Green Transitions: Rethinking Political Economy in the Context of Climate Change

Kus, Basak; Jackson, Gregory Article — Published Version Green Transitions: Rethinking Political Economy in the Context of Climate Change Regulation & Governance Provided in Cooperation with: John Wiley & Sons Suggested Citation: Kus, Basak; Jackson, Gregory (2025) : Green Transitions: Rethinking Political Economy in the Context of Climate Change, Regulation & Governance, ISSN 1748-5991, John Wiley & Sons Australia, Ltd, Melbourne, Vol. 19, Iss. 2, pp. 287-302, https://doi.org/10.1111/rego.70013 This Version is available at: https://hdl.handle.net/10419/319318 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ Regulation & Governance, 2025; 19:287–302 https://doi.org/10.1111/rego.70013 287 Regulation & Governance ORIGINAL ARTICLE OPEN ACCESS Green Transitions: Rethinking Political Economy in the Context of Climate Change BasakKus1 | GregoryJackson2 1Wesleyan University, Middletown, Connecticut, USA | 2Freie Universität Berlin, Berlin,Germany Correspondence: Gregory Jackson ([email protected]) Received: 24 December 2024 | Revised: 21 February 2025 | Accepted: 24 February 2025 Funding: The authors received no specific funding for this work. ABSTRACT Although political economy (PE) has long engaged with environmental issues, climate change has remained at the margins of the field until very recently. This article argues that fully addressing the transformative challenges brought up by climate change requires a fundamental rethinking of core PE concepts related to the state, distributional struggles, economic growth, varieties of capitalism, and markets. Rather than treating the state as a neutral regulator or market facilitator, we conceptualize the green state as actively structuring transitions through mitigation policies, adaptation strategies, and the governance of just transition conflicts. Green transitions generate new distributional conflicts—within and across countries, between incumbent and emerging industries, and among social groups with unequal exposure to climate risks and transition costs. Climate policy also challenges growthcentered economic models, raising questions about the viability of green growth versus degrowth strategies. Different varieties of capitalism are evolving in response, with distinct institutional pathways shaping the speed and character of transition efforts. Finally, we critique marketbased approaches that assume price mechanisms alone can drive decarbonization, highlighting the role of noneconomic values, institutional constraints, and distributional struggles in shaping green markets. By linking climate change to core debates in comparative and international political economy, we identify new research agendas for understanding the uneven and contested pathways of green transitions across economic systems. This article, along with the others in this special issue on Greening the Economy: Toward a New Political Economy, aims to bridge some of these critical gaps. 1 | Introduction Climate change poses an increasing array of risks, becoming more severe each year and emerging faster than previously anticipated (IPCC2021). Human food systems are under growing strain, species are disappearing at an unprecedented rate, and the migration of plants and animals due to changing climates is increasing the potential for disease transmission, exacerbating ecological and human health challenges.1 The World Health Organization reports that over 3.5 billion people live in areas highly susceptible to climate change and that over the next two decades, climate change could cause 250,000 additional deaths annually.2 These developments are likely to fuel geopolitical tensions and conflicts over resources such as water, arable land, and energy, and are inevitably associated with significant economic costs. According to some estimates, current trends could result in a loss of 10% of total economic value by 2050.3 Businesses will see their assets lose value or become worthless, while also facing reduced revenue and increasing operating costs due to extreme weather events. Insurance premiums are rising and in some highrisk areas, coverage may no longer be available. Furthermore, climate change is expected to worsen longstanding socioeconomic inequities as marginalized groups—such as farmers, indigenous communities, and urban poor populations—often face the highest exposure to climate hazards, while lacking resources to adapt. The absence of formalized adaptation mechanisms or relief programs within nations' social security schemes exacerbates these challenges, This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. © 2025 The Author(s). Regulation & Governance published by John Wiley & Sons Australia, Ltd. 288 Regulation & Governance, 2025 leaving populations without sufficient safeguards such as disaster insurance, heat shelters, or recovery funds. The most severe impacts are unsurprisingly expected to occur in lowincome countries, which contribute minimally to global emissions (see Figure1)4. As such, climate change raises urgent moral and policy challenges regarding historical responsibility and the equitable sharing of mitigation and adaptation costs. To reduce reliance on carbon and adapt to the consequences already unfolding, immediate changes are required in how we produce and consume, how we design our cities, and how we transport ourselves and the goods we produce—put simply, how we live. All of this will also necessitate rethinking how we finance the necessary transformations and rethinking the roles of both the state and markets in driving them. Some of these changes are underway. As Nachtigall etal. (2024) show in their recent paper, drawing on OECD data, there has been an increase in both the number of policies nations have adopted and the average policy stringency concerning climate mitigation over the past two decades. Still, many countries are falling short of meeting the emission reduction targets pledged at the 2015 Paris Accords, as policies that could effectively reduce emissions often encounter domestic resistance from key industrial sectors and labor groups, which are reluctant to adapt to the profound transformations required or to bear the associated costs. This brings us to questions that political economy is uniquely well suited to address: how do nations navigate political inertia against climate policies? What policy tools are both effective and politically feasible? What role do ideas, interests, and political institutions play in the adoption of particular policies? How much convergence and divergence do we observe across nations in terms of their decarbonization and adaptation strategies? How do nations ensure “just transitions,” where the burdens and benefits of these transformations are distributed fairly within and across nations, as well as across generations? What role do marketbased and nonmarketbased instruments play in this process? How do governments, businesses, and other advocacy groups negotiate the tradeoffs in enacting climate policies? How does climate change redefine the state as we know it—not only in regulatory, fiscal, and monetary terms but also in moral terms? These critical questions will undoubtedly occupy political economists for decades to come. This introductory paper and special issue seek to identify how climate change creates challenges for core concepts in political economy, but also highlight the analytical potential of political economy thinking to understand the international variety, political viability, and effectiveness of different climate policy solutions around the world. 2 | Field of Political Economy: A Neglect of Climate Change? The field of political economy (PE) spans multiple disciplines, including political science, sociology, economics, history, and geography, and thus defies any single definition (Rudel etal.2011). The interdisciplinary nature of PE provides useful a lens to study the interplay between political institutions, economic systems, and social power structures that influence climate mitigation and adaptation strategies, and thus contribute to understanding the systemic and distributional challenges posed by climate change. For the longest time, however, PE scholarship—in its comparative, historical, and international forms—has made little room to study climate change.5 The Oxford Handbook of Political Economy, published in 2006, for instance, did not have a single chapter on climate change among its 50 chapters. Likewise, a review of major PE journals clearly shows that most research on climate change has been published primarily since 2020. Despite an impressive body of pioneering work on these issues that was published before this date,6 climate change was typically treated as a “specialist subject, irrelevant for the major tenets of the field, and divorced in practice from major analytic and conceptual innovation.”7 This lack of attention may now seem surprising, given the magnitude of the risk posed by climate change. So why has mainstream PE not made a more concerted effort to bring climate change to the forefront of the field sooner? This, of course, is not a question that can be answered casually; it concerns how scholarly fields operate and FIGURE 1 | Total, per capita, and historical emissions of selected countries and regions. 289 determine which problems and puzzles are important to focus on (Kuhn1962). We can, however, speculate on some possible answers. First, one obvious reason why political economists have not focused on climate change has to do with the lack of realworld action by both governments (in terms of adopting policies) and market actors (in terms of changing their behavior). Scholars naturally tend to turn their attention to subjects when there is something substantial to analyze. Although climate science had already reached a consensus on global warming, national and international efforts to address climate change were minimal to nonexistent until the early 1990s. The United Nations Framework Convention on Climate Change (UNFCCC) was not established until 1992, and the Kyoto Protocol—a legally binding agreement committing industrialized countries to reduce greenhouse gas emissions—was not adopted until 1997. Even then, major players like the United States proved unwilling to commit to the necessary steps to limit their emissions and largely continued business as usual. A second reason has to do with a paradigmatic focus on economic growth, which has shaped the field's direction since its 19th century coming of age studying industrial capitalism. Growth has been regarded not only as the primary indicator of prosperity but also as a way to alleviate distributional conflicts by expanding the economic pie—by promising to provide more resources and wealth to various social groups without fundamentally altering existing policies or power structures (Schmelzer 2016). This emphasis is still very much alive, particularly in the study of “growth models”—the economic policies, institutions, and social practices that together underpin economic growth in a specific country or region. While assumptions around growth have come under increasing scrutiny, discussions of ecological sustainability and the impact of climate change were often marginalized and pushed to adjacent disciplines. Third, PE scholarship has typically retained a focus on nationallevel policymaking and political processes with relatively short time spans.8 Climate change involves externalities that are global in scope, and where its consequences unfold over decades or generations. The disconnects between the locations of production and consumption within global value chains complicate efforts to address emissions within the traditional nationstate framework of PE. Extending its temporal and geographic scope requires addressing situations where the costs and benefits of climate transition are often decoupled. For example, wealthy nations may benefit from climate mitigation efforts in poorer countries but may be unwilling to bear those costs. Similarly, investments made by one generation may only yield benefits for future generations. Understanding both international and intertemporal conflicts requires PE to adopt new analytical and normative lenses that go beyond conventional notions of selfinterest and shortterm time horizons, taking seriously the broader narratives and discourses that shape how actors perceive climate issues and form expectations about uncertain futures. Fourth, the absence of robust measures to capture the environmental costs of economic activities has also hindered scholarship on the topic. Macroeconomic indicators, such as Gross Domestic Product (GDP), measure economic output and growth without accounting for environmental costs. GDP treats the depletion of natural resources, environmental degradation, or carbon emissions as externalities that do not detract from economic performance. Data on corporate profitability or household consumption also fail to consider the environmental impact related to carbon emissions, pollution, or resource extraction. Likewise, PE scholars also lacked data until recently on the input side, such as the stringency of climate regulations, the magnitude of green investments, or corporatelevel environmentalism. For example, the OECD Environmental Policy Stringency (EPS) Index was first introduced only in 2014 to measure the stringency of nationallevel environmental policies. The availability of data on corporatelevel “green” practices has grown as part of Environmental, Social, and Governance (ESG) reporting, which has become mandatory across the European Union and in some other countries. However, much policy data is based on selfreporting and does not take into account the ambition of specific targets or the details of implementation and enforcement. While related critiques have been expressed previously (e.g., Tanner and Allouche2011), we hope that PE has reached a critical threshold and turning point where climate change issues come to be systematically integrated into the mainstream of the field with a sense of urgency—toward a new PE. What would this new PE look like? At its core, a PE approach highlights the fact that climate change is not merely a question of technical innovation and diffusion, but involves new and acute distributional conflicts. In what follows, we argue that a new PE involves rethinking or extending major concepts in at least five areas. First, the role of the state must be reconceptualized by treating climate change as a systemic risk that pervades every aspect of the state–economy relationship, one that is explicitly policyinduced, political, economic, and social, as much as external and environmental. This entails updating our theories about the “protective state” (Ansell2019; Kus2024) in terms of the mitigation and adaptation policies governments implement at varying degrees. Second, distributional politics are becoming more complex as traditional class politics represent one cleavage that is layered into other conflicts between regions, economic sectors, and even generations. Third, economic growth must be reconsidered both as a normative paradigm to evaluate economic success and a political mechanism for solving crises inherent to capitalism. Fourth, different national varieties of capitalism must be rethought in light of how their diverse governance models and interest politics approach decarbonization and adaptation. Likewise, markets must be understood not only as arenas involving a price mechanism (e.g., taxes and carbon pricing) but also as how market actors may embed noneconomic criteria of valuation and evaluation in making decentralized economic decisions. 3 | Toward a New Political Economy This section outlines some of the key issues central to a new PE that appropriately incorporates the reality of climate change: conceptualizing how the green state challenges and expands traditional understandings of the state, rethinking distributional questions and cleavages arising in response to climate change, examining the compatibility of growth with decarbonization 290 Regulation & Governance, 2025 efforts, exploring how climate policy varies based on institutional diversity, and theorizing about the role of market actors in green transitions. 3.1 | Conceptualizing the Green State Climate change and the prospects for a green transition profoundly influence how we conceptualize the state, the market, and their interrelationship. The role of the state in the economy remains at the heart of PE. Scholars as varied as Marx, Polanyi, Hayek, and Friedman agree that capitalism could not exist or function without the rights and rules established by the state (e.g., the legal constitution of private property, the commodification of labor, freedom of contract, and juridical personhood). The state's policies and interventions have shaped capitalism in different ways across countries, leading scholars to develop various typologies of state–economy relationships and typologies of the state, including the “developmental state,” “regulatory state,” “entrepreneurial state,” “state capitalism,” and “submerged state,” to name a few. The unfolding climate crisis imposes risks and economic costs on every country and region, across sectors and social divides, thereby requiring us to rethink the role, legitimacy, and capacity of the state. Whether we call it the “green state,” “ecostate,” or “environmental state,” these concepts have both a normative and empirical aspect. The notion of a green state is often a normative aspiration in which a state prioritizes decarbonization, sustainability, and longterm environmental stewardship (Eckersley 2004). However, we see the green state as a useful empirical concept. Even though no state is fully “green,” the concept is useful to explore what states do, empirically speaking, and what they should do to achieve decarbonization and protect those impacted by climate risks. From levying carbon taxes to fostering carbon trading, from embracing commandandcontrol regulation to relying on voluntary measures, and from investing in green industries to doing virtually nothing, a variety of paths are available. Attempts to conceptualize the state of the state in the Anthropocene are not new. While many radical political ecologists have a negative and critical view of the capitalist state, Barry and Eckersley(2005) advocated for “reinstating the state” as a catalyst for progressive environmental reform rather than as a force of environmental harm. Meadowcroft (2005) drew parallels between the ecological state and the welfare state. Just as the postwar welfare state took on significant responsibility for providing social services while maintaining a marketbased economy, he argues that the increasing prominence of environmental issues today is likely to encourage the development of an ecological state—“a state that places ecological considerations at the core of its activity.” Dryzek etal.(2003) similarly conceptualized the green state as the next step in a modernization framework. They argued that the rise of the economic imperative initially democratized the modern state by incorporating the bourgeoisie into its core, forming the capitalist state; the legitimation imperative further expanded democracy by including the organized working class, leading to the welfare state; and now, the environmental conservation imperative could advance democratization even further by integrating environmentalists into the core, resulting in a future green state. Duit(2016) talked about the four faces of the green state: regulating the environment; redistributing the environment; administrating the environment; knowing the environment. Babić and Dixon(2022) reminded us that the modern state does not only govern or regulate markets so as to mitigate climate change, the state is also a carbon owner and is “in a position in which their investment or disinvestment decisions have a direct and measurable impact on humanity's global carbon footprint.” Here, we add to these studies by further developing the ways in which the green state can be conceptualized. Just as the welfare state was a political response to protect the social body from the risks and fluctuations of marketbased economic systems, green states are a political response to shield against the many changes and disruptions caused by climate change. We believe this parallel can be extended further. Just as welfare states can be categorized by their various functions—how much they decommodify (social insurance function), how much they equalize (redistributive function), the source of provision (public–private mix), and whom they primarily benefit (the elderly versus the young, public servants versus the entire labor market, middle classes versus lowincome groups)—green states can also be conceptualized and categorized by the roles they play and how those roles are structured. In this vein, we propose that one useful way to conceptualize green states is through their three primary functions: Decarbonization (emissions reduction), climate change adaptation, and just transition. Decarbonization refers to reducing the emissions released into the atmosphere. The state could approach it in various ways: investing in and promoting green industries; enhancing greenhouse gas storage through carbon sinks, such as expanding forests; employing commandandcontrol measures where the government establishes emission standards for specific sectors or facilities; imposing a carbon tax, which charges emitters for each ton of greenhouse gases they release, encouraging businesses and consumers to cut emissions to avoid the tax; or setting an overall emissions cap while allowing emitters to trade emission credits in a market where the price of carbon is determined by supply and demand (cap and trade). Variations are expected among nations in terms of the tools they will rely on and prioritize in decarbonizing their economies. As the pathway that could curb emissions without undermining economic growth and poverty reduction, green industrial policy has received significant attention recently as a policy tool. While it has been employed successfully by China9 and now in the United States and Europe, governments have turned to it, marking a break with the neoliberal period of limited state involvement (McNamara2023; Gabor2023). As Rodrik(2024) notes, green industrial policy goes beyond traditional climate policy, incorporating a social policy dimension with the potential to compensate for job losses in declining brown sectors and generate welfare in sustainable ways. In that sense, it represents a “qualitative shift away from climate policy as we know it—as classic environmental policy,” as Meckling argues (Meckling2021). In fact, given that it combines two policy orientations whose end goals differ substantially—industrial policy is 291 often aimed at generating economic growth, while climate policy is about cutting emissions10—what makes green industrial policy a particularly powerful and “complementary” policy tool may also be the source of “conflictual dynamics” (Meckling 2021). What different governments will do to scale up their green industries, and how they will do so, depends on a large number of both domestic and external factors. With tools like tax incentives, subsidies, loan guarantees, and tariffs in the picture, the formulation of green industries will have major consequences for international trade, power, and security globally and inequality and welfare domestically. One key issue here is the extent to which these tools can be designed in a way to “maximize public benefits” through the use of “conditionalities that grant equitable access” (Mazzucato2022; Mazzucato and Rodrik2023). Adaptation involves “adjustments in ecological, social or economic systems in response to actual or expected climatic stimuli” in order “to moderate potential damages or to benefit from opportunities associated with climate change.”11 These measures may include disaster preparedness—such as upgrading public infrastructure to withstand rising temperatures and sea levels—relocating vulnerable communities, investing in early warning systems, educating the public, expanding healthcare, and transitioning to climateresistant crops in agriculture, among others.12 Transitional justice speaks to the state's role in “greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind”13 and includes the state compensating for “loss and damage” in areas where communities experienced climaterelated impacts. Notably, compensation for loss and damage is a moral and cultural issue, as much as a technical and fiscal one, especially given that some of the losses and damages are unquantifiable and “priceless”14—such as loss of lives, biodiversity, traditional livelihoods, cultural heritage, indigenous, and indigenous knowledge. In the coming years, an important agenda for PE researchers is to empirically compare the policies, policy instruments, and outcomes associated with different types of green states. States will differ in terms of the degree and the ways in which these three functions are articulated and accommodated, as well as the policy tools used. States may pursue decarbonization in different ways, ranging from statebased regulation of emissions to adopting marketbased instruments such as carbon tax, or establishing, facilitating, and investing in carbon markets with differing levels of political support around them. More fundamentally, the emergence of the green state challenges foundational assumptions in PE about the role of the state in markets, economic growth, and distribution. Traditional PE frameworks often treat the state as either a regulator of markets or an enabler of capitalist accumulation. Yet, unlike the developmental state, which prioritizes industrialization and economic expansion, or the neoliberal state, which minimizes direct intervention, green states must simultaneously discipline markets through regulation, redirect investment toward decarbonization, and mitigate the social costs of ecological transition. This introduces new tensions between marketbased and interventionist strategies, as well as between national interests and global ecological imperatives. Moreover, green states challenge conventional notions of state autonomy due to the growth of transnational pressures and the growing role of scientific expertise and interactions with nonstate actors (e.g., NGOs, financial institutions, etc.) that blur traditional boundaries between state, market, and civil society. Thus, we see the politics of the green state as going beyond climate policy but raising fundamental questions about the sovereignty, legitimacy, and economic purpose of the state itself (see Figure2). FIGURE 2 | Conceptualizing the green state. 292 Regulation & Governance, 2025 3.2 | Distributional Conflicts and Climate Change: New Cleavages Many studies on green transitions focus on mobilizing capital investment or issues of technological innovation while neglecting distributional justice concerns tied to NorthSouth divides, labor, gender, and racial inequalities (Pansera etal.2024). A core contribution of PE is to highlight and analyze how these distributional conflicts shape climate politics and green transitions. As a starting point, existing inequalities lead to varied levels of exposure to climate risks and impacts, as well as different capacities for coping with these challenges. As climate change affects vulnerable populations, these groups often pursue policies to help them adapt and advocate for a fair distribution of transition costs with those who have historically benefited the most. Incumbent groups, however, often resist losing established privileges and aim to maintain unsustainable lifestyles that are increasingly at risk while delaying and deflecting any compensatory measures. The concept of “just transition” seeks to address these issues (Wang and Lo2021), particularly by minimizing the adjustment costs for labor and local communities (Galanis etal.2025). However, cleavages around climate change involve complex geographic and sectoral divides and result in new social alignments that cut across class, identity, and generational lines. Thus, green transition can either exacerbate or alleviate previous inequalities, depending on factors such as context, policy design, and implementation (Markkanen and AngerKraavi2019; Canale2020; Mildenberger2020; Vormedal and Meckling2024). First, climate politics are most glaringly shaped by inequalities across countries and regions. The NorthSouth Divide reflects their respective historical responsibilities for carbon emissions and ecosystem destruction. The result is intractable political tradeoffs between securing access to energy for those who do not have it and justice for those who are affected by the transition away from fossil fuels (Newell and Mulvaney2013). Countries of the Global South require investment in green infrastructure capable of supporting young and growing populations but lack the fiscal space as they grapple with external debt burdens and the economic impacts of climate change (Carley and Konisky2020). For example, debt cancellation or restructuring can free up national budgets, allowing investment in sustainable infrastructure without compromising social spending (Cevik and Jalles 2024). Meanwhile, some proposed climate solutions may aggravate these global inequities in negative ways. Scholars of international political economy (IPE) are needed to examine energy and energy security more extensively (Kuzemko etal.2019). For example, policies of carbon offsets may enable “carbon colonialism,” where land and resources in the Global South are appropriated for ecological projects, often without benefiting local communities (Parsons2023). Hence, the struggle over shrinking resources and the displacement of populations due to climate change are likely to intensify existing or cause new geopolitical conflicts (Koubi2019). Second, green transitions require a very rapid and decisive move away from fossil fueldependent economic activities, with uneven impacts across different sectors of the economy. While the effects are most apparent for firms, industries, and political actors tied to the fossil fuel economy (e.g., coal and oil companies), the fallout extends far beyond, affecting transportation, tourism, agriculture, manufacturing, and more. Incumbent groups aligned with the fossil fuel industry retain significant political and economic influence and use it to block or at least delay climate action (Geels2014). But other economic actors also align with incumbent interests—shareholders seeking to exploit high profits, governments seeking to maintain tax revenue, local communities seeking to maintain jobs, and workers with industryspecific skills who fear job losses in “brown” sectors (Bosch 2023). Sectoral shifts also impact regional inequalities within countries. Rural versus urban divides will be exacerbated as these populations face different risks from climate impacts, such as drought or extreme weather, and different opportunities related to technological innovation. Regions depending heavily on fossil fuel industries may face massive transition costs, whereas resources for renewable energy may be concentrated in very different regions. These dynamics have also created a political backlash to climate change policy, which is an active part of rightwing populist appeal seeking to defend a perceived way of life against changes (Haas 2024). Local policymakers and voters often prioritize shortterm economic stability and oppose climate policies that threaten the status quo. While green industries leading the shift to clean technologies (e.g., renewable energy companies, electric vehicle manufacturers, and industries focused on energy efficiency) may compensate for job losses by creating “green jobs,” the movement of capital and labor to new industries will inevitably involve massive upheaval. Effective climate policy, therefore, will not only take investing in green growth but also involve efforts toward a “managed decline” of brown industries (see Ergen and Schmitz in this issue; Rosenbloom and Rinscheid 2020). Investment in new green technologies, for one, will require large subsidies, likely placing further distributive constraints on the ability to compensate losers in the green economy. One of the ways in which PE scholarship should evolve in the coming years is by examining how conflicting interests—such as regulating and also managing the decline of brown capitalists, supporting green capitalists, and protecting workers or other groups to prevent opposition to the green transition—can be reconciled (Grazini etal.2024). Third, the green transition is shaped by inequalities between more and less vulnerable segments of the population, who have unequal access to assets and social protections, and different political capacities to shape green transition policies (Ribot2014). In terms of social class, poorer communities are often most affected by climate change because they live in areas more exposed to environmental risks with fewer resources to adapt to change. For example, the costs of implementing cleaner technologies are often regressive, disproportionately affecting lowincome households, such as when higher prices for fuel, energy, or food from carbon taxes strain limited household budgets. These vulnerabilities often intersect with gender, migration status, race, or ethnicity (Ayanlade et al. 2023). For example, indigenous peoples are often impacted by climate mitigation and adaptation measures in ways that deeply impact their sovereignty and cultural heritage (Johnson etal.2022). While climate risk policies are slowly coming to acknowledge these intersectionalities, 293 these efforts remain uneven (for the case of India, see Singh etal.2021). Finally, generational inequity is also highly salient since current generations have reaped economic benefits from fossilfueled industrialization and retain vested interests in current lifestyles, but future generations will bear the brunt of the environmental impacts of climate change. However, in advanced industrialized countries, aging populations and small birth rates have demographically bestowed older generations with greater political influence than the relatively small younger generations. By contrast, many Global South countries have extremely young populations who may have different priorities—desiring catchup growth and higher living standards, but who may also stand to benefit from rapid investment in green technologies. Whether political and economic decisions prioritize shortterm benefits over longterm sustainability depends very much on the political dynamics of this intergenerational conflict. The distributional conflicts related to climate change challenge longstanding assumptions of PE. New political and economic cleavages that cut across traditional left–right, national–international, and sectoral boundaries thus demand a reassessment of how actors construct their economic interests, build coalitions, and even exercise power. Issues of climate justice also intersect with other social inequalities—including class, race, gender, and generational divides—in ways that complicate conventional analyses. Against the backdrop of irreversible ecological thresholds, these distributive struggles take place against a background of uncertainty about climate dynamics but are also exacerbated by the fact that delay clearly results in growing costs for everyone (Tirole2012). As we shall argue in the next section, the green transition also requires attention not only to economic growth but also to economic contraction, industrial decline, and longterm ecological limits—factors that do not fit neatly into existing models. 3.3 | Climate Change and Economic Growth The relationship between economic growth and climate change presents two key challenges: first, whether economies can reduce emissions while maintaining growth, and second, how different national growth models shape climate policies and green transitions. 3.3.1 | Economic Growth and Emissions Do nations need to abandon economic growth to achieve decarbonization? While some climate activists view this as a moral imperative, politically, it remains deeply contested. Economic growth is not just a goal of capitalism—it is embedded in state priorities, financial markets, and global development frameworks. From urban planning to education systems, economies have been structured around growth as a means of ensuring employment, social stability, and poverty reduction. As a result, climate policy debates reflect competing visions of growth: green growth advocates arguing for technological solutions to decouple emissions from GDP, while degrowth proponents question whether such a pathway is feasible or desirable. The concept of “planetary boundaries” highlights the urgency of these debates, identifying climate change and biosphere integrity as critical ecological limits (Rackstraw etal. 2009). The Stockholm Resilience Center (2023) suggests that six out of nine planetary boundaries have already been breached, raising doubts about whether economic growth, as currently structured, can remain viable without exacerbating environmental degradation. These concerns fueled renewed calls for degrowth, which argue that highincome countries must reduce material consumption and energy use to remain within safe planetary boundaries. The term “degrowth” originated with the publication of The Limits to Growth by the Club of Rome (Meadows etal.1972). Intellectuals like GeorgescuRoegen(1975) and Grinevald(1979) contributed to its development in the 1970s advocating for a reduced use of natural resources and radical transformation in how societies function. While receding to the background in the 1980s, in the “there is no alternative” neoliberal era, scholars like Kallis(2018), Hickel(2021), and Saito(2023) have revived and championed the degrowth thesis, calling for “rich nations to scale down throughput to sustainable levels, reducing aggregate energy use to enable a sufficiently rapid transition to renewables, and reducing aggregate resource use to reverse ecological breakdown” (Hickel2021, 88). By contrast, “green growth” advocates argue that economies can continue expanding while reducing emissions through technological and policydriven decoupling. As Rodrik (2024) notes green growth constitutes “a trajectory of economic development that is based on sustainable use of nonrenewable resources and that fully internalizes environmental costs, including most critically those related to climate change.” Hausfather(2021) highlights evidence of relative decoupling—where emissions per unit of GDP decline—even in rapidly growing economies like India and China. Both countries have made commitments to green growth by investing in clean energy sectors. In China, cleanenergy sectors—solar power, electric vehicles, and batteries— were the primary driver of economic growth, contributing 40% to the GDP expansion in 202315. Some highincome countries have also achieved absolute decoupling, with territorial emissions falling despite continued GDP growth since 2005 in 32 countries.16 Meanwhile, critics note that absolute decoupling is nowhere near happening at the global scale (Moriarty and Honnery 2023), and cannot be expected to result from a single recipe since the complex interdependent effects of growth, resource use, and environmental impact may differ across countries (Mahmood etal.2023). Even among rich countries, the decoupling rates are inadequate for meeting the climate and equity commitments of the Paris Agreement (Vogel and Hickel2023). The question of whether or not growth needs to be abandoned to reach emissions objectives has huge implications for the distributional aspects of climate change discussed previously. A core critique of the degrowth thesis relates to its political feasibility. Lawhon etal.(2021) note that “in a world of vast global inequalities, the degrowth literature inadequately grapples with power 294 Regulation & Governance, 2025 and inequality.” We could add that it also inadequately grapples with path dependencies, the power of interest groups over policy, and institutional constraints that shape the capacity of states to abandon growthcentered policies. 3.3.2 | Growth Models and Climate Change A second critical aspect of the debate is how national growth models—the institutional arrangements shaping aggregate levels of demand—shape decarbonization. Nahm(2022) describes a “manufacturing paradox,” showing that exportled manufacturing economies with a historical reliance on highemissions industries, like Germany and China, have managed to form broader domestic coalitions in favor of climate action. Although these economies have vested interests that have traditionally opposed climate policy, Nahm argues they also have the industrial capabilities necessary to develop manufacturing sectors focused on producing new clean energy technologies. In contrast, consumptiondriven growth models, such as the United States, have proven less compatible with green industrial development strategies, struggling to build strong domestic coalitions. Thus, the feasibility of green growth strategies depends on the underlying structure of national economies. In sum, climate change has deeply challenged economic growth as a norm for economic policy and a political mechanism for resolving distributional struggles. The green growth versus degrowth debate reveals a core tension in PE: whether capitalist economies can continue expanding while staying within planetary boundaries or whether they require deeper transformations that contradict historical growth imperatives. This tension has realworld implications for policy choices, industrial strategies, and the ability of states to construct coalitions for climate action. For example, what are the key drivers of green growth, and can they be scaled or replicated across different economic contexts? Alternatively, what would be the political, social, and economic implications of adopting a degrowth strategy? PE must also grapple with the global dimensions of these debates, as Global South countries demand space for continued growth while the Global North struggles to transition with minimal disruption. Here we next turn to the role of institutional diversity in shaping these dynamics. 3.4 | From Varieties of Capitalism to Varieties of Green Transitions Comparative political economy (CPE) highlights how different societies develop institutional frameworks to manage economic growth and distributional struggles. These frameworks—whether understood as “varieties of capitalism,” “modes of regulation,” “national business systems,” or “growth models”—shape how states respond to climate change. Institutional diversity matters through several channels. Green (2023) argues that each variety of capitalism grapples with the ecological transition differently based on its entrenched growth model. While institutions create pathdependent legacies that shape climate policies, PE also highlights the potential for agency and institutional change: in response to new challenges of climate change, actors may seek out new coalitions and promote new policies, as well as adopt new strategies to bypass or avoid past political constraints. Literature linking “varieties of capitalism” (VoC) to green transition remains fairly nascent. Finnegan(2022) has stressed that VoC may matter for climate policy through two interlinked channels: the structures of interest intermediation, as well as electoral politics such as proportional representation vs. majoritarian institutions. In coordinated market economies (CMEs), such as Germany and the Nordic countries, climate policy is often advanced through strong coordination between government, labor, and business. In CMEs, proportional electoral rules and corporatist structures enable higher climate policy investments by spreading costs strategically across consumers and producers. This structure fosters ambitious environmental goals, as CMEs leverage corporatist collaboration to pursue longterm sustainable development with mechanisms, like renewable energy incentives and just transition policies. For example, Germany has sought to balance ecological initiatives with strong labor market protection (Bosch2023; Green2023). CMEs' focus on “just transition” policies highlights their commitment to distributing the benefits and burdens of green transitions equitably across society, aligning with their historically collaborative policy approaches (Magnin2018). However, high coordination can also slow climate transition due to path dependencies—in particular, many CME countries remain strongly cardependent political economies, both in terms of domestic consumption but also exportoriented production (Meckling and Nahm2019; Mattioli etal.2020). Liberal market economies (LMEs), including the United States and the United Kingdom, tend to prioritize marketdriven approaches and have a more limited role of the state in climate policy. LMEs have pluralistic political structures and favor electoral competition; therefore, they struggle to sustain ambitious policies due to heightened political risk and opposition from incumbent industries (Finnegan 2022). Climate policies rely on marketbased incentives, such as tax credits for renewable energy rather than stringent regulations, reflecting the competitive nature of their economies and the limited role of labor unions in shaping environmental policies (Carley and Konisky2020). Marketbased mechanisms, such as emissions trading, align with LME institutions by providing flexibility to corporations while avoiding direct regulatory controls, allowing firms to manage compliance in a manner compatible with their profit goals. LMEs often adopt piecemeal and inconsistent policies that are vulnerable to shifts in political power (Mildenberger2021), contrasting with the statecoordinated frameworks seen in CMEs (Magnin2018). Across advanced economies, Green New Deals (GNDs) have emerged as a response to climate change: climate policies aimed at decarbonization and social equity based around largescale investments in green infrastructure and green jobs (Green2023). 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