What is the purpose of money in a world facing so much social and environmental distress? Why can’t we channel a big chunk of that money toward the investments necessary to avoid what is categorically a worsening environmental default?Paula DiPerna
What breakthroughs need to happen for us to both avoid the worst impacts of climate change and prepare communities to adapt to the new challenges that will arise?
We need to publicize financial solutions; we have an investment shortfall to address. For example, the Forest Resilience Bond – a pilot project launched in California – offers a realistic and potentially scalable answer to wildfires. It enables capital to come in early to be applied to what the forest needs most, which is resilience building. This means hiring enough people to clear out growth, strengthen firebreaks, and prepare for the reality that climate change is going to make everything drier. The Forest Resilience Bond brings together differentiated sectors – insurance, hydropower, forest products – around a financial tool that securitizes risk. It treats forests as infrastructure and funds them as such.
There’s also coral reef insurance. 50% of the world’s coral reefs are already lifeless, and are going to stay dead because it is so difficult to fight rising sea temperatures. But what about the 50% that still have a chance? Coral reef insurance funds amazing reef services, putting trained divers into the sea after raging storms to try to put Humpty Dumpty back together again by hand. In the meantime, in laboratories worldwide there’s significant ongoing research to develop coral that is more resilient to climate change.
In addition to these new financial approaches, there is ESG [environmental, social, and corporate governance], which is vital but slowed by headwinds, like suspicion over greenwashing. But the reality is there is no perfection in any system. What would you rather have: all the trillions of dollars in the world going the wrong way, or redirecting some of those funds the right way?
We need to set aside the hope of perfection and work with the forces at hand. I’m not an apologist for capitalism – chasing profit for its own sake has caused much of the environmental degradation we now face – but Pricing the Priceless is about reinventing capitalism. If you have your profit going up and your cost to nature going down, that’s cherries all across. That’s the jackpot.
What would you rather have: all the trillions of dollars in the world going the wrong way, or redirecting some of those funds the right way? We need to set aside the hope of perfection and work with the forces at hand.Paula DiPerna
What keeps you up at night about achieving these goals? What makes you optimistic?
I’m pessimistic about the decline in leadership, the absence of consistent policy, and the incoherence of action. Something I learned from Cousteau is that most people protect what they love, and not much more. He said, “If all this depends on sacrifice, you can forget it.” And we have been sold the story of sacrifice.
But I’m hopeful about the next generation of wealth transfer, which will capture an attitudinal change. I could add a fourth force in addition to science, capital, and policy: intergenerational responsibility. This has to come into alignment as well. By this I don’t mean youth, necessarily, but new thinking. The other positive is that there are phenomenal technologies out there that we can tap into, if we can get them to scale. We need to focus on breakthrough applications – like hydrogen fuel cells – that are still looking for financial investment.
For the moment, science and capital are running ahead of climate policy globally. One way for policy to catch up and really unlock change would be an accelerated push for a global integrated carbon price, based on mandatory emission reduction targets. When you price carbon, you’re not pricing nature, per se: you’re pricing the scarcity and the preciousness of the 60 miles above us – that’s all that is protecting us from solar heat. If we can robustly price the value of atmospheric scarcity – and realize it didn’t cause a metaphysical collapse – we can be comfortable with other forms of pricing natural assets. An international carbon price would be the linchpin that I would certainly pull – it’s very doable.
For more on Pricing the Priceless, watch Paula discuss the book with Amanpour & Company on PBS, or read about the book’s connection to the Bellagio Center in the Bellagio Library. Pricing the Priceless has been selected as one of the Best Summer Books of 2023: Economics in the Financial Times.