Climate Crisis - The threat to capital

The irreversible climate catastrophe threatens billions of dollars of capitalism’s assets with sudden redundancy, either being directly damaged by disrupted climates, or brought to a halt by the desperate rearguard actions of state legislators. The climate crisis has now forced itself into existing inter-imperialist struggles, as the owners of capital calculate and react to shift the inevitable losses onto each other. In this competition, they still treat the natural environment as a disposable resource, and the world’s working classes as dupes. JAMES MARTIN and SOMA KISAN report.

The destructive effects of climate change are now so obvious that the ruling classes can no longer deny that bourgeois society is on ‘a fast track to disaster’ as UN Secretary General Antonio Guterres put it. Even the Financial Times (25 February 2024) now declares that governments ‘need to mandate carbon reductions rather than hoping that the market delivers them on its own’. The large corporations’ 60-year long campaign denying climate change (reported in FRFI 298) has been destroyed by the weather. Yet the Labour Party has abandoned its promised £28bn climate programme. There is now widespread obstruction to, and reversals of, previously agreed targets for emission restrictions. The priority of each state’s ruling class is to save their capital investments, their sources of surplus value, their system of private capital accumulation, from climate disaster.

Heat and destruction

On 8 February the European Union announced that in 2023 the global average atmospheric temperature was 1.52°C higher than the ‘pre-industrial average’. Sea temperatures are now the highest ever recorded, an average of 20.8°C. In the 2015 Paris Agreement the imperialist states had announced they would try, voluntarily, to hold the rise in the average atmospheric temperature to below 1.5°C and to ‘well below 2°C’. They knew the higher figure was very likely, but to quieten the public, and so limit campaigns to cut pollution, their media deceitfully promoted illusions of achieving the lower target. The recently recognised higher average still disguises dramatic regional changes. In some parts of Britain temperatures in February 2023 had already risen 2.5°C since 1960. The following examples give only an inkling of the future problems.

From June 2023, drought in southeast Louisiana has caused a drop in the Mississippi River levels, disrupting shipping which transports 45% of the US’s agricultural exports. Increasingly severe droughts seriously hit many countries in the last 10 years. In 2023 river transport was severely interrupted by shrinking rivers in Argentina and Brazil, and the Panama Canal is now forced to reduce transits. Rice cultivation in Italy’s Po River valley – Europe’s biggest producer – has been reduced by over 30%. In West Africa climate change-induced extreme (humid) heat is now 10 times as likely, at 1.2°C to 3.4°C warmer than pre-industrial levels.

Record high temperatures in Siberia of 38°C have triggered early sea ice melt and wildfires, drying out the region’s tundra, with many lakes draining away. In 2006, the Qinghai-Tibet railway was threatened by permafrost melt, causing railway foundations to sink. In 2020, thawing permafrost caused a tank at a Russian power plant to collapse, leaking 21,000 tons of diesel into the two rivers. Lack of snow this year has again created major financial losses to companies in tourist and sports destinations, especially across the US, and in Europe. ‘Last Chance’ tourism is now the perverse response of the wealthy.

Within their lifetimes young Londoners will face up to 1.4 metre tidal surges in the Thames, flooding 68 London Underground stations, 400 schools and 16 hospitals. The Environmental Agency estimates that more than one million UK residential properties are at risk of flooding in the Thames area, 400,000 of them in London, within 50 years. Coastal erosion threatens a further 200,000 properties in England from the 2050s. A similar fate faces many coastal and riverine areas of Europe. Record heat in Britain dries the clay soil leading, in 2022, to 23,000 subsidence claims. Insurance payouts for these were £219m, the highest in 16 years.

Capitalism’s stranded assets

Extreme weather events cause immediate damage to infrastructure and capital, but there are dramatic long-term implications. Globally, dams, urban structures, railways, and power plants, built assuming stable climate conditions, now face unimagined threats. As water supplies shift or dry up, hydro-dams and reservoirs become less effective or fail, with extensive droughts now widespread across the planet, eg the Amazon, California, Chile, Mexico, Catalonia, Afghanistan, Canada, Iran and Venezuela. Yet in north Brazil in 2021 and Libya in 2023 dams were completely swept away by storms. Climate change either forces abandonment of assets, like oil reserves, coal mines and dams, or cripples their full capacity to extract surplus value before their existing fixed value is fully transferred into new commodities or services. These are ‘stranded assets’ – productive and commercial capital made useless by climate change.

In 2017 the International Energy Agency (IEA) estimated that without rapid decommissioning, a late and sudden transition from oil could mean about three times as many stranded assets as compared to a ‘smooth and early transition’, with upstream oil and gas most badly hit. Yet in the blind drive for immediate profit these industries stubbornly reject change. In November 2021 Nature Energy reported that half of fossil fuel assets (wells, mines, gas fields, machinery) might be worth nothing in 15 years. There is a risk of leaving $11trn to $14trn (£8.1trn to £10.3trn) in ‘stranded assets’, where the value has fallen so much that they are written off.

In Pakistan in 2022 floods submerged one third of the country, affecting 33 million people, half of whom were children, forcing more than 5.4 million people to use contaminated water from ponds and wells. Floods in the US have caused at least $323bn in direct damage since 1960. In 2023, twenty-eight weather related disasters hit the US. Each cost at least $1bn. The US insurance industry reported $60bn in losses from ‘severe convective storms’ last year, (Insurance Information Institute), up from $31bn losses in 2022. An estimated 3.3 million people were forced from their homes in the US in 2022, and 2.5 million in 2023. In 21 of 50 states home sellers do not have to disclose past damages or future risks from flooding, so houses in flood-prone areas are misleadingly overvalued by an estimated $121bn-$237bn. They are occupied but unsellable, thus, ‘semi-stranded’. This is an ever-expanding category for many other assets.

Four countries – Bangladesh, Cambodia, Pakistan and Vietnam – which represent 18% of global clothing exports and house approximately 10,000 apparel and footwear factories employing 10.6 million workers, now risk losing $65bn in export earnings and one million potential jobs by 2030 as workplaces are made inoperable by cyclones, floods and erosion.

The Carbon Disclosure Project, an information system for investors, says 69% of its members are exposed to ‘water risks’ potentially costing $225bn. The UN predicts a 40% global shortfall in water supply by 2030. There are already many instances where physical risks (flooding, drought, etc), regulatory risks (eg more stringent water permits), community opposition and litigation, and competitive technology risks have resulted in stranded assets. Key examples include lost company income from Canadian Barrick Gold’s Chilean Pascua-Lama gold mine, and TC Energy’s Keystone Canadian XL pipeline extension. Such is the size and power of global monopolies that these cases do not usually hit the current finances of the parent companies significantly. However, predicted accumulated lost capital and revenues from stranded assets are so huge that they can no longer be ‘shrugged off’. In Panama, Canada’s First Quantum Minerals copper mine was closed for good this January after mass protests, cutting 5% of Panama’s GDP and 70% exports by value.

Capitalism’s conflicting reactions

Capital accumulation takes place un­evenly, opportunistically, competitively, and through short term individual company decisions, with immediate concern only for its own self-expansion. Old and new capital, large and small, all react differently to the climate threats. They all continue to plunder nature in whatever way they can get away with. Corporations with large investments in climate damaging technologies commonly oppose regulation, despite the material threat to them from climate change. These companies ‘greenwash’ old practices. Other ‘enlightened’ capitalists seize the opportunity to create ‘competitive advantage’ with new technologies. Facing the loss of capital and markets, they prepare ‘sustainable’ strategies, initiatives to profitably ‘adapt’ to the crisis. The fundamental differences between climate ‘leaders’ and ‘laggards’, have already led to bitter political battles, polarising domestic electoral campaigns around denial of climate change, and its effects eg by Trump, Bolsonaro and Milei.

Capitalist competition accelerates technical invention and innovation generally, but is now shaped by the destructive consequences of its own action. New methods sideline older industries, deskilling and expelling workers. However, since profitability remains the measure of success, the negative effects of new techniques on the natural environment, are cynically treated as ‘collateral damage’, as with shale gas, phosphate, and lithium extraction, causing respectively, methane emissions, water pollution, oxygen depletion, and even more acute water shortage. The shift to new opportunities for profit will increase the demand for mining with its environmental destruction, with huge increases in the extraction of iron ore, copper, nickel, and rare earth metals.

Decarbonisation demands profit

From 2000 to 2019 climate change cost an annual $140bn globally, or $16m an hour in weather damage, totalling $2.8trn, and affecting 1.2bn people (Nature Communications). In 2022 losses rose to an annual $280bn, an underestimation due to a lack of data from low-income countries. The latest US National Climate Assessment reports that ‘weather events’ in the US alone cost over $170bn in 2023. It now makes ‘financial sense’ to avoid further disasters. Suddenly we are confronted with a rash of comparisons between the costs of further emission damage versus costs of carbon absorption and emissions avoidance. The financial loss not the loss of life is the capitalists’ priority. In 2024 PwC estimated a $125trn cost of total investment was needed to reach net zero emissions by 2050. Joyfully it finds a role for ‘Banks (that) stand at the centre of catalysing the energy transition’ with trillions of dollars backing a multitude of sustainable finance projects. Capitalism is blindly convinced that it has a future.

The reluctant shift to ‘decarbonisation’ presents capital with a profound contradiction between this goal, and the means to obtain it. Using profit-seeking as the means to organise society presents innumerable barriers to creating an ecologically-sustainable system. In the US most key resources, 97% of nickel, 89% of copper and 79% of lithium are either on ‘protected’ Native American reservations or within 35 miles of them. Intense conflicts have arisen over access to, and use of such resources, so that in the first half of 2023 US firms had to invest $10bn outside the country in mining, 130% more than in the first half of the previous year.

Current strategies to decarbonise global capital accumulation will require 6.5bn tonnes of metal between now and 2050 (Energy Transitions Commission). Maintaining the private motor transport system – as a mass electric car market – requires lithium and nickel for batteries. At least 170m tonnes a year of steel, more than 10 times current world production, will be needed for new systems, from wind turbines to electric vehicles. Huge quantities of copper will be required for electricity grids. Demand for aluminium, cobalt, graphite and platinum will grow. The threat to the seabed is immense (see FRFI 294, ‘Deep-sea mining: the new frontier of capitalist environmental destruction’). This shift has barely started because returns on risky new mining are currently about 7%, so money capital remains ‘safely’ in government bonds at 5%.

The slowdown in the Chinese economy has already seen more than $50bn worth of assets written down. In February BHP, the world’s most valuable mining firm, said that it would write down the value of its Western Australian nickel business by $2.5bn due to higher costs, and the falling price of the metal due to a greater Indonesian supply. Overproduction of commodities, not the protection of earth’s biomes, paralyses activity. BHP has sold its least-profitable sites.

Others have followed suit. The cash raised is used to repay debts instead of financing new projects. Investment has not recovered. Large miners are concerned only with their shareholders’ dividend demands or buying back shares in record numbers to squash investor discontent. Capitalism’s own ‘solutions’ to the environmental threats it has created must wait upon revived profits.

Government responses

As committees for collective capitals, governments have introduced measures such as carbon pricing and water or motor regulation. These schemes are designed to provide a ‘fair playing field’ for competing capitals, as all are forced to adapt to climate change. Mitigating the basic causes of climate change is a secondary issue for them.

In 2016 the Bank of England (BoE) asked British companies to provide annual climate stress tests to inform their shareholders of the threats to their assets. In 2019 it reiterated its concerns in its Climate Transition Plan.1 It wanted to reduce ‘transition’ risks in an ‘orderly fashion’, and ‘not unnecessarily create stranded assets, or other system-wide risks’.2 In February 2024 Chancellor Hunt ‘deprioritised’ this supervision.

Between 2019 and 2022 the EU introduced its ‘taxonomy’, a list of investment criteria, directing banks and non-bank financial intermediaries to constrain their main borrowers’ investments to ‘environmentally sustainable’ projects.3

Such tactical changes by governments are not made with direct concern for the masses or nature, but for the practical survival, or ‘sustainability’, of capital, including political support for it. Rules are regularly delayed, manipulated, cancelled or left unapplied. The immediate instinct of investors is to stop governments restricting their absolute freedoms to profit. For example, the US Environmental Protection Agency has just proposed the first-ever regulations to cap greenhouse gas emissions from US power plants, and immediately business lobbyists have rushed to block the move. Indonesia has just shamelessly added coal plants to its ‘green investment taxonomy’ to protect coal power investments until 2050.

In February 2024 President Biden announced a delay in limiting exhaust pipe emissions, slowing the switch from petrol/diesel engines to electric vehicles to 2030. This followed Prime Minister Rishi Sunak’s delay from 2030 to 2035 for phasing out combustion engine and gas boiler sales in the UK. US car manufacturers now have more time to phase out old capital and invest in a national network of charging stations.


The BoE has pressed the London Insurance Companies to respond to the growing threats of climate claims, of the inevitable rise in premiums and deductibles, and the collapse in insurability of many markets. California has had to prohibit insurance companies from not renewing policies on homes in declared disaster areas since 2019. Florida insurance companies offer discounts for policyholders who fortify their homes against hurricane force winds.

In 2017, insurance giant AXA announced a quadrupling of its 2020 green investment target from $3.53bn to $14.13bn. Yet even with AXA’s CEO warning that more than 4°C of warming this century would make the world ‘uninsurable’ (sic), AXA promised only to move away from companies which earn over 30% of their revenue from coal, exceed a 30% coal energy mix, construct new coal plants, or produce more than 20 million tonnes of coal annually.

In July 2021, 29 leading insurers launched the Net-Zero Insurance Alliance (NZIA) representing 14% of the sector in 2022. NZIA’s shamelessly distant goal is to take nearly 30 years to ‘neutralise’ member’s carbon footprint – by 2050. This provides more than enough time for most of their clients to fully depreciate – profitably use up – all their climate-destroying assets without insurance companies taking any action against them at all.

Currently real battles rage, for example, to prevent insurances being provided to the $5bn East African Crude Oil Pipeline (EACOP). The Stop EACOP campaign has demanded that the British-based Tokio Marine Kiln rule out insuring this project. It would be the largest heated oil pipeline ever built, running 900 miles from Uganda, where oil was discovered in 2006, to Tanzania’s coast, to export the crude. The pipeline will run through the basin of Lake Victoria – Africa’s largest lake – threatening to pollute this vital water source. It will pipe oil that will generate over 34 million tons of carbon emissions each year for 25 years. The corporations behind EACOP – French oil company Total and majority state-owned China National Offshore Oil Corporation, backed by the two governments – are still looking for insurance for the project. Over the last six months, young demonstrators in Kampala have been arrested, held in custody, beaten and face a year’s imprisonment simply for demanding the pipeline be stopped.

Corporate climate cartels back out

In 2017 Climate Action 100+ (CA100+) was founded and now boasts 700 global investors. Its real aim is to prevent ‘unfair’ competition and ‘free-riding’, where companies benefit from others cutting back emissions while doing nothing themselves. CA100+’s ‘Phase 2’ attempt in June 2023, to push members to achieve net-zero by 2050 (forget actual remediation), was confronted by US Republicans investigating financial intermediaries, introducing laws against directing investments to environmentally sound projects, and withdrawing funds from investment houses that support ‘green investment’. By 2024 this campaign has forced JPMorgan’s fund arm to abandon such practices. BlackRock has shifted its membership of CA100+ to its international arm alone, ending its US involvement. Pimco, and State Street – the world’s biggest fund manager ($4.1trn) – have left CA100+ saying the new priorities set by it, threaten its ‘fiduciary duty’ to investors. Vanguard dropped out of another well-known climate grouping, the Net Zero Asset Managers initiative, in late 2022.

Big oil companies enriched shareholders with dividend payments and share buy-backs worth $104bn in 2022. Why should fund managers object to their own purpose, dividend clipping? Oil and gas investors are actively sabotaging restrictions on continued CO2 emissions. Oil is the key component of plastics where the battle against pollution rages too. In February, 54 companies or associations, including the Plastics Industry Association, Dupont, Chemours, and The Toy Association, opposed New York’s proposed 2024 law on plastic recycling, stating it ‘wrongly strays into banning certain materials from packaging’ due to their chemical makeup.

Inter-imperialist rivalries

The global climate picture is already disastrous: more than half of the world’s lakes and two-thirds of its rivers are drying up, with horrendous consequences for ecosystems, farming, and drinking water availability. Already states are involved in water diversion, undermining adjacent societies. The first international theft of water came out of the Arab-Israeli conflict of 1967, after which most of the headwaters of the Jordan were diverted, and plundered for the Zionist settlers’ use. Since then, dams in Turkey have diminished water flow to Iraq and Syria, and it has sold water to Israel. Dam building in Ethiopia has affected flows of water into Egypt. The rivalries over water are, at heart, driven by the rivalry between large imperialist banking networks for the reinvestment of capital. Since surplus value can only be accessed by the provision of useful outcomes, the driving force of bank profit is constantly obscured by the apparently innocent provision of water.

Imperialist strategies are increasingly incorporating climate calculations. Each state plans to save its own businesses. US and EU solar panel manufacturers risk going out of business as cheap Chinese solar imports outcompete them. Calculations by Wood Mackenzie show that $29trn would be required from now until 2050 to reach global net-zero carbon emissions, but anticipating an ‘isolated’ China, in which Chinese-made solar, wind and battery products were blocked by western imperialism, the consultancy predicts a global energy transition would cost an extra $6trn. In the rare earth market, there is already emerging a more expensive ‘ex-China’ market as giant companies pressure weaker states to concede supply contracts. Of course, the immediate needs of humanity are secondary, the driving force being the need to convert commodities into money.

The Ukraine war continues to boost profits for all the ‘super-majors’ – BP, Shell, Chevron, ExxonMobil and TotalEnergies – as Russian gas and oil is blocked. They made $281bn (£223bn) in the year since the Ukraine war began in February 2022. More carbon, more profit; so, Shell is cutting up to 330 roles from its ‘low-carbon solutions unit’ to focus on high-profit oil projects this year. In 2023 it reversed a pledge to cut oil production each year for the rest of the decade, and now again targets fossil fuels to ‘reward our shareholders today and far into the future’. BP also moved to scale back its climate goals last year. In Guyana the US government has now stepped in to assert the country’s boundaries against Venezuelan claims, so as to guarantee growing extraction of oil there by ExxonMobil.

Fossil fuels account for more than 10% of world trade and some 10% of global investment, ignoring the necessary secondary investments in derived processes. Fossil fuels made up about a sixth of global trade in 2017. Economies with large fossil fuel exports risk the loss of income from stranded assets. With ‘decarbonisation’, fossil fuel exporters would receive lower prices, but importers will pay lower fossil fuel prices. Fuel importers such as EU, India, Japan, South Korea, countries that have sizeable fossil fuel trade deficits, will gain, benefiting from lower fossil fuel prices, improving their external balance.

However, for the Middle East, North Africa, and Venezuela, fossil fuels make up nearly 70% of exports. ‘Decarbonisation’ will hit these and other fossil fuel exporters such as Brazil and Russia. These will try to slow down transition as they face a deterioration of their terms of trade – the relative prices of imports to exports – as their export income falls. Saudi Arabia may lose $11trn in stranded assets over 15 years from 2022-2036 globally. The bulk of these investments are made in emerging market economies. China and India remain the two largest fossil fuel investors.

The well-diversified imperialist states would save on fuel import bills. While Britain could lose almost half its remaining fossil fuel assets ($120bn) by 2036, it could add $700bn to its GDP via savings. Global investment funds and governments, which hold claims on major industrial and commercial sectors reliant on fossil fuel-based systems face great losses.

A new phase

Capitalism’s compulsion to accumulate, the battle for asset control, now takes on a new phase. Oil capitals, ports and plant will be hit by the collapse in oil use, as European and US regions were from ‘de-industrialisation’ in the 1970s and 1980s. The disruption and struggle for resources and markets lead to yet more wars. As capitalists chaotically calculate profit-making in the present against immeasurable capital losses in the future, the environment continues to deteriorate at ever-increasing speeds. Since capitalism is essentially a competitive battlefield between self-interested monopolies which have no direct interest in the global preservation of nature, it is imperative that socialist political movements get rid of the private control of the means of production, and its blind profit motive, and introduce economically democratic planning, the bourgeoisie’s feared ‘dictatorship’ by the workers.

  1. The Bank of England’s Climate Transition Plan
  2. Bank of England: Report on climate-related risks and the regulatory capital frameworks. 2023.
  3. What is the EU Taxonomy and which companies are required to report?