Green Macrofinancial Bargains: How Economic Interests Enable and Limit Climate Action

In the late 2010s, countries began to strengthen policies that redirect financial flows into decarbonization, such as higher carbon prices and new green industrial policies. However, investments remain below what is necessary to reach official climate targets. We argue that the green turn reflects the success and limits of political bargains that attempt to use decarbonization as a means to fortify countries’ growth models and dominant economic interests. Such bargains have proven effective in overcoming entrenched path dependencies, unlocking policy progress. But these bargains also entail trade-offs that constrain the scope and goals of decarbonization. Prioritizing incumbent economic interests can slow emission cuts, limit tools to the unpopular and ineffective, and thwart visions of a just transition. To develop this argument empirically, we provide original quantitative estimates of climate policies in the G20 and conduct case studies of the UK, the EU, and South Korea.