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I am a tree hugger.

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I spent much of my childhood

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on the great lower limb
of a massive copper beech,

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alternately reading and looking up
at the sky through its branches.

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I felt safe and cared for

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and connected to something
infinitely larger than myself.

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I thought the trees were immortal,
that they would always be here.

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But I was wrong.

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The trees are dying.

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Climate change is killing
the cedars of Lebanon

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and the forests of the American West.

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And it's not just the trees.

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Since 1998, extreme heat
has killed more than 160,000 people,

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and unchecked climate change
could kill millions more.

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How did we get here?

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There are many reasons, of course,

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but one of the most important

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is that we let capitalism
morph into something monstrous.

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I'm a huge fan of capitalism at its best.

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After all, I'm an economist
and a business school professor.

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I think genuinely free and fair markets

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are one of the great inventions
of the human race.

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But here's the catch:

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markets only work their magic
when prices reflect real costs.

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And right now, prices
are badly out of whack.

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We're letting the firms
who sell fossil fuels,

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and indeed anyone
who emits greenhouse gases,

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cause enormous damage
for which they do not have to pay.

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And that is hardly fair.

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Imagine for a moment

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that my hands are filled
with a cloud of electrons,

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10 dollars' worth
of coal-fired electricity

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that could power your cell phone
for more than 10 years.

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That probably sounds
like a pretty good deal.

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But it's only so cheap

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because you're not paying
for the harm that it causes.

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Burning coal sends poisons
like mercury and lead into the air,

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increasing healthcare costs
by billions of dollars

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and causing the death

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of hundreds of thousands
of people every year.

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It also emits huge quantities
of carbon dioxide.

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So another part of the real cost of coal

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is the climate damage it will cause
and is already causing.

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More than a million acres
burned in California this summer,

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and massive floods put a third
of Bangladesh under water.

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Hundreds of studies have tried
to put a number on these costs.

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My sense of this work,

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and here I'm relying on my colleagues
in the School of Public Health

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and my friends in economics,

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is that generating 10 dollars' worth
of coal-fired electricity

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causes at least eight dollars' worth
of harm to human health

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and at least another
eight dollars' worth of climate damage

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and probably much more.

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So the true cost
of this handful of electrons?

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It's not 10 dollars.

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It's something more like 26.

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The hidden costs of doing
things like burning oil and gas

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and eating beef are similarly
enormous and just as unfair.

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Everyone who's trying
to build a clean economy

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has to compete with firms
that are heavily subsidized

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by the destruction of our health
and the degradation of our climate.

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This is not the capitalism
I signed up for.

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This is not a market
that is either free or fair.

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So ...

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What do we do?

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The "easy" answer
is that governments should insist

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that anyone who emits greenhouse gases
pay for the damage that they cause.

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However, at the moment,

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there's not much sign
that governments are up for this,

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partly because the fossil fuel companies
have spent the last 20 years

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using their heavily subsidized profits

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to deny the reality of climate change

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and to shower the politicians,

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who should be regulating them, with money.

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So here's my crazy idea.

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I think business should step up.

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I think business should fix capitalism.

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I know.
(Laughs)

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Some of you are probably
thinking, "Fat chance."

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Didn't I just say that companies
are the ones denying the science,

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distorting the market
and lobbying the politicians?

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I did.

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But fixing this is squarely
in the private sector's interest.

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The truth is business is screwed
if we don't fix climate change.

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It's going to be hard to make money

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when the great coastal
cities are under water

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and millions of angry people
are migrating north as the harvests fail.

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It's going to be tough
to keep free enterprise alive

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if most people believe
the rich and the white

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are using it to trash the planet
for their own benefit.

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So let me tell you
what this looks like on the ground.

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My friend Erik Osmundsen
left a cushy job in private equity

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to become the CEO of a garbage company.

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That sounds like a slightly odd idea.

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But Erik wanted to make a difference,

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and changing the way that trash is handled

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could reduce emissions
by billions of tons.

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Right away, he ran into a massive problem:

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the industry was thoroughly corrupt.

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Firms were cutting costs
by dumping waste illegally,

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the regulations were poorly enforced

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and the fines for violation were tiny.

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Erik announced he was going to run clean

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and to raise prices
to cover the costs of doing so.

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Many of his senior team
thought he was crazy.

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Half of them quit.

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So did many of his customers.

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His competitors denounced him
for bringing the industry into disrepute,

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and he started
to receive personal threats.

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But corruption works best
when it's hidden.

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As soon as Erik went public,
people started to step up.

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A few customers were willing to pay more.

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His investors agreed that taking
the high road could pay off.

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Those of his employees who remained
loved the idea of taking a stand

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and found all kinds
of legal ways to cut costs.

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Erik persuaded several of his competitors

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to join him in refusing
to dispose of garbage illegally,

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and it got much tougher
for regulators to stay on the sidelines.

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Today, Erik's company, Norsk Gjenvinning,

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is one of the largest
recycling companies in Scandinavia.

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Let me generalize.

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These are the four pillars of change:

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Build a business
that can set the right price

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and still be profitable.

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Persuade your competitors
to do the same thing.

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Make sure that investors understand
there's money to be made.

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And push governments
to put the right price into law

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so that bottom-feeders can't survive.

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I'm not telling you we've got this nailed.

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Things are pretty desperate.

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But there are thousands
of businesspeople like Erik,

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and there are millions of people like us.

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And we are customers, employees,
investors and citizens.

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Instead of giving up
on capitalism, let's fix it

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by making sure that markets
are truly fair and truly free,

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and that no one can dump garbage on us

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and walk away without paying for it.

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We have the resources and the technology
to solve climate change.

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Together, we can save the trees

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and each other.

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Thank you.