‘Black capitalism’ arrives in Italy

Ultimately, the “green capitalism” of Von der Leyen and her associates causes instability and inequality, especially to the detriment of the weaker social classes.

The threat of an ecological catastrophe still looms over the world. A paper just published in One Earth notes that carbon dioxide emissions have reached their highest levels in the last two million years.

And they are bringing us closer to the so-called “point of no return,” with Earth’s temperature spiraling out of control and potentially devastating effects on both the economy and the climate.

In essence, the data shows that ecological decarbonization policies are failing. And that we will have to suffer the consequences. But why is that the trend? Why are emissions not decreasing? The current dialectic between the European Union and Italy on this matter clues us in on the answer.

So far, the European Union’s ecological policy has followed a doctrine sometimes called “green capitalism.” In practice, to reduce emissions, it employs typical market mechanisms. The case of electricity is paradigmatic: the EU adopted the ETS (“Emissions Trading System”). In short, it set a cap on total carbon dioxide emissions, which it divided up, distributing emission “rights” (allowances) to individual energy-producing companies. The more polluting the companies are, the more “rights” they have to buy, increasing their costs.

The market thus determines an equilibrium price for energy that is just slightly higher than the highest production cost – that is, the cost of the producer that usually pollutes the most. This means that although that company will still be able to produce, it will have to settle for minimal profits. Conversely, the most efficient and least polluting companies – producing at lower costs while being able to sell at the same equilibrium price – will enjoy high “differential rents.” Ultimately, the system is designed to make those who pollute less earn more.

On the surface, the mechanism seems effective in incentivizing the ecological transition. But on closer inspection, it generates momentous side effects. First of all, as it is based on a market mechanism, price formation is influenced by the action of speculators. These actors cause “irrational” and hard-to-control fluctuations in the price of energy, with perverse effects on decarbonization and heavy increases in consumers’ bills. Second, the mechanism of emission “rights” is typically “regressive”: it weighs indiscriminately on rich and poor consumers alike, and thus is a much larger burden on the poor in percentage terms.

Ultimately, the “green capitalism” of Von der Leyen and her associates causes instability and inequality, especially to the detriment of the weaker social classes. Given these results, it would be interesting to look at alternative forms of ecological policy. In China, for example, certain forms of ecological planning based on “command and control” criteria – in many ways more efficient than the European ETS system – are still in effect in the face of the “pro-market” trends.

But in our part of the world, other ways of thinking prevail. For example, that of the polluters, who undertake to solve every problem with “denialism”: in their view, the dangers of climate catastrophe are not real, so ecological policy is pointless. This is an anti-scientific solution that, nevertheless, is gaining adepts among significant segments of the working class. The social injustices of “green capitalism,” one might say, create support around the resurgent disaster of “black capitalism.”

In Italy, the Meloni government is not so shameless as to support the insane narrative of climate “denialism.” But its strategy de facto goes in the same direction. This is shown by the latest measures from Palazzo Chigi to address high energy prices.

Meloni is setting €5 billion aside, with an explicit “class-based” distribution: €4 billion to businesses and only €1 billion to less well-off families. According to the details from the Prime Minister’s office, the bonus from this bill for the poorest households will not go much higher than an additional €115 per year; lower-middle-income families will receive nothing at all; while entrepreneurs, by contrast, will be able to get handouts of up to €200,000.

A few days ago, an ECB report pointed out that in Italy, households are paying twice as much in their bills than businesses do. This gap is not seen in other countries, for instance France and Spain. But the government’s decree seems intended to aggravate this inequality.

Even worse, the generous subsidies to businesses will be awarded primarily to compensate for the cost of emission “rights.” In practice, the EU is fining polluters and the Italian taxpayers are paying it. The result is that the incentive to reduce CO2 goes out the window. In Italy, it seems, “green capitalism” has already turned a shade of “black.”

© Il Manifesto Global