Bob Hancké, PEACS
4 February 2025
How have we made sense of the green transition its potential and its problems up until now? Ever since the climate crisis found its place at the centre of political agendas with the first report of the IPCC in 2007, governments all over the world have started to think about policy packages meant to reduce carbon emissions (with the aim of reaching zero or close in about one generation). Most of those borrow disproportionately from two dominant disciplinary approaches: technology and engineering on the one hand, and economics on the other. In this essay I will unpack and evaluate those approaches and proposes an alternative framework that balances the complexity of the green transition with the political constraints in modern societies.
Much of the debate starts with simple solutions, often against a background of political unwillingness to grasp the nettle. We are stuck because politicians are holding up the process. We should move five times faster to save the planet (Sharpe 2023) but slow politics is holding us back. In that world of politics chasing its own tail instead of moving forward, engineers are called upon to provide the technical solutions while shifts in relative prices of brown and green activities will determine their uptake.
There is, obviously, something to this point: in complex democracies, political processes determine the broad outlines of strategic choices, even after four decades of neo-liberal attempts to sideline governments in the economy. And since single parties do not hold majorities in most of Europe, and even if they do, they are usually broad coalitions of smaller political groupings with overlapping but nonetheless different interests, it is unlikely that such political systems produce strong mandates for a speedy and deep green transition (or brown reversal, as our friends in the US may soon find out). But the underlying idea that political will is all that is needed to push us in a green direction is simplistic. Slow processes are a crucial part of multi-party democracies in which socio-economic interests are politically organised – they protect minorities against the tyranny of the majority, as political thinkers from John Adams over Alexis de Tocqueville to John Stuart Mill have argued. And we may lament the influence of ‘special interests’, yet this rarely seems to apply to interest groups that protect our own income or status. The ‘political will’ approach to the problem may, therefore, analyse reasonably well how but not why political will is absent.
With political will (and its evil twin, political nihilism, in which politics is unable to solve this problem) found wanting as the main reason for a slow and shallow transition, what about technology and prices? While these obviously matter, their effect is probably not as important as their proponents suggest. Take technology: the basic engineering solutions for clean energy have, in fact, been around for centuries: the essential renewables – wind, hydro and solar power – have been refined, not invented, to produce green electricity. One of the traditional key bottlenecks, however, the storage of the energy produced, remains a problem even today. Green energy can relatively easily be produced, even at scale, but not very easily stored, and definitely not easily at scale. In addition, unless sudden, revolutionary breakthroughs in nuclear fusion – a technology that has perennially been three decades away since the Second World War – allows energy companies to produce unlimited cheap electricity very soon, we need to work with what we have (in a letter to the Guardian on 23 January 2025, nuclear fusion physicist Luca Garzotti lists five seemingly insurmountable obstacles to nuclear fusion at scale). Hydrogen is probably not the magic bullet either: while it may, under the best of circumstances, work very well for large-scale energy needs in single, energy-hungry steel or chemical plants, aeroplanes, and (fleets of) trucks or other commercial transport (Financial Times 23 January 2025), it is ill-suited to the small-scale, decentralised energy needs of households. And, finally, although the most advanced nuclear reactor may be technically carbon neutral, it is at best a temporary solution because of the long-term problem of radioactive waste. Technology, this quick review suggests, may be a chimera, unable to overcome political obstacles.
Similarly, relative prices are obviously important – if brown energy and transport are significantly more expensive than green alternatives, consumers and producers will switch to green alternatives. (Some authors suggest that the uptake of green alternatives is slow because profits not prices are what matter in capitalism and green profits remain low – Gosh 2025. While that certainly makes sense, I do not think it it changes the nature of the problems with economic explanations that I address here, since net profits must reflect relative costs and prices to some extent.) Relative prices that drive shifts in production and consumption may be a conceptually elegant solution, but it has been empirically quite difficult for it to work well: two decades of market-based solutions à la CBAM and ETS in Europe suggest that we are still struggling with the determination of prices that are high enough to put a brake on fossil fuels, but without severely damaging economic growth. As a result, carbon emissions have fallen somewhat but levels (ie the stock of carbon in the atmosphere) remain high, and emissions are probably not falling fast enough. The reason for this relative failure of the price mechanism is simply that companies whose short-term competitiveness is based on fossil fuels see carbon prices (including eco-taxes) as a fee – the price of doing business. The European car industry buys unused carbon permits from pure electric car (EV) producers, for example, and thus remains slow in developing EVs themselves. This will undoubtedly change – but without deeper intervention it will only do so very slowly.
The problem runs deeper, however. Even assuming we got those prices right and green profits follow, and even if we figured out sustainable energy storage solutions, the switch to green energy that they induce will take time, during which we do not or only very slowly decarbonise our activities while the stock of CO2 and other greenhouse gases (GHGs) in the atmosphere increases; and that aspect of the transition, when pushed through at speed, will almost certainly generate major social tension. Recall the spontaneous, chaotic gilets jaunes protests in France in 2018 against a modest green tax on fuel and then imagine the havoc that well-organised consumers and workers elsewhere could wreak. The capital side is not much more enthusiastic. Current investors in brown sectors are reluctant to abandon their highly specific capital assets and take the cost of decommissioning fossil-based capital on the chin, while future investors in green activities are held back by accounting conventions that militate against the green transition (Doganova 2024). Without a significant carbon tax, a recent study found (Gasparini et al. 2024), the interest rate premium on new green investment is systematically and substantially higher than without such a tax – up to the point of being effectively prohibitive. As things stand, in other words, green investment often simply makes no economic sense.
Taken together, these objections to the simple techno-economic argument suggest what many of us have intuited but rarely been able to spell out clearly: envisioning the end point of an energy transition may be easy but mapping the road, in terms of actually working incentives, to get there is very difficult. Moreover, the economic argument not only fails on its own terms, but also largely ignores the systemic, networked effect of the green transition, which is not just the aggregation of billions of individual energy and transport choices in the margin but requires public goods and other structural back-ups that are usually not very profitable and therefore undersupplied. Unless the infrastructure, from the electricity grid over access to (recycled) raw materials to storage and charging networks, is adapted to such a sudden, dramatic shift in demand, the green transition may remain incomplete forever and have deeply negative macroeconomic effects – rising prices, slow or zero growth and falling prosperity. If not handled well, in other words, the green transition will lead to stagflation, a politically and economically losing strategy, as we discovered in the post-Covid era.
The quasi-Schumpeterian approach to the green transition, based on a combination of technological optimism and economic naivety, may offer some elegant short-term patches, but it ignores the systemic complexity, multi-dimensionality and temporality of the green transition. ‘For every complex problem,’ as H.L. Mencken pointed out, ‘there is an answer that is clear, simple and wrong.’ The green transition is no different. It involves not only the speedy abandon of old and adopting new ways of doing things, but also heralds a redistribution of risks, gains and losses that can cut deeply into the life chances of particular social groups and therefore have deep political mobilisation potential. Because strong political and social actors in many advanced economies in the vanguard of the green transition support these mobilisations, the political-economy issues they generate are not a an obstacle or an afterthought, but a central part of the green transition. Rather than simply a drag on the adoption and implementation of an optimal solution, in other words, politics – collective struggles over the distributive effects of the green transition – is as integral to its evolution and success as technology, engineering and economics may be.
In the following instalments in this series of essays, I will discuss these processes, reflect on their impact and political ramifications, and how they could become a more central part of a successful transition. While I borrow from notions of ‘Just Transition’ – the idea that the consequences of the transition on different social groups should be considered when designing policies, and that social actors that (however loosely) represent them are part of the design of the transition – I take a more active position, suggesting that the transition also includes alternative, less socially costly and politically explosive solutions that are debated upfront, and not as ex post solutions after the key techno-economic choices have been made. Put differently, we walk away from the crisp first-best world of engineers and economists, and engage with the actual, messier second-best world captured in political economy, the perspective that emphasises the mutual and often tense links between the economy, society and the state. (A disclaimer: much of the conceptual apparatus in these essays borrows from a recent book on political economy that I wrote with two colleagues (Hancké et al. 2025). I suggest readers looking for more detail on the political economy theories check there for more in-depth discussions.)
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