Just a few years ago, capitalism seemed on track towards greener pastures, as indicated by the passage of the Inflation Reduction Act in the US, adoption of the Green Deal in the EU, declaration of ambitious decarbonization goals by China, and trumpeting of net-zero targets by private firms.
But the months since Donald Trump’s second inauguration have seen dizzying reversals. Upon assuming office, Trump promptly set about dismantling the US administrative state and proclaiming the end of the “Green New Steal”. The transition to renewable energy, once confidently proclaimed to be capitalism’s future, suddenly appeared to stand on fragile foundations. Has the age of green capitalism come to an end?
Alyssa Battistoni is an assistant professor of political science at Barnard College. Her latest book is Free Gifts: Capitalism and the Politics of Nature.
Not so fast. Before we can answer the question, we have to back up and understand what exactly green capitalism was in the first place. First, a caveat is in order. Green capitalism is, of course, a misnomer. The “green” in green capitalism typically signifies a narrow ambit: shift away from fossil fuels and technologies reliant on them towards renewable energy. Whether capitalism can ever actually be green is, of course, a matter of dispute — and even many who use the term will acknowledge its limited scope. It’s nevertheless a useful term to describe a genuine trend that has developed over the past 40 years.
Following on this, I want to ask two questions. First: why did capital turn, however briefly and haltingly, in a green direction, and why is it now backing away? Second: is green capitalism distinguished by anything other than its energy base? In other words, are there any structural differences between so-called green capitalism and “ordinary” — fossil — capitalism, or is the distinction purely technological?
My proposition is that the answers to these questions are related. A green capitalism is also, necessarily, a state capitalism — or at least more of a state capitalism than the neoliberal model that has dominated much of the past half-century. The question, then, is whether, how, and why states might encourage the formation of green capital in particular, and what political opportunities or constraints the configuration of state and capital presents.
From Market Environmentalism to a Soft Green New Deal
To understand the relation between state and capital, we have to go back a bit further. Although green capitalism has become faddish in the past few years, some version of the idea is much older. A Google n-gram — an unreliable tool, but a useful heuristic — shows that references to “green capitalism” begin to appear in the mid-1980s, uptick slightly over the course of the next decade, and then skyrocket beginning around 2004. In that four-decade stretch, two models of green capitalism have been prominent.
The first model is an essentially neoliberal programme developed by a political tendency often referred to as market environmentalism. This mode of green capitalism is perhaps best summed up by Bill Clinton’s 1992 Earth Day speech lauding “a new era in environmental protection which uses the market to help us to get our environment back on track, to recognize that Adam Smith’s invisible hand actually can have a green thumb”. The problem driving climate change, on this account, was that carbon emissions and other environmental phenomena weren’t priced, and thus weren’t factored into market decisions. The solution was to integrate these “externalities” into markets via a range of instruments, including carbon markets, cap-and-trade programs, carbon taxes, ecosystem service programs, and other elements, as Adrienne Buller has aptly diagnosed. Institutionally, it’s reflected in what Geoff Mann and Joel Wainwright call “Climate Leviathan”: a system of global capitalism governed by a planetary sovereign, aimed at a “sustainable capitalist status quo,” and epitomized by institutions like the UN COP process.
Verboten in the West at the height of market fundamentalism, industrial policy had become au courant by the late 2010s.
Yet this model struggled to take hold. It turned out to be tricky to green the invisible hand, and laborious to integrate nature into property and pricing systems. The prospect of constructing carbon credits to be bought and sold as commodities in carbon markets required herculean state effort. Carbon taxes were simpler in theory, but in practice, they were repeatedly rejected by voters, who unsurprisingly proved reluctant increase their own cost of living for the sake of nebulous future benefits. On top of these challenges, the global collective action problem — the disincentive to incorporate the cost of carbon into production as long as other countries didn’t — proved intractable absent a truly planetary sovereign. The UN, it turned out, was no Leviathan.
Faced with these setbacks, a new model of green capitalism began to emerge early in the twenty-first century. Instead of – apart from Germany and later the EU – making fossil fuels more expensive and increasing the cost of carbon-intensive goods, states would seek to make renewable energy cheaper — ultimately, cheap enough to outcompete fossil fuels. The transition to renewable energy, in this model, was not a cost to be imposed, but an opportunity to be seized via the development of new technologies and industries.
Some version of this idea had been percolating for some time: in 2007, the liberal columnist Thomas Friedman pitched the Green New Deal as a “geostrategic, geoeconomic, capitalistic and patriotic” way for the United States to improve its economic position and “get its groove back” following the morass of the Iraq War. But it was the global financial crisis of 2008 that opened the door to this new model, as governments worldwide reached for the Keynesian toolbox of economic stimulus.
The major US stimulus bill, the Obama administration’s American Recovery and Reinvestment Act (ARRA), included 90 billion dollars in funding to develop green energy via subsidies for research and development and implementation. At the time, this seemed insignificant: a gesture to Obama’s campaign-trail climate promised, packaged within an inadequate stimulus. The following year, the Waxman-Markey bill, centred on a cap-and-trade programme, died in the Senate — and with it, Obama’s serious climate ambitions. In retrospect, this moment marked a crucial transition: the death of market environmentalism as a viable political programme (though it would stagger on in the form of ESG investing), and the emergence of green industrial policy as the way forward.
If the internal dynamics of US climate politics reflected a nascent shift in the tenor of green capitalism, the real driver of change was located elsewhere. In contrast to the wan American stimulus, and building on previous efforts, China’s massive stimulus programme poured hundreds of billions of dollars into renewable energy technologies — and solar power in particular — as part of a long-term strategic investment plan. The idea was that developing renewable energy technologies would help China address its own environmental problems and its pariah status on the global stage as a major carbon polluter, while also positioning it at the forefront of an emerging high-tech sector. Instead of licensing or copying technologies developed elsewhere, the country would develop and own the technologies the rest of the world wanted to buy. By the late 2010s, China accounted for nearly half of global investment in renewable energy, spending three times as much as the US.
The Biden administration may have put too much faith in the state’s ability to serve as the committee for managing the affairs of the bourgeoisie, while failing to secure the broader political legitimacy necessary to advance the interests of capital in democratic societies.
This massive burst of state-driven investment in green tech has proved decisive for global climate politics. The bet paid off handsomely: China is now undeniably dominant in renewable technologies, including solar photovoltaics, wind turbines, lithium batteries, and electric vehicles. Other countries have scrambled to catch up. The EU has sought to build out a domestic supply chain for battery production via initiatives like the EU Battery Alliance and EU Technology Platform. The UK has attempted to develop a comparative advantage in wind technologies and carbon capture and storage. Meanwhile, the US has adopted a wide-ranging clean energy investment program in the form of the Inflation Reduction Act, which set sectoral goals backed by 370 billion dollars in funding.
Chinese policy thus began to set the terms not only for green investment, but for the configuration of state and market within global capitalism: verboten in the West at the height of market fundamentalism, industrial policy had become au courant by the late 2010s. Chinese investment has also drastically altered the terrain of climate geopolitics. Where once the green transition was viewed as a project for global capital, facilitated by great power cooperation as channelled through international institutions and agreements like the Paris Accords, it is now understood as a mode of competition between nations and national capitals — the US and China in particular.
Yet although Western programs have been strongly motivated by Chinese policies, they have not replicated the Chinese model of state-driven planning and investment. In the United States and Europe, private firms remain the drivers of investment; the state simply seeks to tweak the steering wheel by using public money to leverage private investment, nudging investors in green directions via mechanisms like subsidies and tax credits. The aim is to shore up fledgling green tech industries and jump-start a virtuous circle of competition among green capitalists. Daniela Gabor has described this in terms of the “Wall Street Consensus” in which the state’s role is not to directly invest in public works, but rather to guide capital into profitable investments through incentives that reduce the risks of investing in new sectors and make it more likely that bets on clean energy will pay off for private companies — a process she calls “derisking”. With its tax credits and subsidies, the IRA epitomizes the derisking model. The EU’s Green Deal, by contrast, has leaned more heavily on regulation than funding, reflecting the EU’s more developed regulatory apparatus and more significant budget constraints.
Green Capitalism in Limbo
Here we can return to the present. Following Trump’s re-election, of course, the future of green industrial policy in the US is in limbo. Immediately upon assuming office, Trump issued an executive order to cease a number of Biden administration climate actions and freeze funds allocated by the IRA — although the freeze was overridden by a judge, funds have yet to be disbursed. At the same time, the IRA’s tax credits incentivizing investment in the likes of wind power may yet survive since they tend to benefit “red states”, as they were explicitly designed to do. Whether elements of the IRA continue to have effect will depend on whether this strategy proves to be effective. Even if some investment in EV and battery manufacturing persists, however, many green energy producers in the US will struggle, insofar as green tech supply chains remain heavily reliant on imports from East Asia, and will be severely disrupted by Trump’s tariff regime.
Regardless of its precise policy coordinates, then, the IRA reflects a more fundamental political failure — and reveals a challenge capitalist democracies in particular must face more directly. In contrast to Bernie Sanders’s and the climate justice movement’s Green New Deal, which proposed a populist, social democratic climate programme including reforms for social security and investment in public infrastructure, the IRA put its chips on new investment in renewable energy, battery manufacturing, and technologies. At the same time, the IRA reveals that “green” vs. “fossil” capital may not be such different fractions of capital at all. As Andreas Malm and Wim Carton have recently argued, energy companies increasingly have both renewable and fossil arms.
Indeed, the IRA’s passage was backed not only by clean tech investors but also by energy companies with major fossil fuel holdings, since it contained so little in the way of sticks. If the IRA was able to secure support from private investors, however, it is not a popular policy amongst voters — nor even very well known. Less than 3 percent of taxpayers made use of the bill’s tax credits for energy efficiency upgrades and solar installation, and those overwhelmingly by households in the top quartile of wealth distribution — only about a quarter of Americans say that the IRA has benefited them.
Green capitalism needs the state. Its future will depend on what states do.
My provocation here is that the Biden administration may have put too much faith in the state’s ability to serve as the committee for managing the affairs of the bourgeoisie, while failing to secure the broader political legitimacy necessary to advance the interests of capital in democratic societies. The IRA abandoned the populist leanings of earlier Biden proposals: it didn’t address cost of living issues or show how state investment could address the challenges of daily life. Although Biden leaned rhetorically on the promise of green jobs, the IRA’s projected job creation was too minimal, and the time horizon for the emergence of those jobs was too distant. It left the space for Trump to come roaring back with a critique of the Democratic elite.
A similar dynamic is emerging in Europe, too. As right-wing parties take aim at the Green Deal’s regulatory targets, EU officials have pulled back from many of its most ambitious goals, and appear likely to retreat further.
The retrenchment of Western states from more robust economic intervention is a real problem for green capitalism. Green capital, such as it is, is indisputably a creature of state invention. But it may need more extensive and more enduring state support than anyone had previously understood.
State investment in renewable energy technologies has successfully bent the cost curve. In the past decade, renewable energy technology has gotten much cheaper, much more quickly than almost anyone expected. But as Brett Christophers has demonstrated in his important book The Price is Wrong, policymakers have focused on the wrong target. Price isn’t the key factor in the uptake of new technologies — profitability is. Renewable energy has not displaced fossil fuels because it simply isn’t as profitable — and it’s not likely to be. Because wind and sun are free and widely available, it’s easy to produce renewable energy — which drives overcompetition and price collapse. Renewable energy is, if anything too cheap for capital to bother investing in it.
As Christophers argues, for renewable energy to become the basis of electricity generation would likely require public ownership of utilities. Many other aspects of the renewable energy economy suffer from similar problems. Insofar as certain technologies have little prospect of becoming profitable, it may turn out that states will have to guarantee profits for green sectors more or less in perpetuity. The upshot is that derisking is unlikely to be sufficient to truly establish green capital as a force capable of driving the transition to green capitalism.
If renewable technologies may need more state support than anticipated, meanwhile, so too will curbing the use of fossil fuels require more robust state discipline. Even as China invested massively in renewable energy, it built out a flood of new coal-fired power plants. Similarly, the clean energy subsidies of the IRA occurred alongside a drastic expansion of US oil and gas development. So far, while many countries have been willing to offer green capital carrots, few have dared to use the stick against fossil capital.
Establishing a new composition of capital and a power bloc, a new fraction, that can lead, necessarily depends on relative disempowerment and dis-investment in the fossil-military-complex. This could only come by a deep and longer economic crisis in the US or as a response to intensive class struggle. The debate over “green capitalism” as economic modernization and hegemonic project tended to underestimate the balance of forces within the power bloc structuring the state.
We haven’t seen the end of green capitalism, not by a long shot. The investments made over the past 15 years have produced real technological advances, and will not be easily rolled back. The history of green capitalism thus far is marked by cycles of hype and deflation, speculative booms and busts — it’s only a matter of time before the next wave of optimism. We nevertheless remain far from any kind of real transition — either of energy sources or regimes of accumulation. Green capitalism needs the state. Its future will depend on what states do.
In the US, it depends on whether Trumpism will consolidate and create an epoch, with dynamics of fascization and prolonged extreme fossilism, or if the Left organizes to defeating Trump in 2028 with a renewed Green New Deal Agenda, at least as radical as the plan by Alexandra Ocasio-Cortes and Bernie Sanders presented in 2019? That may be the last chance before an accelerated, out-of-any-control climate catastrophe takes shape.
This article first appeared in LuXemburg.