Climate capitalism: can market-based solutions save the planet?
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Welcome to the LSE Events podcast by the London School of Economics and Political Science. Get ready to hear from some of the most influential international figures in the social sciences.

Good evening everybody. So, as people are still filing in, but I'll make my introduction. So, welcome to LSE everybody for this public event hosted by the Ralph Miliband Lectures Series called Climate Capitalism: Can Market-Based Solutions Save the Planet? So, my name is Jonathan Hopkin. I'm a professor of comparative politics in the European Institute here at LSE.

I'm very pleased to welcome you all and our online audience here in the Shakespeare lecture theatre for this discussion with our guests who very kindly agreed to come and talk this evening. Professor Brett Christopher, Benjamin Brown, my colleague in the European Institute, and Daniela Gabor. I'll introduce them.

briefly in a sec. So we're going to be addressing this question of whether capitalism can solve a crisis of its own making. You might quickly get a sense of how the panel feels about this question. But we're looking forward to really thought-provoking discussions. And after the presentations, we'll be able to have some Q&A, some debate, both from questions from the audience here

in the theatre but also online. Just some brief introductions to our speakers. Brett Christopher, on my left, is Professor of Human Geography at the Institute of Housing and Urban Research in Uppsala University.

He's the author of The Price is Wrong, his most recent book, although has one come out in the meantime because Brett is extremely prolific. He also wrote Our Lives in Their Portfolios and Rentier Capitalism, amongst many other works. And he's a Brit now based in Sweden. So...

And in the middle there, Benjamin Brown is Assistant Professor of Political Economy in the European Institute here at LSE. His research includes the role of finance in capitalism, macrofinance, and the green transition, appropriately enough. So obviously, like Brett and Daniela, his research is squarely in the area of this talk. So his work has been published in a variety of

high-profile journals in the field of political economy, including a recent paper in the Review of International Political Economy on Green Macrofinancial Regimes with our third speaker, Daniela Gabor, who is Professor of Economics at SOAS, University of London. She was formerly Professor of Economics at the University of West of England.

She's published widely, very important and impactful work on central banking, on shadow banking, on international financial governance, and on the green transition, obviously, and it's the way in which financial markets and financial regulation relate to that.

So, yeah, I mean, I couldn't think of a better panel, really, to discuss this question. Each of the panellists will speak for a few minutes in turn, and then we're going to open it out to the audience. So, you know, start thinking of questions you might want to pose. But for now, I'll hand over to Brett, who will start. Thank you.

Okay, thanks Jonathan. Thanks everyone for coming. It's lovely to see lots of people here. Hopefully, I'm sure we're gonna have a good discussion. So I'm gonna start very literally by addressing the question in its component part. So can market-based solutions save the planet? And I want to think about those two parts of that question in reverse. So the first of all, I want to think about the question what do we mean by save the planet?

And what I'm particularly interested in there is being very clear about the kind of extent of the problem with which we are faced, the degree of severity that the climate crisis represents. And I want to do that because I think often this question gets sugarcoated quite a lot, a lot of the books and books.

Other commentaries that are most widely distributed about these questions are precisely the ones that present a very kind of happy, everything is going to be fine narrative. Which are not necessarily particularly useful or particularly accurate, I think. Here is the latest data on where we are at.

So if we think about global greenhouse gas emissions and we think about what happened during COVID,

there was a 5% reduction in global greenhouse gas emissions during Covid. So think about the nature of the enormous changes in social and economic life that occurred during Covid and that led to a 5% reduction in emissions. So to have an 80% chance of staying within two degrees

of pre-industrial temperatures, so 1.5 is essentially gone, but to have an 80% chance of staying within 2 degrees, we need to have a 7% annual reduction in global greenhouse gas emissions every single year, repeating from today.

So that's to have a significant chance of remaining within two degrees. Now, if you think there's any credible prospect of that happening, given that we only achieve 5% under the COVID emergency conditions, then I'm personally very, very sceptical about that. It seems to me that

well in excess of two degrees is already baked in, even though many people would like to suggest otherwise. All of which is to say that kind of piecemeal measures are clearly insufficient. We need...

massive, rapid transformation in pretty much everything about society. And I think above all else what we need, and I think the best recent commentary on this is the new book by Andreas Malm and Wim Karten called Overshoot.

is rapid and massive stranding of fossil fuel assets. Now, for many of you it might be obvious why that's so important, but just to again to put some numbers on this. So if we think about the totality of anthropogenic greenhouse gas emissions, about 75% of those emissions are carbon dioxide. And then if we focus in specifically on those carbon dioxide emissions,

about 75% again of those emissions are from the combustion of fossil fuels. So fossil fuels, that's why we always focus on fossil fuels or we focus predominantly on fossil fuels when we're talking about climate 'cause that's the very, very heart of the problem.

And so whatever we do in terms of building out renewables or other forms of low carbon power, if we fail to strand fossil fuel assets massively and quickly, we are continuing to failing in every sense of the word.

So that's the kind of situation we're in, in very, very blunt terms. So that's what we mean by save the planet. What do we mean by market-based solutions? Again, to take the question very, very literally. So I think what we mean by the market, market-to-market-based approach is lots of people interpret that terminology in different ways. To me, it means the centrality of the price mechanism. It means...

a belief in the power of unfettered price mechanism to drive transformation, to drive reorganisation of society and economy. It means supply and demand, sending and

sending and responding to price signals. And it stands in contrast to forms of planning, forms of central planning, which are about a centralized organization of social change, social organization, rather than relying on markets and on price signals.

Again, as I'm sure many of you know, that idea of price mechanism and market mechanisms is at the very heart of what you might call an orthodox economic approach to the climate problem. So it's worth just saying a little bit about how that orthodox economic framing understands the climate problem. And it's as one of market failure. And the basic argument, again, I'm sure most of you will be familiar with this,

is that the only reason the market is failing to correct for market change, to enable us to respond to climate change in a more progressive manner, is because of a fundamental mispricing. So the argument there is that fossil fuels and other forms of climate pollution are...

produce a series of environmental externalities, carbon pollution, and because we misprice or even inversely price through a range of different subsidies to the fossil fuel sector, because we misprice those externalities, the market is unable to do the work that one would expect it to do through the mechanism of the price signal.

And so the argument there is that if we get the price right, if we put a proper price on carbon through, for example, carbon taxation, then the market will basically do its work. So the basic argument there is that the problem is not markets, the problem is not that we're relying on markets, the problem is that we haven't got the price of carbon right. And if we get the price of carbon right, everything will fall into place and we will transition rapidly away from fossil fuels.

So what should we make of that argument? I think we'll hear a lot about that argument this evening in one form or another. What I want to say is that I'm actually, the more I think about this, the more I'm actually probably more ambivalent about that argument than I think many other people on the left are.

And I actually think that if we did quote-unquote properly price carbon, if we put a proper significant price on carbon, it could do actually quite a lot of important work. And I think that the best example of that being the case is quite close at hand. So as I'm sure all of you know, the UK recently phased out its final coal-fired power plant.

And carbon taxes actually played a really important work in that happening. So for about ten years, the UK had a relatively significant targeted carbon tax

on coal-fired power generation. That played a really significant role in enabling coal-fired power generation to be phased out in the UK. So I think that proper, broadly based pricing of carbon could do important work. And if it was expansive enough, it could potentially lead to fossil fuel stranding. However, the caveat is to say that that would be the case if

significant carbon pricing, significant carbon taxation were socially and politically tolerable. And that's the problem, right? Which is that, as I'm sure, again, all of you know,

We today, and particularly in the global north, live very, very carbon-intensive lifestyles. Our lifestyles are saturated in carbon from top to bottom, whether that's the way buildings are heated, the way electricity is generated, whether it's the way we travel in road transportation, aviation and so on, the packaging in the food we eat, all of it is saturated in carbon. If politicians start introducing significant taxes on carbon,

then the price of daily life goes up very, very far and very, very fast, and no government is willingly going to introduce policies that mean massive inflation in the cost of daily life because that ends in them getting voted out. So while in theory carbon taxation is a significant tool of potential policy, the reality is, I think, that for social and political reasons, it's very, very unlikely to happen.

And the last thing I want to say is that that, for me at least, is one reason that we simply cannot expect markets to do the work we would like them to do. Certainly not expect them to do that work within...

the timing, you know, on the short time frame that's necessary. It's definitely not the only reason for being suspicious of the capability of markets to do that work. There's all sorts of other reasons for it. But I think it's one very, very significant reason. So my...

conclusion would be that in view of that inability of markets to do their work, it's pretty clear that we would need a much more interventionist state imposing itself on, in a sense taking over from the price mechanism,

and doing so specifically to actively strand assets, fossil fuel assets, as quickly as possible and to effectively drive an energy transition. So I'll leave it there. Fantastic. Thank you very much. So Ben, you have slides. He's going to speak from the lectern.

So with apologies to my students in the green transition of the climate of the political economy of the green transition, I will repeat some things I said in last week's lecture, but because I think they are very important for this topic today. So I want to talk about briefly just add to what Brett has been doing, which is add some numbers and in this case some pictures.

to familiarize everyone with the state of the energy system transformation and then I will talk about why the problem may even be more fundamental than just markets or not markets, capitalism or not capitalism. We'll get to that in a second. So I will show you three things, the good, the bad, and the ugly about the state of the energy transformation.

The good is that the global installed renewable energy capacity, especially from wind and solar, has been increasing on a clearly exponential path, at least for solar in recent years. This is global. This has really taken off, and we are in a completely different world. There is at least hope from this perspective that was not there even 10 years ago.

However, the bad, unfortunately something got messed up. Please note that on the right hand chart where you have the renewables, the scale is different. This should be a tiny corner in the right hand corner of that chart, okay?

The bad here is that oil, gas, and coal are still the largest energy sources, and they have not at all been declining. They, in fact, have continued to grow despite the leveling out of coal at a very high level.

Again, solar wind increasing fast, but on a different scale. Sorry for this mishap. Now, the ugly, of course, is emissions. Brett has talked about how they need to come down. This is carbon dioxide emissions from fossil fuels and industry, and this curve is going up. You see that 5% decline during COVID and the rebound from that right afterwards. All right. Now...

Does it make sense to talk about energy transitions? This is a concept that comes from the idea that we've had energy transitions in the past from wood to coal, from coal to oil and gas, and now we have one from fossil fuels generally to renewables. This is the standard model of how we talk about energy transition transitions and it's everywhere in the public discourse. Now,

There's a great recent book by an energy historian called Jean-Baptiste Fréseau working in France that is very comprehensive, ambitious, yet accessible, so it's highly recommended. And Fréseau argues that a point that he's not the first to make, but probably the first to make in a big general audience book like this,

At closer inspection, the history of energy is one of addition, not transition. New energy sources have been added without displacing old ones. Let me give you a couple of examples. The book is one long list of detailed historical examples. Fortunately, I didn't find a picture of timber, wooden props in coal mines in England, but here is one of a coal mine in Pennsylvania. So this is about the non-transition from wood to coal.

So the idea is that coal replaced wood as a source of energy, whereas previously homes were heated by wood. This changed relatively early, even before the Industrial Revolution. However, without timber to prop up mines, England would have had very little coal and therefore very little steel and very little coal.

In terms of volume, Great Britain consumed more wood for energy in 1900 than in pre-industrial times. That such a process can be described as an energy transition or an escape from the organic economy is somewhat disconcerting. That's the main argument of the book, and it is repeated at various stages in the history of energy. So the use of wood just for propping up mines was sufficient to...

People did not burn wood anymore for energy, but they used wood to produce energy from coal. This is just one example. There was also a non-transition from coal to oil. This is a picture of the Ford factory in Dearborn, where in the middle you can see vast open-air storage facilities for coal in order to make cars from steel. The steel was produced here.

partly on site. So the biggest source of demand for oil in the mid-20th century were cars. Cars were made from steel, which was produced and continues to be produced, of course, from coal, with heat from coal. Cars also required roads and much more fortified roads than the dirt

roads that existed before and they required a lot of coal, all of the materials that go into these roads to this day. Oil was also and continues to be transported in tankers and pipelines which consume enormous amounts of steel to this very day. Now where are we today? This is from the International Energy Agency's electricity report. Last year's report on the left showed a projection

for the next three years, 2024, 2025, and 2026, that projected a decline

in the use of coal for electricity generation. As soon as this year's report, which came out a few days ago, you see that this projected or forecast decline has disappeared. There's now a tiny decline forecast for 2025 and then actually an increase for 2026.

The demand for energy has, of course, increased as all of you are aware from things such as data centers and AI and just general. So what we are now dealing with here, of course, in this book is the so-called

rebound effect or the Jevons paradox as energy sources become cheaper and as generally goods become cheaper, demand for them increases and uses for them increase, which is not at all surprising. You can also look at this chart, global energy sources all in one chart. Clearly there's very little sign of a transition. It's more and more and more as the title of this book says.

What's the implication for climate policy and the things we are discussing tonight? So the story of climate change is a problem of vested interest of carbon capital, which is a common political economy way of telling the story of this green transition. You have to overcome entrenched resistance from the fossil fuel lobby and then we'll have won. But this story, according to Fréseau, underestimates the immensity of the climate challenge.

And history shows us this. Getting out of carbon will be far more difficult than getting out of capitalism, a condition that is probably necessary but certainly not sufficient. Now, the challenge from this perspective is to suppress this rebound effect. We want to reduce the demand for things as those things get cheaper, including energy.

But that's not capitalism's strong suit, and that's also not market's strong suit. Brett mentioned we need carbon pricing, but the basic dynamic is and always has been as energy gets cheaper, we come up with new ways of using it, and new ways of using it become

profitable and they are being embraced and rolled out on a large scale. And so last year's projections of energy demand and therefore demand for coal for energy are already surpassed by this year's forecasts. So non-market coordination is called for precisely because the emphasis needs to be not just on scaling up renewables but from a historical perspective

The challenge, the real difficult challenge is not deploying solar and wind. It's phasing out coal, oil and gas. This has never been done before. There has never been an energy transition. This is of course a different situation. This is a socially engineered, politically engineered energy transition, whereas previous ones were not really. So there is hope from that perspective.

But the focus needs to be, we need to really focus, I think, in this discussion on reducing fossil fuels. Now let me just spend one more minute on this paper that Daniela and I have recently published after many years of working on it, on green macrofinancial regimes. Here's the title. It's on the internet. And we have a typology of four different

four different macro financial regimes that we loosely link to different configurations in different countries currently. And we distinguish between two dimensions. On the one hand, the scale of public spending. That can be low or high. And if you think about the difference between the weak de-risking approach, as we call it, that's been mostly deployed in Europe,

and what we call the robust de-risking approach that's been deployed by the United States under the Biden administration, especially in the form of the Inflation Reduction Act. One difference is that the scale of public spending, at least if all these tax credits were actually in the IRA, were actually, you know,

becoming reality and applied, which now we don't even know if that will happen, then the scale of public spending in the US under this approach would be much higher than in Europe. So that's one crucial dimension in which green macrofinancial regimes that

offer a path towards decarbonization in theory are different. But then there is a second dimension, which is the degree of discipline imposed on capital generally and on capital that has something to do with greenhouse gas emission in particular. And here we distinguish between... So de-risking regimes are low-discipline regimes precisely because they require...

sector profits in order to coordinate investment in the economy. These are market-led investment regimes, so profits are decisive and coordination is achieved via market prices that are slightly modulated by the state. Then you have high-discipline regimes. One is carbon shock therapy, we can talk about later. The

The other one, their discipline comes through the market. Everything, this is the carbon pricing regime. Put a massive price on carbon and let the market rip and do the rest. The other one is what we call the big green state. And here discipline comes through the state, which doesn't mean that it becomes any easier

to impose discipline on carbon capital. It's just a different mechanism and the political obstacles that prevent a high carbon price would also make it very difficult for a big green state to impose discipline. And maybe or maybe not, Danila will talk more about it. She has left this in the dark. So I'm very curious to hear what she has to say. Thank you. Thanks, Ben.

Okay. Daniela, over to you. Thank you. So you see, Ben has made life difficult for me in two ways. First, he very bravely and successfully attempted to summarize our paper in a minute and a half. Well done. And secondly, he brought charts and

As a political theorist or scientist, I don't know what to call him. And as an economist, I feel a bit bad for not bringing your charts. I think it's part of the contract we signed when they gave me my PhD that I would always take charts in a presentation. And Ben, you made me look a bit out of guilt. So how to continue?

How to continue from here without charts. I want to maybe tell you a bit of my kind of personal experience as a researcher trying to understand political processes around decarbonization. And I want to make two big points. And we've been thinking with Ben...

That, you know, Ben and I are co-authors. We know Brett for quite a while now, and we are sitting here, three people on a panel agreeing with each other, and it can be quite boring, so we were thinking how to find sources of tension and disagreement in our argument. So the first source of disagreement, you haven't heard tonight anything about what I think has been the biggest political obstacle to

So decarbonization in Europe, and I'm going to stick with Europe because it's an important part of the second part of the story. The biggest political obstacle to decarbonization in Europe has not been carbon prices, have not been politicians, has been big finance. The power of large financial institutions who to me are very important because they create credit, they allocate credit across the economy, and if we want to strengthen assets, we have to strengthen their assets, not just carbon assets.

So big finance, this is the first point. Big finance has been the biggest political obstacle to the last decade of European attempts to decarbonize. And the second point that I want you to take home is that when we talk about decarbonization, we should stop talking about price signals and market mechanism, and we should start

talking very seriously about the state. Only the state can deliver the kind of decarbonization that can meet the challenges that Brett spelled out and made me even more depressed than I'm usually these days looking at the political situation. And for the state to be able to do that, it needs to create mechanisms to discipline capital.

And we don't talk enough about discipline. I think discipline in capital is something that before neoliberalism happened a lot in development states, in developmental states, it's not impossible to do and Europe has tried to do it. And I'll tell you now my personal story of how I came to observe European attempts to discipline, particularly big finance, why they were successful for about, I don't know, nine months. It's a strange period, but that's how much the European Central Bank, and I'll talk to you about central banks because this is how I started my career.

studying central banks. So these two points, right? Big finance and the big green state or the state's ability to discipline capital particularly but not exclusively through central banks. And I came to this story around 20-- in 2013, 2014, I started working with civil society organizations on the financial transactions tax.

This was a proposal by the German and French governments pushed through the European Commission, and it scared big finance quite a lot because all of a sudden the financial transactions tax was not only going to be applied to currency markets, which is what civil society organizations had wanted for a very long time, to kind of redistribute some of the speculative assets

profits that were coming from the global south. But all of a sudden, the European Commission said, oh, we will put our financial transactions tax on almost every kind of market-based financial instrument. And that was big. It meant there would be a tool to basically engineer structural transformation in the European financial system. This was the good old days when the global financial crisis was very fresh on the minds of European politicians, and they all felt that something needed to be done.

And that, of course, that process kind of started very ambitiously and it died a very European death. But what stayed from there was my personal relationship with civil society organizations that kind of became again important once a country signed the Paris Agreement. And once with the Paris Agreement, we have to be very clear that with the Paris Agreement,

in 2015, we have a recognition from the 193 signatories that the carbon price mechanism or carbon taxes are not enough, that decarbonization should be a national project, it should have nationally determined contributions, and there has to be some kind of general planning or some general mechanisms to achieve this reduction in contributions.

And from 2015 to 2018, I was not a climate skeptic, but because I was trained in development studies, I used to think that environment, as Edward Said taught us, was for like liberals who didn't want to think about poverty and inequality and structural change. So I didn't pay much attention to it until I went to a conference in Brussels organized by the European Commission.

called the Sustainable Finance Conference. And I thought, okay, since I'm studying finance, I want to understand what the European Commission is doing. And talking to financiers there, I realized that they were very, very worried about one thing. And usually financiers are not worried about the European Commission because it's very easy to lobby and it's very easy to extract concessions. But they were worried because

This conference was a day-long conference. It was super high profile. There were a thousand participants in the room, which is quite a lot. I was probably the least well-dressed person there, me and five civil society participants. The rest of them were bankers and financiers. And they were all very worried because the commission was envisaged in proposing a taxonomy of sustainable finance

which is a taxonomy of economic activities that would distinguish between green economic activities and dirty economic activities. And it's a long story. We can talk about it more if you want. But what worries them is that once you have a taxonomy that distinguishes between green and brown, then you can have something called a brown penalizing factor.

And this brown penalizing factor worried financiers because all of a sudden it looked possible that both the European Commission and financial regulators more generally would start to impose penalties on financial institutions that gave credit to fossil fuel companies.

That's when I realized that this is an important political struggle. It took quite a while for it to unfold, but the European Commission for a while was very determined to create mechanisms to discipline capital. This is why I'm talking about the role of the state and disciplining capital, because the Commission was prepared to do that. This taxonomy process took a while. At the beginning there was some determination

to create both a brown taxonomy and a green taxonomy to impose penalties on financial institutions. However, it got kind of amplified in 2019 because we had a new European Commission where there were lots of green MEPs and these green MEPs were very alert to students and young people in the street basically marching every Friday for climate.

They were also very alert at the political pressures around the climate crisis. It was like the heyday of green climate activism was probably 2018, 2019. We also had the new president of the European Central Bank, and this is where I'm going next. The new president of the European Central Bank, Christine Lagarde,

came from the IMF. We who studied the IMF were a bit worried because the IMF is a very conservative institution that only does fiscal austerity. But when Christina Gart came to the European Central Bank, she said, I will make climate a part of the operations of the Central Bank. And this is very unusual to do so because the European Central Bank, like any large central bank, basically is in

in the business of targeting prices and keeping prices stable, in part for reasons that Brett explained, because of this neoliberal obsession with the importance of price signaling and the price mechanism. But once Lagarde came to the ECB, all of a sudden she said we will make climate an important issue,

And we will start thinking about how to realign financial flows or credit away from brown activities into green activities. So this idea of disciplining capital into the strategic priorities of the European states became more politically salient. And that was an important moment. And here is where market failure comes to play a part. Market failure usually, I also agree with Brad, that market failure is not a good way to think about

how to address the climate crisis because I think the state has to ignore the price mechanism, it has to suppress it in some ways. But it was very useful for the European Central Bank because all of a sudden they could say, well, there is a market failure to price carbon in financial markets when Shell issues corporate bonds. The price of climate destruction that Shell does is not in the price of this corporate bond.

And because the European Central Bank was buying lots of corporate bonds as part of its unconventional monetary policy interventions, all of a sudden it became possible to say that there was a market failure in financial markets. And because the ECB was ignoring this market failure, it was basically in the business of subsidizing carbon capital. It was in the business of subsidizing climate destruction. And with this...

intuition and behind this kind of legitimization of market failure, all of a sudden the central bank starts to say it is our mission, it should be our mission to at least correct the carbon bias that we have in our operations and to discipline capital. And

What does it mean to discipline capital generally? I think Ben showed you this idea that you can discipline capital through the price signal, and that's where I will disagree with Brett, and maybe we can go back to it. He said that the problem with carbon prices is that they are not economically and socially-- sorry, they are not politically and socially sustainable. As in, if you raise carbon prices or put carbon taxes high enough, you generate some adjustments, but they can't be-- it will kick politicians out of power very quickly.

To me, there is a third dimension that is important that you also trigger economic adjustments. You have a disorderly transition and if you read the paper with Ben, we argue that the German is going through a version of carbon shock therapy because it's allowing prices to basically shrink some economic sectors. And that generates bigger, in a sense, it amplifies social and political problems, but it generates bigger questions. So...

With this, and this is where the ECB became almost like a green planner. Brett talked about how we need some kind of planning in order to decarbonize. We had a central bank with a very kind of neoliberal framework of operation that only cared about price stability. We had a central bank that all of a sudden said, you know what? I need the business of disciplining capital. I will discipline big finance into...

lending less to dirty activities and lending more to green activities and it did so and when we think about discipline we should think very carefully about how do you make sure that capital does what you want it to do. And you can't make sure that it does what you want it to do unless you have some kind of new institutional framework under which you can very closely monitor what they do on a regular basis.

And this is where the nine months came in. For nine months, the European Central Bank designed a mechanism to basically monitor the climate footprint of every large corporation that issues bonds and then to adjust the portfolio of bonds that they have by selling some of the dirty bonds, buying some of the green bonds. And you can say, okay, this is still a price mechanism, but it was...

to my mind, probably the most innovative and in a sense the most radical measure that a European state had taken on the pathway towards green planning. Because it brought back something that the French know very well from

the post-war period, it brought back credit policy. And when we talk about the role of the state in decarbonization, we have to start talking about what can the central bank do and how should they do it? How does it discipline capital? What does it mean for public investment?

What does it mean for nationalization of particular areas of economic life because some of them will have to be nationalized. Stranding assets is not as easy politically unless you have to compensate investors one way or another. And I'll just finish with this.

There are examples already of states trying to do this. Carbon pricing is the least interesting example to my mind. The experience of the European Central Bank, the experience of the Bank of England to some extent as well, shows us that there is political, or there was for a while, a political opportunity

to push the state into a direction where it can take control of capitalism on a much larger scale than it has done during neoliberalism. In the question and answer session, I'll tell you why this failed. Thank you.

Okay, thank you panelists. That was fascinating and Daniela congratulations for opening out a line of disagreement that we were wondering where it was going to come from. And now it's over to our audience. So raise your hands. There are roving microphones, I believe.

I will try to be fair and balanced in picking people out. Don't get upset if it takes a while to get around to you. When the mic reaches you, could you please briefly state who you are and your connection to LSE or why you're here, and then ask a question rather than give a speech?

because the panelists have already done a great job of that. So, okay, so let's start on this side of the room. I've a gentleman here in the second row, a gentleman here a bit further up near the aisle, and we'll do those two and then...

Take polls. Yeah, go ahead. Hi, my name's John, and I don't have a connection to LSE, but I work in finance, and I won't say where. So I guess I just want to question the point on the taxonomy. Having used it, I find it very complicated, but I guess if policymakers know enough about what's green and what's brown...

Why wouldn't they just directly make those things profitable or unprofitable instead of indirectly trying to get the finance sector to do it? Because my experience has been we just follow what's profitable and unprofitable. And so it seems like it would be a lot cleaner to just do it right at the source rather than second to removed.

Okay, shall we collect and then you can all have a go? There's another question here. Can I just ask that we think of gender balance in the questions? I'll try. Ladies, please put your hand up, otherwise the feminist in me will die. Glad you said that. I got told off once for making a similar point. I'm gently telling you off. Okay. And yeah.

We have another question further up. So yes, go ahead. Thank you for your comments. Charlie Laurie at the University of Sussex. Just a couple of quick questions. One is--

could I suggest that there's a Eurocentrism to this conversation in the sense that the majority of the world's hydrocarbons are owned by state-owned companies, so does Europe even matter? And then the second is the discussion has assumed that the state and capital are somehow analytically distinct categories which in so many countries, in fact probably all around the world, they just aren't. Thinking of the namesake of this program, Ralph Inaband, and all of his work.

Thank you. Great. And then a third question just a bit further up. Somebody had their hand up. Yeah. Hi. I'm studying a master's here in environment and development at LSE. And we've actually discussed all of your work quite a lot on the program. So it's been really great to hear you talk. And I have a couple of questions. We've been talking quite a lot about

the role of the state in regulation. And I'm just sort of wondering how you envision that that is going to happen because we speak a lot about the state as this kind of like abstract entity, but really it's made up of real people who are liable to influence in various different ways. So I'm kind of wondering whether you envision that civil society is going to play a big role in pressuring them and also what kind of like psychological changes need to happen. And then a second question I have as well is

We spoke a little bit about how in 2019 there was more of a push for change than there is right now. And you mentioned, I think it was Daniela mentioned the Green MPs. And I'm wondering whether you think there's any hope that at the moment we are seeing like sort of a rise of transnational Green City networks and a lot of mayors who are wanting to enact change or whether it's, you know, just green capitalism in disguise.

Okay, thanks. So three questions is something to get started on. In any order, fire away. Brett? Yeah, I'll just make a couple of points that address at least some of those questions, hopefully, if not all of them. I mean, I think just the point about the intertwining of the state and capital is something that came up, I think, in a couple of questions.

I mean, I think that's really, really crucial and it's really, really crucial not just in those countries where fossil fuel companies are wholly or largely owned by the state. I mean, if... So going back to one of the things that we were all discussing in one way or another, if you think that the state is the only actor with the...

any likelihood of being the one to actively strand fossil fuel assets. The question then becomes why is that not happening to any significant degree anywhere in the world? I think the worry about what you might call fossil fuel inflation is one of those, but obviously the other is that everywhere in the world

where fossil fuels are produced, the state actively benefits from that, either as the owner of those assets themselves or as the recipient of significant tax revenues. And so the idea that any state really in an active fossil fuel producing nation is going to willfully...

take the lead in stranding those assets while others are not doing so around the world, I think is unfortunately is a bit fanciful. And actually I think it's quite interesting in that light to think quite, not cynically, but at least skeptically about Labour's plans until at least recently to not issue new fossil fuel licenses in the North Sea.

It's very easy to think of that as a very progressive measure, but the reality is that the North Sea is kind of an exhausted basin. It's the most expensive fossil fuel producing basin in the world. So the profitability of it is very, very minimal. So the state in the UK is actually not giving up that much as a financial actor in stranding assets in the UK compared to what would be the case in much cheaper producing regions of the world.

the US included, let alone Venezuela or Saudi Arabia or other parts of the world. So the state is fundamentally part of the fossil fuel producing

complex, whatever you want to call it, either as an owner or not as an owner, simply as the recipient of tax revenues. There was one of the other points, and then I'll just talk about that one, about why don't we just directly make activities more or less profitable. I think that's an interesting point, and I think one of the points why it is interesting, and this connects to something Daniele was saying, was that actually the idea that you can disconnect

discipline

fossil fuel capitalists through finance is actually has become increasingly moot I think in recent years precisely because those oil and gas companies are making so much money that they can actually fund new investments almost entirely out of existing cash flow. They don't need to go to the debt markets, they don't need to go to the equity markets to raise capital to do that. So the very idea that you can discipline them through finance even if that was something you were inclined to do has actually become increasingly moot.

because they simply don't rely on that external finance. In fact, they're returning money to investors rather than actually taking money from investors. But why don't you make it more... I mean, this is a good question, right? So one of the things I've been trying to write about in recent years is that one of the reasons we're not seeing more investment in renewables is that it's simply not profitable enough, particularly for those actors that generate much greater profits in fossil fuel business.

So the argument might be, let's just make it more profitable so the investment flows in. Well, there's all sorts of problems with that. But one of the problems with that is you make it more profitable for them, that tends to mean making things more expensive for consumers. You can't get one thing or the other. If you make it more profitable and incentivize investment in that way, it tends to mean higher bills for energy consumers. So I think governments in countries that at least are semi-serious about growing renewables

are caught between a rock and a hard place of, A, wanting to keep household energy bills as low as possible, but on the other hand, wanting the profitability of the generation on the renewable side to be sufficiently high to incentivise private investment. And they're constantly struggling to thread the needle between those two things because they're fundamentally incompatible with one another. Brilliant, thanks. Ben, Daniela? Yeah, thanks for these questions, maybe about...

The first question about why so indirect, I think this is a great question that we can ask about many things that the European Union and its fiscally constrained member states are trying to do. Often

state actors, state managers, technocrats, embracing direct ways of doing things, trying to enlist their financial sector to achieve their goals because they lack the state capacity and or the political will or mandate to do it themselves. And both are equally important. Even if there was political will right now, we would not have

capacity. There is a reason why the one episode that happened in this direction happened at the European Central Bank, which to some extent, you know, you can think of central banks as extraordinarily well resourced, staffed, trained and so on organizations that are

remnants of state capacity that have not been harmed by decades of basically gutting of state capacity that have affected so many other branches of the state. So, you know, same elsewhere. The military in some states and the central banks. In Germany, not so much the military, for example. But, okay, so...

Why carbon assets are owned by the state, we've heard this, or states benefit from tax revenues. I would add that when you think about who would be affected right now from the stranding of fossil fuel reserves, that's not just the states that own carbon.

those assets, but also shareholders that own the remaining shares, the floating shares. Not all of these assets, fossil fuel assets, are fully owned by states. A lot of them are privately owned by oil companies that have shareholders, and all of those shareholders are in the global north.

All is an exaggeration, but almost all of the wealth is in the Global North, and therefore all of the shareholders are in the Global North. And a lot of these shareholdings are concentrated in pension funds, which then impact large swaths of the Global North middle class. So the ways in which we're implicated into the fossil fuel economy are infinite and extend everywhere.

Maybe I'll leave it there and then come back later. Okay. Let me start with a question of the taxonomy. What is interesting about the taxonomy, and you pointed to it, we didn't go into the details, it became so complicated in some ways that it just generates... And complication to some extent is sometimes a political instrument to make it more difficult to use taxonomy.

I think that some of the complexity there was in some ways deliberate. But the interesting thing about the European Central Bank is that it didn't need a taxonomy. It created its own climate scorecard. It had three sub-components. And on its own, it had a metric on which it could decide whether credit should flow less or be more expensive for certain sectors or for certain corporations. This was at corporate level, not at sector level. And the taxonomy is another thing.

So it showed to me the capacity of technocrats to design or to protect

direct new initiatives or new institutional frameworks to discipline capital from the lobbying power of capital, which the taxonomy was in many ways a failed experiment. And related to that, the idea that it should be indirect, that's a framing that I often hear from finance, that why are you regulating us, why don't you go directly to the economic sectors that are producing, why don't you deal with the problem at its core?

The answer to me there is that it actually requires a much greater degree of planning to directly stop private companies from producing or to impose targets on them. The only way out is public ownership, and we are not yet at the level where you

European political elites are prepared to say we will nationalize large parts of our economic activity so that we can decarbonize. In some ways, if you live in capitalism, you have to take seriously that credit is a very important institution of capitalism and it does things in society and you need to work with it. That's the experience of all

strong states that decided to stay within capitalism and direct capitalism and direct economic activity to a certain extent. So, to me the alternative, and we can debate this, the alternative to working through the financial system would have been to say, okay, public ownership and public ownership on a large scale.

I grew up in communism, I know what state owned companies look like. Sometimes they can be more efficient, sometimes they can be less efficient, but there are certainly no political will to do large scale nationalization, which I think is necessary.

And on the analytical difference between state and capital, I think it's both analytically important to distinguish them outside countries that are clearly fossil fuel exporters and they're okay. The political economy is very different. But it's also a political position to take because if we think that state and capital

or basically indistinguishable, then basically we're saying we will never get decarbonization. This is not politically possible. We are just playing at the margins with some kind of good intentions because there is some political pressure in the street, but eventually it

it's a dead project. So I think I would preserve that distinction. I think it's important. I think we have examples where the state doesn't work, it's not always subordinated to or advances the interest of capital one way or another. There are, and we can, I think the European Central Bank is an example of that, although it's a short example, so I'm kind of shooting myself a bit in the foot, but it was there, it could happen, and

And that's where the story of why did it fail, and I would suggest, please, if you want a longer answer, read our paper, but the short answer is you can't transform economies with the institutional framework that neoliberalism put in place. The institutional framework we have now is independent central banks

who are accountable for price stability, where the political pressures when inflation is high is for them to reorient there. And Christine Lagarde, that I mentioned at the beginning, ended up being derided as Madam Climate, and internally and externally, both the financial sector and...

fossil fuel companies and fossil capital that was basically trying to push back against this initiative of green planning were saying, why aren't you focusing on price stability? So we need large-scale institutional change for green planning to happen and large-scale institutional change is...

difficult to achieve but not impossible. If you look at what Donald Trump is doing now, he's delivering probably large-scale institutional change. We might not like it, but this is what it kind of has to look like in some ways, hopefully with a progressive government in charge rather than an authoritarian one. And on the question of politics there in the back, thank you very much. I think...

So when you talk to people in central banks or when you talk to people in the European Commission, they will say that political momentum and political will to change, to transform things fundamentally comes from the street. It basically, they were in some ways maybe intimidated, in some ways mobilized, in some ways legitimized because I think there were people inside state institutions that wanted to do things about climate. They were very clear of what needed to be done

in the horizon of political possibility that is not nationalization or central planning. And when I asked them, why did you stop? They said, well, because there is no political pressure in the street after COVID. And this was very unfortunate. I mean, COVID

COVID pandemic could not have come at a worse time than it did because it basically destroyed all political momentum for climate that we had. So will we get it back? I don't know. I mean, there are many of you here in the room. I'm hoping this is a good signal one way or

that climate politics is not dead. My experience from working in various areas of kind of policy debate is that a lot of politicians are afraid of it and they are afraid of it because they don't have either the imagination, they don't have the political pressure, and they don't have the tools to think about particularly public investment. That's why we talk a lot about public investment in our paper because obviously you resolve in a sense the problem of

a state capitalism that exports fossil fuels by cutting the demand and that was the intuition and that's my political position personally is if you have public ownership of transport, if you have public ownership of a lot of what used to be public goods, you fundamentally reduce demand for cars going in the streets, even for electric vehicles and you can shrink demand for fossil fuels.

Just to follow up on what Dan was saying about the politics of it, I think that if you take

The fact that the stranding of fossil fuel reserves, so basically making them unexploitable, economically or politically unexploitable, is the most important thing in addressing the climate emergency. I would say that essentially all significant initiatives in that direction that have occurred in recent years have come from civil society. Every single one. Nothing has come from governments or from the private sector.

Two great examples of that, one is in Ecuador, which is an example that Mal and Carton talk about in their book.

where there was enough signatures gathered in the early 2010s to have a referendum on not exploiting the biggest fossil fuel reserves in Ecuador. The government refused to allow that referendum to be held, but the campaigners took it through the courts and eventually the Supreme Court of Ecuador ruled in 2023 that the referendum had to go ahead, national referendum.

voted in favour of stranding those assets. And for now at least, it looks like the results of that referendum will be respected. And then much closer to home, a case which I think has had very significant implications in the UK, was where Surrey County Council in the late 2010s approved a new oil development in Surrey.

and a campaigner took it to the court basically making the argument that in granting that permission the county council hadn't factored in

the downstream consequences of that oil being burned for the climate. And again, it went all the way to the Supreme Court in the UK and the Supreme Court ruled in favour of that activist and those assets were stranded and the implications of that ruling are reverberating around the legal system today. And so all of that has come from civil society campaigning.

Brilliant, thanks. The sort of oil prospecting in Surrey took me back for a moment. It's a really fascinating case. Okay, so let's get some more questions. I realise I tried to pick them from this side of the room just to keep things quick. What else? We've got a bunch of questions in the middle. Can the mic sort of head...

I can see four people with their hands up. If you can see them too. There's one question up there too. Sorry, I can't be... Can we start with that one there? Thanks. No, it's okay. You've got the mic already. Go ahead. Next up there.

Hi, I'm Dennis. I'm not affiliated with LSC, so thank you. Can you hear me? Yeah. So thanks for just allowing this lecture to be public for everyone. Really appreciate it. Public good. Absolutely. So my question is around the...

the lifestyle, the carbon-intensive lifestyle that you mentioned, described as the so-called imperial mode of living, that you know it's so adopted in, particularly in the north, but it's desired pretty much all around the world. And my question is, you mentioned that demand basically should be reduced, and there's problems around the fact that society is showing backlash against that. People love the carbon-intensive lifestyle, and also in the last couple of years,

at least to me from papers that i've read it feels that there's been a quite serious media campaigns to exacerbate the dangers or the threats of this uh hypothetical changes that might happen to to individuals if we adopt more climate friendly policies so my question is then is the main battlefront going to be on the media public awareness front rather than in the

in universities. I'd say, and so just quick extra one is would you say that there's any current policy proposals from green politicians that you will support? Green UD obviously probably is the forefront, but de-growth I've heard is a theory as well. Is there any outside that you would support personally or do you think have a high chance of being successful? Thank you. Thanks. I think there are a couple of people just behind you who wanted a question. So if you can pass the mic back. Just... Yeah? Yeah?

So those... Yeah. And then we go to the...

Hello, my name is Gaston Monstering. I'm a PhD student at the International Relations Department. I have a question on the international component. If you see that countries in the Global South already have more problems in funding the green transition, so I guess that the capacity to strand assets is also unequally distributed. So what is your perspective on this international perspective? And Ben, you mentioned as well this kind of...

ownership concentrated in the global north so countries in the global south have less capacities of the state a higher balance of payment constraint at the same time they must also in a way strand capital from the global north so what pathways are there in the global south as well as maybe a higher responsibility in the global north. Okay thanks and yeah quickly yeah

Yeah, thank you. Email from Soas. Maybe also for Ben and Danina. I was wondering what you think about the whole off-balance sheet fiscal agency ideas from like Steffen Mugau and others. So the idea that if we lack the state capacity and political will to do state investment directly, that we create some entity like a development bank and make them fund themselves via bonds on the market and then we do...

implicit guarantees from the government to come up with those bonds. So it is kind of public investment, but like, does not affect the primary deficit of a country. So what is your what are your thoughts on also potential problems with democracy and democratic mandates and so on? Thanks. And if it can work its way up to the top right. Hi, I'm interrupting this event to tell you about another awesome LSE podcast that we think you'd enjoy.

LSEIQ asks social scientists and other experts to answer one intelligent question, like why do people believe in conspiracy theories, or can we afford the super-rich?

Come check us out. Just search for LSE IQ wherever you get your podcasts. Now, back to the event. Hiya. I'm Roxanne and I did a Masters at Leeds about climate change policy and politics. And I also now work at LSE. And so my background isn't in finance. So this question might seem a bit basic, but...

- We keep talking about... - Speak up a bit, sorry. - Is that better? - Yeah. - Thank you. - Did you everything I said before? - Yes. - Just about. - Yes. We keep talking about transferring the cost of carbon pricing onto the consumer.

And I was just wondering, is there not a world in which we could both have the market solution of carbon pricing combined with sort of state regulation to ensure that the extra, like, increased costs aren't transferred onto the consumer? So you can sort of have a mixed approach in that sense.

Great, thanks. Okay, plenty of food for thought. Who wants to go first? Daniela, you're itching. I like the idea, so I'll start with the last question. I like the idea of a win-win situation, but it's not possible. What you're basically saying is that fiscal resources should be used to subsidise the profits of companies so they can continue to produce or they can absorb the carbon tax. I'm

being a bit provocative, but I think it's an important and it's a valid question and the first question also asked it, is it simply something that is impossible to sell to an electorate? The idea that we have to adjust our lifestyles

I'm not sure that I believe that, but I have a German next to me, so maybe he has better views on how difficult it is to sell, I don't know, not eating a lot of meat to the Germans.

I'm saying this because this was part of a political debate around what the German Greens were going to prohibit in Germany and it was very effective in some ways. But to me, if we can transition to, we need new institutions, Emil, so I'm going to touch on that question too. I think that trying to do kind of fiscal engineering with off-balance sheet entities that will do kind of marginal things, it

we need large-scale institutional change for the state to be able to organize decarbonization, to pay for it, and to discipline capital into following it. And, you know, small off-balance sheets, again, Germany is a good example of why that idea doesn't fly very fast, because, I don't know, you have a constitutional court that likes to see things on balance sheets. So I would say no. The more difficult question of how do we address decarbonization

lifestyle issues. I guess, maybe I'm the only one because I grew up with public transport, I guess it's once you have reliable public transport, it's easier to think of not having a car. Or it's easier to think of not using your car every day and that runs for different sorts of other things.

In my previous life, I tried to do politics in Romania and sell this idea, and we had these promises or this political campaign around organizing, for example...

collective kind of kitchens where you can provide food in a way that is more environmentally sustainable. There are ways to think about it, but it really needs a lot of reorganizing of institutions. And I think it's easier to sell it to the public when the distributional politics is not so obviously based on

you put the cost of the transition on the poor or you put the cost of the transition on the state alone. And I will finish with that. There was a question on...

On the global south, I think that's a very important question and we have to remember that in the Paris Agreement in 2015, there was a commitment from countries in the global north to direct 100 billion annually towards climate justice and funding of climate, particularly adaptation in the global south. These commitments have not been met for a variety of reasons that have to do with the fact that the

of austerity for a variety of reasons is still quite powerful. So to me, looking for countries in the global south cannot really, should not expect, pragmatically should not expect to see large aid flows and large climate financing from countries in the global north. I was in New York last week for the financing for development conference that is taking place every 10 years. This year we will be in Seville and

And it's very clear that countries in the global north are thinking we can't even spend on climate nationally, how are we going to increase our contributions towards countries in the global south? And to some extent this is not a bad thing. It's not a bad thing in the sense that we have to recognize, and the Paris Agreement has recognized, that decarbonization and dealing with the climate crisis has to be a matter of national politics and national planning.

And national planning means that, OK, if the political will moves there faster because there are no easy sources of financing, perhaps it's not entirely a disaster to not have countries in the global north recognize that questions of climate justice means they should be paying for decarbonization in the global south. OK. Ben?

So I want to say something about the question about off-balance sheet vehicles. So what about financing parts of the public investment that is needed through off-balance sheet vehicles?

rather than through the regular state budget. It's definitely something that is currently helping us and has the potential of helping us more. Stefan is also a co-author, so I'm not going to go too hard against it. However, I want to say one thing. So off-balance sheet vehicles, this is a way of

The first thing I want to say, the idea that financing is scarce and that that is the bottleneck, I would contest and say that this is not in fact true. What is scarce is fiscal space given the constraints of a legal and political nature that political systems have imposed on themselves. Now I'm talking about the global north.

The chancellor in this country has no money only because the rules prevent her from issuing more bonds and the politics prevent her from raising taxes. So...

Funds are not scarce is also true in the private financial system. Brett makes this point in his book very well, and I think I completely agree. Many financial investors would be happy to invest more in green if certain conditions were met. That's one point. The more fundamental point that I would like to make about this is fudging.

So there is an impulse to find fixes because, you know, time is running out and we need to ramp up public investment or investment generally now. However, off-balance sheet vehicles have something in common with the Inflation Reduction Act, which is why would you name the biggest climate bill in the history of the United States and in the history of the world, Inflation Reduction Act?

It's a way of hiding the fact that the most powerful state with the biggest fiscal bazooka ever is using that bazooka to kickstart the green transition of the U.S. economy and is repurposing the state for once for green purposes. You call this inflation reductionism.

Well, then inflation might continue to rise and you look very stupid on both counts. And you lose the election and everything's over. But that's a different story. So generally, there's also literature, in fact, that is quite serious about this by Fred Block and others who have written about the hidden developmental state in the United States. And it's quite similar here. I mean...

You can also think about in Germany, for example, we have these fiscal rules and then we do special funds for really important things that are so important that we still can't use the normal state budget for them, but we can have a special fund that makes it exceptionally possible to invest in climate change, the biggest challenge humankind has ever faced. But we can't have that in the normal budget.

because of fiscal rules. So the challenge, in my view, is to bring these things into political contestation and really fight for, you know, have a political movement that fights to take

The state is a vehicle and it serves whoever holds power over those institutions. We're currently witnessing what this means in the United States. Some street protests, according to Daniela, were sufficient to reorient the entire apparatus in Brussels, who probably had very little direct exposure to the street protests.

So the point that I'm trying to make is that let's not spend too much energy on trying to find fiscal fudges and solutions to push through little things given the constraints we're under. These constraints, these political constraints on taxation, on bond issuance,

or the possibility of bond markets with minor movements to scare governments. We need to attack these things when the bond markets or the capital market need to be regulated. There are things such as a state can do financial repression in ways that force private investors to buy government bonds.

which the state can issue in order to finance the green transition. The demand is there. That's why, that's what offshore off-balance sheets vehicles do. They do the same thing. They just issue liabilities that private investors buy. It's the same thing. They buy them. There's demand for these public sector issued liabilities. It's just that the government purportedly cannot do it. So that's my cautious response to the offshore balance sheet.

Great. Brett, you want to add something? Sure, yeah, just a bunch of random thoughts in relation to some of those different questions that hopefully take us in thinking in some new directions in addition to those identified by Daniela and Ben. So the first thought was in relation to the point about the, which I think was a really important one, about the unequal state capacity to strand assets.

And all I wanted to do there was not really offer an answer but just give you another data point to think about which I think is kind of a salutary one. Which is that in May 2021, there was a really important moment when the International Energy Agency said

for the energy sector globally to have a realistic prospect of reaching net zero by 2050, so not actual zero, but net zero by 2050, there could, from that moment in time,

be no new oil or gas fields approved for development around the world and no new coal mines approved for development around the world. So since May 2021, the Norwegian government alone has approved over 150 new oil and gas field licenses for development off the Norwegian coast. So we're talking there about the country probably with the greatest capacity in the world

to strand its fossil fuel assets. It's a country that has historically, of course, used up more than its share of the global carbon budget. So the country that's best positioned in the world to say, "No, we're going to strand these assets, we're going to take our economy in a new direction," has basically thumbed its nose at the very idea. And that's the country with the greatest capacity to do that. And you do kind of wonder, how rich do you need to be

as a country and Norway is basically just ignoring its commitment globally in that sense. So I think that is a kind of a telling

indication of the problem we face given precisely the unequal distribution of capacity you mentioned. Second point, in relation to the point up the top about carbon pricing and the distribution of costs of that. So the way I look at this, I mean it's, again, I diverge a bit from some of the people who write about this stuff insofar as

I think that if you're going to think about carbon taxation, carbon pricing, the key is that it has to be done, if it's going to be done at all, in socially progressive ways. And one of the things I mean by that is that while a lot of people say, well, you know, we have to be cautious about inflation that might result from carbon...

My view is that we need inflation, we need massive inflation for particular classes of consumers. So climate change is a class phenomenon if nothing else. Precisely those people who Ben was talking about as having their pensions invested in fossil fuel companies are exactly the same class of people who have much more carbon-intensive lifestyles than the rest of the world. It includes many of us in this room, including myself.

And frankly, we need inflation through carbon taxation in our lifestyles so that we live much less carbon-intensive lifestyles. So the idea that inflation is kind of a universally bad thing is something I'm not sure about. It's about the distribution of those costs.

a very small percentage of the population is responsible for the vast bulk of carbon emissions. It's quite a discomforting fact to realise that one is oneself a member of that class. Related to that, on the third point, which is precisely about lifestyle, one of the earlier questions, I think one of the interesting things about the mainstream narrative from what you might call the progressive generation

but very, very liberal commentators on climate and climate solutions. I'm thinking about people like Hannah Ritchie, people like Michael Mann, I would include in here. It's precisely the point that we can solve this without any significant impacts on lifestyles and on the way we live. I personally don't believe that. I think that's a complete fallacy. And I think that while I think that, of course,

changes in individual lifestyles, changes in individual consumption are for nothing if you don't have institutional change and large-scale asset stranding. I'm not as convinced as other people that they're completely disconnected from one another. I do think that changes in consumption habits amongst

those who are in the public eye, whether that's politicians, business people, academics and others can have much more impact than many people think. And I think there's also just a fundamental hypocrisy to it. I think if one is going to sit here saying, you know, we want the fossil fuel companies assets to be stranded,

but will continue to actually benefit personally from their continuing production of fossil fuels through our lifestyles for as long as they are allowed to continue to do that. I think there's a certain hypocrisy there that we should be aware of. Brilliant, thanks. So we just have a few short minutes left. I'd like to relay a question from the online audience and see what you think about that. From an anonymous user who asks,

If increasing state interventionism is the most viable way to discipline capital, is the solution here socialism?

So maybe your thoughts on that. But also I'd like to throw in a question, which is that so much of what happens in financial markets is to do with expectations of the future, and current prices supposedly incorporate all of this information that we have about what we think we know is going to happen in the future. And I'm just thinking what kind of scope is there to manipulate that?

in various formal or informal ways these expectations because clearly one thing is stranding assets, another is the fact that none of the financial assets that are currently being traded are really incorporating the certain costs that a future climate crisis is already bringing and obviously is going to accelerate.

Is there any smart thinking out there of how we can sort of do things to sort of discipline and away capital to stop buying stuff which is destroying us and not having to deal with the internalizing the costs? That and socialism. And you have two minutes. I'll have a very short answer to the first question about socialism. It's a big failure, I think, on everyone's part here, on our part, that we haven't talked about China enough.

which will decide the fate in terms of corporate emissions, of course, and which is the example in our paper of a big greenish state. This state has the capacity to do the discipline of capital that we have been talking about. This is also the state that has deployed more solar last year than the rest of the world combined, and the same is true for wind. So this is...

the renewables deployment is on a whole different scale. However,

Despite being a socialist or communist state, they face very similar problems. This is the point that I, that's why I was talking about the book by Friseau. Exiting capitalism is maybe a necessary but not sufficient condition. So China last year, or increased,

started or restarted development on, I think, a record number of coal mines or a much greater number of coal mines than in previous years, while also being a renewable energy champion. It's just a fact that we need to reckon with. It's not, unfortunately, even as simple as capitalism or not.

So when Ben and I were writing this paper, we were trying to think through whether we should have some form of degrowth in there as a specific or a distinctive macrofinancial regime. And once you start thinking seriously about degrowth, you have to think about green socialism, I would say, Jonathan. Jonathan and I have known each other for quite a while, and I'm trying to provoke him into a debate around Jeremy Corbyn and whether that could have been the path to socialism. But

I would say I grew up in socialism and it was a pretty environmentally destructive kind of socialism. Maybe a different kind of socialism is possible. If I had like a magic wand that would give me one political will under capitalism would be socialism for the pension funds. That's my one big proposition.

proposal everywhere I go. I say nationalized pension funds and everything else will follow. It's probably one of the most demanding political kind of actions to do under capitalism, but it would trigger radical reforms. And despite what Brett just told you,

pension funds of people like me in the UK university system don't seem to be benefiting us as much as they do in Sweden, I suppose, where you are. Here it seems that the redistribution is at the level of the people managing the pension funds. We were on strike for at least three years trying to keep the very small pensions that they were promising us because they threatened to take them away. And seriously, if you think about it, and this goes to your broader question, Jonathan, about

How do we think smartly about this? When the state, let's call it the state in general, or the financial regulators in general, thought about how do we reorient or how do we discipline capital into basically supporting less dirty activities and supporting more green activities, they also thought about private equity, for example, about the fact that there are pockets of finance that can absorb

assets that we would like to strand and milk them further. So you really need to be very careful about the whole range of financial institutions that you have to regulate. And again, the easy solution of the politically difficult one, but the easy intuitively one is to say, do

don't allow private equity to use my pension contributions in order to basically both destroy the planet and kill me earlier in a retirement home. So yeah, this is a take-home to solve capitalism, socialism for the pension funds. Brett, final word.

I want to pick up on your point about expectations. I think it's a really interesting one. Just to connect back to something Daniela was saying in her original comments, I think that there was around, particularly when there was a crucial moment of time between around 2016 and 2020, where many institutions, particularly within the financial sector, but not only in the financial sector, had an expectation of forthcoming

of fossil capital in one shape or form, whether it was through the financial sector or other. What's happened since around 2021 is what they've seen, not least through the reactions of governments like the Norwegian government, but not only the Norwegian government, every government around the world, is that governments are actually not remotely serious, frankly, about taking the type of action that they had, that many people in and associated with the fossil fuel sector had feared.

And that has emboldened the fossil fuel sector. And now, the second point is that if you talk to them about their expectations, if you talk to people within the finance sector, and a friend over here might disagree with me, but conversations I've had with people in that world within the last year, is that there's absolutely no expectation from people in that world that we're heading for anything less than three degrees. They're planning on the basis that that's where we're heading. They'll tell you that in private, they obviously wouldn't say it in public.

And of course, there's a self-reinforcing element to that, right? If that's what they're expecting, then they invest accordingly and we end up precisely in that type of world. And then the third point in terms of the thinking around the role of expectations in all of this is I think the other thing to remember about the finance sector, and again, I might get brickbats from over here, is that most people working in that world are not thinking anything like that far ahead, right? Everything about that world is relatively short-termist, right?

in terms of institutional incentives, personal and professional incentives. The idea that people are acting in ways that really pay any credence to expectations about things that are perceived to be likely to be happening decades ahead, I think is quite far-fetched. Those expectations are quite narrow actually.

Excellent. Well, we've run a couple of minutes over time, but I think it was well worth it. It's been fascinating. Just before you leave, a word of thanks. Thanks to the Ralph Miliband Steering Committee for organising this, Milena especially, for putting this together. Thanks to the LSE Events team and everyone working here tonight to make this happen. Thanks to all of you for coming and asking interesting questions and taking part. And above all, thanks to all our panellists. And a big round of applause. Thank you.

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