Daniela Gabor and Benjamin Braun in Phenomenal World:
At the end of April in Santa Marta, Colombia, two months into the US-Israeli war on Iran, fifty-nine countries attended the first high-level conference on transitioning away from fossil fuels. The attendees agreed that decarbonization was more than energy sovereignty. It meant “building a new economy…that empowers communities,” to cite Stientje van Veldhoven, the Dutch Economy and Climate Minister, co-organizer of the event. The German environment state secretary, Jochen Flasbarth, reassured the room that countries would emerge “more resilient” from the green transformation.
This transformation, we argued in 2025, is a question of macrofinancial regimes: the combinations of monetary, fiscal, and financial institutions that shape decarbonization choices.1 Countries can plan decarbonization through a big green state, derisk private green investments a la Biden’s US Inflation Reduction Act which showered private greentech manufacturers and energy producers with tax credits, or allow the market to drive transformation in response to higher carbon prices, in what we termed carbon shock therapy. This latter echoes the 1990s shock therapy imposed on post-Soviet economies, whereby state-owned companies were subjected to market discipline through price liberalization and the removal of cheap credit, subsidies, and tax concessions. Without state support, market competition and the price mechanism would sort out good from “bad,” inefficient firms, or, in a climate framework, green from “dirty” firms.
More here.
Enjoying the content on 3QD? Help keep us going by donating now.