Jason Hickel and Charles Stevenson
It is clear to everyone that decarbonization is happening far too slowly. Even the best-performing high-income countries are not reducing their emissions fast enough to achieve the Paris Agreement objectives—not even close. And one big reason is that even though renewables are now routinely cheaper than fossil fuels, they are still not nearly as profitable. Returns on fossil fuel investments are around three times higher than returns on renewables, largely because fossil fuels are more conducive to monopoly power while the renewable sector is highly competitive.
Commercial banks allocate capital on the basis of profitability, not social and ecological objectives. The result is that we get massive investment in sectors such as SUVs, fast fashion, industrial animal farming, private jets, and advertising—even though we know they are ecologically destructive and must be reduced—but we suffer critical underinvestment in areas that are clearly necessary for the ecological transition, such as public transit, agroecology, or building retrofits, because they tend to be less profitable.
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