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Overshoot

For us non-economists there seems to be a logic that should prevail. If renewables are significantly cheaper than non-renewable fossil fuels, then why do banks and financial institutions continue to provide capital to the fossil fuel industry to extract more oil and gas, despite climate change?

For an answer, I return to the work of Andreas Malm and a recent book (2024), Overshoot (co-authored with Wim Carton). We experience overshoot when policy makers conclude that we can afford to spend our carbon budget in the (mistaken) belief that we can bring back 1.5 degrees by carbon capture and storage. Or even more problematically, reduce the surface temperature of the Earth through geoengineering. It is propagated by fossil-fuel industry lobbyists in order to maintain business-as-usual. Business-as-usual is important because sunk assets of the industry are long-lived and the value of the oil over which they have extraction rights is high.

Commodification

For Malm and Carton (pp209-218) an answer is the inability to commodify sun and wind. We can commodify the equipment that converts the sun’s energy into electricity. We can commodify wind turbines. But because the sun and the wind are renewable – i.e. tomorrow’s sunshine is independent of the sunshine from the previous day – it has not been used up. Moreover, using Marxist theory, Malm and Carton argue that value can only be ascribed to products if human labour is required in its exploitation. Even in the most efficient mining operations, humans are still directing the operation. Wind, sun and water are labourless. That makes them valueless in the eyes of economists. There is no “surplus value”.

By contrast fossil fuels are commodities. They are traded, stored and consumed. The sunshine cannot be traded. There is no world market. There is no OPEC equivalent in renewables. It has no economic value in the capitalist mindset. It is costless. But costlessness may be valuable to consumers, it really is not to capitalists because they are unable to maximise profit – or indeed generate profit at all. Consequently there is only so much renewable energy that any national energy system can support – Malm and Carton suggest about one-quarter to one-third. Above that, costless electricity is so abundant that the price drops to zero or below. It is in Marxist terms, a “labourless void”.

This phenomenon can be illustrated indirectly by asking, name and ascribe a capitalisation to the world’s biggest manufacturer of PV cells or wind turbines. Likewise the owners of the world’s largest PV farms. We can all name the top 10 oil majors and easily find a capitalisation. For those who think Tesla may be a candidate – notwithstanding the current crisis within the company – it is an automobile manufacturer, not a renewable energy company. Essentially, renewable energy technologies (of the flow) have “no talent for providing the accumulation of capital”. (Malm and Carton, 2024: 215).

Competition

Other explanations are available, of course. Is it that there is perfect competition in solar, wind, etc. Barrier to entry are not high and hence there are too many players in the industry (a very Porterian approach). As Malm and Carton argue, if that was the case, then the whole industrial revolution would not have happened as the textile industry was just that, highly competitive.

What is particularly interesting in these technologies is their disruptive potential that could be led by consumers. No amount of consumer demand for fossil-fuel-free electricity, as we have seen, will see off the producers of electricity from fossil fuels. The profit motive blocks this. But it is possible for consumers to become their own generators. And whilst the majority of citizens own little in the way of land, homeowners do have roofs – house, sheds, etc., And in those houses they have space for storage – batteries. Most consumers remain indifferent to this. Even better would be whole neighbourhoods pooling their roofs and generating electricity for collective consumption. The question here is just about the design of the delivery system. For the time being at least, the grid is optimised for national distribution, and as such does not accommodate collective consumption.

Why then has there been any investment in renewables. Malm and Carton offer five reasons.

• Government subsidies – paying someone to do it
• End consumers not needing to make a profit (whilst reducing their own bills)
• Early profit – first movers, for example
• Low rates of profit can still be justified up to a point
• Fossil fuel companies have invested in renewables to fuel their own plants because, like all end users, it is valuable to them

Ultimately market capitalism cannot deliver transition, a mixed economy can.