Financial stability and green transition

This chapter argues that financial stability and green transition of our economies are the two sides of the same coin, that is, the structural transformation of the market economy into a sustainable societal framework. However, such a transformation encounters an obstacle that stems from the nature of a capitalist economy, which is the opposition between private interest and the common good. This opposition, which is a social dilemma, has been exacerbated by the financialization of economies since the 1990s, leading to the global financial crisis of 2007–2009. This chapter aims to show that the only way to reform market economies to ensure long-term systemic viability is to develop regulatory mechanisms that would enable financial markets to finance ecological transition projects and inclusive green development in a sustainable way. This requires changes not only to the rules that govern financial regulation but also to the organization of the energy transition process and, more generally, the economic transition. So, such an organization requires tight (international) coordination and cooperation. However, in the context of geopolitical instability, this condition is proving extremely difficult to meet, to the extent that the fight against climate change and designing durable ways of financing the energy transition prove to be more wishful thinking than an attainable target.