The Future of Value: Economics in a Three-Degree World

As we hurtle toward a three-degree future, the implications are stark. Science is clear: a three-degree average global temperature rise translates to five degrees on land and eight degrees in urban environments. The consequences will be far-reaching, with massive volatility and a breakdown of predictability. The conversation around climate change has shifted from mitigation to resilience and adaptation, yet our economic theory remains ill-equipped to handle the risks of climate breakdown. 

We urgently need a new approach to financing that prioritises security and resilience. The current system is fundamentally flawed, failing to price the risk of asset loss on balance sheets. Climate breakdown will disproportionately impact the poorest communities. Price volatility will make it difficult to account for nature in the cost of goods. Consider a shirt: factoring in carbon, water, pollution, and labour costs could raise its price from £45 to £250–£450. This starkly illustrates our unsustainable consumption patterns and the urgent need to account for true costs if we are to survive. 

We are entering an age of constraints—carbon budgets, mineral supply, labour shortages, and cognitive capacity will shape what we can make. Current strategies, such as building 300,000 homes per year, risk consuming England’s entire carbon budget under the Paris Agreement by 2050. Beyond this, there will be severe human consequences. These constraints demand a radical rethink of material justice, spatial justice, and the built environment. 

Operational carbon reductions, including best practices such as Passivhaus, are insufficient. Incremental product replacement cannot deliver the housing justice we need. Instead, we must invest our limited carbon budget effectively, prioritising radical sharing, ecological services, and new material economies. The very concept of comfort must be reconsidered: large, heavy buildings may need to give way to adaptive approaches where residents proactively manage comfort, supported by frameworks for insurance, governance, and institutional overhead. 

A house is no longer simply a private entity; its ecological impacts, water usage, and energy consumption are interconnected with the wider environment. We need a new theory of value that recognises public goods—urban trees, shared green spaces, and ecosystem services—as essential to functioning neighbourhoods. 

The crisis we face is not only environmental but conceptual. Individualistic and consumerist worldviews clash with the emerging political economy of a three-degree future. Addressing this requires new forms of engagement prioritising collective action, civic economies, and multi-sector collaboration. A resilient future demands public, civic, and private sectors working together to deliver energy-first retrofits, micro-attributions, and resilient neighbourhoods. 

Achieving this vision requires audacity. For example, what if an organisation like Clarion committed to enabling all its residents to live well for 100 years? Incremental adjustments will not suffice. We need a new thesis of value and new economics. Shadow balance sheets must account for climate risks, and long-term impacts on asset value must inform financial prudence. 

Clarion’s economic approach must prioritise security and resilience, recognising that the wellbeing of residents and the planet is inseparable from financial sustainability. By taking a systems view, embedding future risks into today’s planning, and redefining value, we can ensure that housing, finance, and communities are resilient in the face of climate breakdown.