in Saudi Arabia, they nearly doubled. In contrast, in the advanced economies such as the US and Japan, total emission has fallen by around 12 per cent over the last 20 years, while in Germany, the decline in carbon emissions was higher, by about 22 per cent for the same period. The decline in carbon emissions is due to several factors, including changes in more strict environmental regulations and changes in trade patterns that enabled these countries to shift the more carbon-intensive production to other (mostly developing) countries and thereby effectively “export” their carbon emissions; changes in economic structure toward services that rely less on energy use; changes in the composition of energy away from the most polluting sources (like coal) to less carbon-polluting sources such as nuclear, natural gas, and renewable energy (Pollin, 2023).

However, despite recent absolute reductions, the advanced economies are by far the greatest emitters in per capita terms (see figure 2). For example, in per capita terms, the US and Australia produce eight times more carbon emissions than developing countries like India, Indonesia, and Brazil. Even China, despite recent increases, still shows less than half the level of per capita carbon emissions of the US (Ghosh et al., 2022).                                                                                                                 

When we examine final emission demands, the per capita differences across countries are even sharper, and the advanced economies are by far the greatest emitters, as shown in figure 3. The US showed eight times more per capita carbon emissions than India in production terms in 2020. The US carbon emissions are more than twelve times those of India when final demand emissions are calculated. The US per capita emissions based on final demand were more than three times those of China, while in aggregate production-based terms, China is seen as today’s largest emitter.

III. Capitalism and Climate Change

Capitalism seeks its supremacy by proclaiming higher growth rates, consumption, and profits, but pursuits for higher profits lead to further destruction of nature and biodiversity. The real wealth consisted of natural-material use values as opposed to the commodified exchange values of the capitalist economy. The violent seizure and transformation of commons into private property constituted the fundamental precondition for the historical origin of industrial capitalism. What Marx called the original expropriation of the commons in England and in much of the world generated the concentrations in wealth and power that propelled the Industrial Revolution of the late 18th century. Marx explained that the expropriation of commons, before the Industrial Revolution in Britain, needed start-up capital, created a pauperised labour force, and later expropriation and plunder continued through slavery, colonialism, and imperialism (Siddiqui, 2023). In the process, the entire human relation to nature was alienated. As Karl Polanyi (1944) noted: “What we call land is an element of nature inextricably interwoven with man’s institutions. To isolate it and form a market for it was perhaps the weirdest of all the undertakings of our ancestors” (Polanyi, 1944: 178).

Western countries’ control over global resources can be defined broadly as the struggle of large, monopoly capital to control foreign territories, which was fully backed by the states. For example, the British East India Company, which was owned by British shareholders, while colonising India had full British navy support. Lenin saw these developments in the 19th century and the control and exploitation of resources in the colonies and called it imperialism. This has not changed in essence, but only in form and structure. The economic territory is the subject of contestation and control and it can take many forms: lands, minerals, and other resources extracted from nature, labour (paid and unpaid), and markets to benefit colonisers.

The present climate crisis is related to the historical process of the concentration of greenhouse gas emissions and it is the major contributor to climate change.

The 19th century saw many such conflicts in the colonial expansion to other countries, in the attempt to establish control physically over other territories, the exploitation and destruction of nature reached new heights. Wars in the 20th century were closely related to control over energy sources like minerals, oil, and gas in the Global South.

Historically, developed countries have been responsible for nearly 80 per cent of cumulative global carbon emissions during colonial rule. The present climate crisis is related to the historical process of the concentration of greenhouse gas emissions and it is the major contributor to climate change. This critical situation is the result of the overexploitation of natural resources, including land, by a small group of now-rich countries which today account for around 16 per cent of the global population. However, the adverse impact of climate change is being felt disproportionately by Global South (former colonies), which are less able to deal with the consequences because of lower per capita incomes, less fiscal space, reduced access to international capital markets, rising debts, and a balance of payments crisis (Siddiqui, 2018).

The colonisation of overseas territories by the Europeans has brought a huge change in the control and use of resources. As a result, the primary commodities and minerals were produced for global markets, which certainly dramatically increased accumulation for the foreign owners and investors, while the native inhabitants lost control over the resources and experienced poverty and hardships. During the pre-colonial period in the Global South, they had various communal and private ownerships over the control of the natural resources, including land and waters. Protection of nature was part of their culture and traditions, and they were cautious that its depletion would adversely affect them (Girdner and Siddiqui, 2008). In contrast, after the colonisation of these countries, Europeans multiplied the extraction of resources, and cash crops were cultivated on a large scale to benefit not the local communities, but the European plantation owners (Siddiqui, 2012). As Europe becomes rich and more awareness among the people about climate change, they are happy to render lip service rather than pursue real change in their patterns of investing and alter their consumption and lifestyle. Moreover, the elites in both rich and poor countries alike are able to benefit from an economic system in which they grab more and more of available resources, including extraction from nature and exploitation of the planet and they would like to maintain the status quo (Chomsky and Pollin, 2020).

Figure 2 Per Capita CO2 Emissions in 2020.

Source: Global Carbon Project, November 2021; Global Carbon Atlas; Statista.

In the context of development, the very important question is our relationship with nature (alienation, exploitation), social relationships in the community and society, organisation of technology, production, exchange, organisation of labour and consumption. Economic development is about improving people’s living conditions, sustainable development, and making a better world.

Mainstream economists’ developmental model emphasises market forces, science, and technology to use to increase productivity and growth, which would free society from human wants and needs. It is said that the “free market” and invisible hands of the market would create a capacity for individual self-realisation through greater choices and competition. Freedom to choose for consumers has always been a keyword for mainstream economists’ notion of development but ignores the fact that the privileged who had greater access to wealth and means of production would be able to claim a larger part of the produced surplus. The mainstream economists argue that the immense supply of natural resources and their destruction did not matter as the price system would adjust to indicate a condition of scarcity. It means that as the natural resources are depleted it would become dearer and then the invisible hands of the market would correct it. This is key to their idea of commodification and monetisation of nature (Foster, 2022).

The neoliberal globalising phase of capitalism since the 1980s, besides increasing global trade and communications, has increased the destruction of the environment and forests in the name of free trade and exports, and cultivation of cash crops has expanded. This has resulted in undermining local control over the environment and in many ways associated with coercion, conflicts, and wars. Since the neoliberalism policy was adopted by rich countries over the last four decades, it has produced unprecedented increases in wealth and income inequalities throughout the world (Siddiqui, 2022a).

Mainstream economists argue that the immense supply of natural resources and their destruction did not matter as the price system would adjust to indicate a condition of scarcity.

Karl Marx (2010) commented on economic development under capitalism and its implications for nature and climate. His idea on development is linked with capital accumulation and the “law of motion” of the capitalist mode of production. He noted the destructive impact of colonialism in Ireland and India. During the last years of his life, he met with Indian nationalist Dadabhai Naoroji to get more information about the expansion of railways, while at the same time declining per capita incomes, rising poverty, and famines in India under British colonial rule. He concluded that the British colonial impact on India was far greater than regeneration. He became less convinced of capitalism’s so-called progressive role after a better understanding of the British colonial rule in Ireland. He also began to take an interest in understanding peasant communes in Russia in the last quarter of the 19th century. He reached the conclusion that non-capitalist communes could be stepping stones to a transition towards post-capitalism (Siddiqui, 2022b). Russia then was economically backward compared to other West European countries. Lenin, after the Bolshevik revolution in Russia in 1917, favoured the creation of the national market which would allow Russia to circumvent the contradiction of under-consumption in the context of capital in motion. And to catch up with the West, Lenin supported a sharp increase in investments in education, infrastructure, and electrification and expected it would boost the economy and living conditions in Russia. Rosa Luxemburg highlighted analysing the ramifications of under-consumption and in turn the impact of imperialism as capitalism searched for a market and supply of cheap raw materials in the colonies or outside Europe.

Moreover, Marx’s emancipation and human progress is very different from Adam Smith’s. It is detached entirely from individual selfishness and market forces, a project of realisation of self through relations with others in collective ownership. Marx did not see capitalism as emancipation, but as alienation. According to him, capitalism renders the product of labour to owners of means of production, i.e., capitalists that dominate the worker. Capitalism alienates workers from their work, since their work no longer belongs to them. Marx saw that the existence of humans depends upon natural resources. For him, the end of capitalism would also mean liberating nature from class privileges (Marx, 2010).

Looking at the current climate crisis, we need an energy transition, which requires a significant increase in the use of some critical minerals. The projections are that the mining of critical minerals will grow at least 30 times in the next two decades. Lithium is seen as crucial to the decarbonisation of the global economy, which is required to support electric vehicles, smart gadgets, appliances in homes and offices, digital cameras, mobiles, laptops, and tablets. Rechargeable lithium batteries are essential for electric vehicles, portable electronic devices, electric tools, as well as grid storage applications.

Figure 3 Per Capita CO2 Emissions by Final Demand in 2015.

Source: Global Carbon Project; Global Carbon Atlas; Statista; OECD Data.

At present, lithium is produced and exported mainly by countries located in the Global South and they are the largest producers of commercial lithium. It is found in the form of concentrations in salt brines or in mineral ores and it is extracted from brine pools in Bolivia, Chile, and Argentina, and each has different extraction and processing techniques. although China is an important producer of batteries and electricity, particularly in controlling supply chains. It seems that lithium demand and production are going to increase sharply in the coming years. The current forms of extraction require them to undergo many stages of complex and expensive processing that can also be environmentally damaging. They are mined from deposits around the world. The different elements are separated chemically to become processed metals.

Currently, China is the leading producer of batteries and needs a steady supply of rare-earth materials, including lithium. The developing countries hold the world’s largest rare-earth reserves, at around 40 per cent, and Chinese firms are estimated to control more than 85 per cent of the production, due to the costly processing stage of the supply chain. However, other players have entered the market in recent years. Australia and the US emerged as the second- and third-largest suppliers in 2022, producing around 12 per cent and 9 per cent of global rare-earth elements, respectively, as global demand for these grows along with the requirements for more investment in mining and production, as well as for front-line equipment for a green transition. In addition, China dominates solar photovoltaic manufacturing and is home to more than 90 per cent of the world’s silicon wafer manufacturing capacity. All these are reasons why the core capitalist countries view China as such a threat, and why the imperialist wars of the 21st century are likely to be more complex and play out in different ways (Foster, 2022).

Indeed, there are new technological changes taking place, which creates increased possibilities for mining and extraction from parts of the earth that were previously not so amenable to exploitation. For instance, the Arctic and Antarctic poles are already being destroyed and simultaneously made more accessible because of melting. Similarly, there is already interest in seabed mining and private attempts to scour deep oceans for minerals, notwithstanding potentially disastrous ecological consequences like mass extinctions of marine life (Klein, 2014).

IV. Conclusion

It is often said that natural gas, nuclear energy, and carbon capture technologies offer an alternative to achieve zero global emissions. Natural gas generates about 40 per cent less emissions for a given amount of energy produced than coal, and 15 per cent less than oil. Such claims do not consider the leakage of methane gas into the atmosphere that results from extracting natural gas through fracking. This certainly reduces the environmental benefit of using natural gases. Nuclear power generates energy without producing CO2 emissions but increases safety concerns, as we have seen in accidents in the Fukushima and Chernobyl nuclear power plants not long ago. The cost of producing a kilowatt of electricity from nuclear technology is twice as high as that from renewables. Carbon capture is more effective, this includes reforestation, where trees can absorb CO2, while deforestation releases CO2 into the atmosphere.

Carbon markets will not succeed, because they fail to address the underlying contradictions related to the commodification of nature and further subject society and ecosystems to markets. In contrast, through reducing economic growth and policies to constrain the market and reduce greenhouse gases, de-growth could represent a genuine countermovement to climate change. De-growth principles prioritise social and environmental goals, subjecting the market to those goals. In addition, de-growth could represent a triple movement to address all those harmed by the commodification of land, labour, and money (Dale, 2010).

The study found that for a meaningful policy, a radical climate policy should target wealthy polluters more. Instead, carbon taxes fall more heavily on low- and middle-income groups and have relatively little impact on the consumption patterns of the wealthiest groups, both in rich and poor regions. The strategies to reduce carbon emissions need to start focusing on containing the consumption of the rich, both within individual countries and globally. This requires a major shift in how climate alleviation policies are conceived and implemented.

Rich nations have been primarily responsible for creating the present climate crisis, but poorer nations face disproportionate burdens of the impact and are more financially constrained in implementing green policies (Siddiqui, 2019). There is a need to improve energy efficiency standards of houses, automobiles, transportation systems, and industrial production processes, while also increasing the supply of clean renewable energy sources such as wind and solar power.


Moreover, defence spending must be curtailed to release huge amounts of money so that it could be invested in improving environments. The total world’s military spending was US$2.16 trillion in 2022. The US alone spends nearly US$1 trillion, which accounts for nearly 45 per cent of the world’s total. This huge waste of money could be transferred, if not most, but at least a large share to support investment in renewable energy and climate security to create a better future for all.

The study concludes that another important policy measure should be taken to work towards achieving sustainable de-growth and a beginning could be CO2 limits. If de-growth is crucial, then the question is how it can become sustainable and improve living conditions of the society as prosperous and stable, rather than a catastrophic collapse. To achieve this, redistributive policies are required, including policies to implement basic income, reduction of working hours, reduction of inequality in incomes and wealth, environmental and consumption taxes, and controls on advertising. Such policies could threaten to harm the economy, and could not be implemented by neoliberal market economies, whose basic institutions (financial, property, political, and redistributive) depend on continuous economic growth. Sustainable de-growth is therefore not just a structuring concept; it is a radical political project that offers a new story and a rallying slogan for a social coalition built around the aspiration to construct a society that lives better with less consumption (Dale, 2010).

The GDP will inevitably decline as an outcome of sustainable de-growth, but the question is whether this can happen in a socially and environmentally sustainable way. Sustainable de-growth is not equivalent to negative GDP growth in the economy, but sustainable de-growth is desirable, which would be socially sustainable and require a radical change in the economic policy.

About the Author

kalimDr. Kalim Siddiqui is an economist specialising in International Political Economy, Development Economics, International Trade, and International Economics. His work, which combines elements of international political economy and development economics, economic policy, economic history and international trade, often challenges prevailing orthodoxy about which policies promote overall development in less-developed countries. Kalim teaches international economics at the Department of Accounting, Finance and Economics, University of Huddersfield, UK. He has taught economics since 1989 at various universities in Norway and the UK.


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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.