The ideology of eco-capitalism was adopted to satisfy two competing needs: • the desire for generating profit by businesses in a capitalist society and • the urgency for proper actions to address a struggling environment negatively impacted by human activity. Under the doctrine of eco-capitalism, businesses commodify the act of addressing environmental issues. The following are common principles in the transition to eco-capitalism.
Externalities: Correcting of a free market failure A central part of eco-capitalism is to correct for the
market failure seen in the externalization of
pollution. By treating the issue of pollution as an
externality it has allowed the market to minimize the degree of accountability. To correct for this market failure eco-capitalism would have to internalize this cost. A prime example of this shift towards internalizing externalities is seen in the adoption of a system for
carbon trading. In a system like this people are forced to factor the pollution cost into their expenses. This system as well as other systems of internalization function on large and small scales (oftentimes both are tightly connected). On a corporate scale, the government can regulate
carbon emissions and other polluting factors in business practices forcing companies to either reduce their pollution levels, externalize these costs onto their consumers by raising the cost of their goods/services, and/or a combination of the two. These kinds of systems can also be effective in indirectly creating a more environmentally conscious consumer base. As the companies who are creating the most pollution face falling profit levels and rising prices their consumers and investors are inclined to take their business elsewhere. This migration of investment and revenue would then be expected to make its way to business who have already incorporated the minimization of pollution into their business model thus allowing them to provide lower prices and higher profit margins attracting the migrating consumers and investors.
Green consumption At the conception of the ideology, major theorists of eco-capitalism, Paul Hawken, Lester Brown, and Francis Cairncross, saw an opportunity to establish a different approach to environmentalism in a capitalist society. These generations currently make up 48% of the global marketplace and still have not hit their peak spending levels. As these generations' preferences continue to shape how businesses operate and market themselves, they could drive a continued shift toward green consumption. According to the Annual Review of Environmental Resources, "the focus of policy makers, businesses, and researchers has mostly been on the latter (consuming differently), with relatively little attention paid to consuming less". A review of how to encourage sustainable consumption from the University of Surrey shows that, "Government policies send important signals to consumers about institutional goals and national priorities." Governments can pull a variety of levers to signal this including product, trading, building, media, and marketing standards. Especially in the case of tradable pollution credits, the resulting market-based system of emissions regulation is believed to motivate businesses to invest in technology that reduce greenhouse gas emissions using
positive reinforcement (i.e. ability to trade unused credits) and
punishment (i.e. the need to buy more credits).
Full cost accounting Environmental full-cost accounting explains corporate actions on the basis of the triple bottom line, which is best summarized as "people, planet, and profit". As a concept of corporate social responsibility, full cost accounting not only considers social and economic costs and benefits but also the environmental implications of specific corporate actions. While there has been progress in measuring the cost of harm to the health of individuals and the environment, the interaction of environmental, social, and health effects makes measurement difficult. Measurement attempts can be broadly categorized as either behavioral in nature, like
hedonic pricing, or dose-response which looks at indirect effects. A standardized measurement of these costs has yet to emerge. This should not be confused with the full-cost method used by organizations searching for oil and gas that "does not differentiate between operating expenses associated with successful and unsuccessful exploration projects".
Genuine progress indicator The current standard of using the
gross domestic product (GDP) as an indicator of welfare is criticized for being inaccurate. An alternative to GDP, the
genuine progress indicator compensates for the shortcomings of the GDP as a welfare indicator by accounting for environmental harms as well as other factors that affect consumption, such as crime and
income inequality. ==Criticism and responses==