Adapting to climate change can’t be left to the wild west of the markets

Razmig Keucheyan in the Guardian (UK): ......This fiscal crisis of the state will weigh not only on reaction and adaptation to climate events, but on mitigation policies. Cutting greenhouse gas emissions implies an energetic transition on a massive scale towards clean energies. This requires investments by the state, which will be difficult given the already overstretched public finances. Rising debt levels inflicted on societies by neoliberal tax cuts for the rich gravely compromise our capacity to adapt to climate change.

So far, so good. But then the IPCC report takes a final step – in the wrong direction. To bridge the gap in public finances caused by recurrent extreme weather events, it recommends appealing to private investors. More precisely, it advocates the implementation of financial instruments such as catastrophe bonds or microinsurance as a means to lighten the burden on the state in the face of a changing climate. Where the state does not have the resources to act, financial markets should take charge.

This financialisation of adaptation was already encouraged, in the years preceding the release of the IPCC report, by organisations such as the World Bank and the OECD. Thus, a 2012 working paper published by the OECD spoke of the need to “immunise public finances” from the effects of climate change, by issuing so-called “sovereign” catastrophe bonds, ie catastrophe bonds issued by states.

Financialising adaptation is a bad idea for numerous reasons. Here are two. Firstly, finance is prone to crisis, as the subprime market’s collapse demonstrated in 2007. Thus, financialising adaptation would put adaptation policies – parts of them at least – at the mercy of the erratic behaviour of financial markets. Adding financial instability to environmental instability will only increase the scale of disasters. What is needed, on the contrary, is less reliance on the logic of markets, and more environmental long-term planning.

Secondly, finance is in its essence undemocratic, ie out of the control of democratic deliberation. It is a form not only of economic dispossession, but of political dispossession, where the few choose for the many.

Adaptation to climate change, however, will require the involvement of the people, the deepening of the democratic process, and even the invention of new democratic institutions. Without their active commitment, their knowledge and knowhow, it is doomed to fail. The reason for this is that adaptation will in a good part be a matter of reorganising the daily lives of the people, and that this will obviously not be done without them. Adaptation to climate change, from this perspective, may well be our chance to revitalise democracy “from below”...

Panic at the New York Stock Exchange in 1893