To save the climate, we have to reimagine capitalism

I am a tree hugger.

I spent much of my childhood

on the great lower limb
of a massive copper beech,

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

I felt safe and cared for

and connected to something
infinitely larger than myself.

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

But I was wrong.

The trees are dying.

Climate change is killing
the cedars of Lebanon

and the forests of the American West.

And it's not just the trees.

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

and unchecked climate change
could kill millions more.

How did we get here?

There are many reasons, of course,

but one of the most important

is that we let capitalism
morph into something monstrous.

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

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

I think genuinely free and fair markets

are one of the great inventions
of the human race.

But here's the catch:

markets only work their magic
when prices reflect real costs.

And right now, prices
are badly out of whack.

We're letting the firms
who sell fossil fuels,

and indeed anyone
who emits greenhouse gases,

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

And that is hardly fair.

Imagine for a moment

that my hands are filled
with a cloud of electrons,

10 dollars' worth
of coal-fired electricity

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

That probably sounds
like a pretty good deal.

But it's only so cheap

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

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

increasing healthcare costs
by billions of dollars

and causing the death

of hundreds of thousands
of people every year.

It also emits huge quantities
of carbon dioxide.

So another part of the real cost of coal

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

More than a million acres
burned in California this summer,

and massive floods put a third
of Bangladesh under water.

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

My sense of this work,

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

and my friends in economics,

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

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

and at least another
eight dollars' worth of climate damage

and probably much more.

So the true cost
of this handful of electrons?

It's not 10 dollars.

It's something more like 26.

The hidden costs of doing
things like burning oil and gas

and eating beef are similarly
enormous and just as unfair.

Everyone who's trying
to build a clean economy

has to compete with firms
that are heavily subsidized

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

This is not the capitalism
I signed up for.

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

So ...

What do we do?

The "easy" answer
is that governments should insist

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

However, at the moment,

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

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

using their heavily subsidized profits

to deny the reality of climate change

and to shower the politicians,

who should be regulating them, with money.

So here's my crazy idea.

I think business should step up.

I think business should fix capitalism.

I know.
(Laughs)

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

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

distorting the market
and lobbying the politicians?

I did.

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

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

It's going to be hard to make money

when the great coastal
cities are under water

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

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

if most people believe
the rich and the white

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

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

My friend Erik Osmundsen
left a cushy job in private equity

to become the CEO of a garbage company.

That sounds like a slightly odd idea.

But Erik wanted to make a difference,

and changing the way that trash is handled

could reduce emissions
by billions of tons.

Right away, he ran into a massive problem:

the industry was thoroughly corrupt.

Firms were cutting costs
by dumping waste illegally,

the regulations were poorly enforced

and the fines for violation were tiny.

Erik announced he was going to run clean

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

Many of his senior team
thought he was crazy.

Half of them quit.

So did many of his customers.

His competitors denounced him
for bringing the industry into disrepute,

and he started
to receive personal threats.

But corruption works best
when it's hidden.

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

A few customers were willing to pay more.

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

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

and found all kinds
of legal ways to cut costs.

Erik persuaded several of his competitors

to join him in refusing
to dispose of garbage illegally,

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

Today, Erik's company, Norsk Gjenvinning,

is one of the largest
recycling companies in Scandinavia.

Let me generalize.

These are the four pillars of change:

Build a business
that can set the right price

and still be profitable.

Persuade your competitors
to do the same thing.

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

And push governments
to put the right price into law

so that bottom-feeders can't survive.

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

Things are pretty desperate.

But there are thousands
of businesspeople like Erik,

and there are millions of people like us.

And we are customers, employees,
investors and citizens.

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

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

and that no one can dump garbage on us

and walk away without paying for it.

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

Together, we can save the trees

and each other.

Thank you.