Launching the Green Planning Commission

Key Points

Summary

Progressive climate action is at an impasse. In the US, the Trump Administration has not only dismantled the Biden Administration’s green investment push, but it is also waging war against renewables development. Across Europe, uneven but real decarbonization progress is threatened by a populist right which promises to row back on decarbonization as an illusory solution to the cost of living crisis. Globally, despite the world-historic force of China’s green state developmentalism, the transition remains dangerously off course.

Our prospects may feel violently fragile, but peril can be the impetus of renewal and strategic clarity. Strong threads of hope remain, from which an agenda to deliver decarbonization and prosperity for working people can be woven.

The passage of the Inflation Reduction Act in the US and the election of a Labour government in the UK with an ambitious clean power agenda marked a clear transatlantic turn towards more state interventionism. These policies began to intervene in the market-led allocation of capital, attempting to shape and scale private investment for green development. This interventionism broke with market fundamentalism which had shaped the preceding 40 years of economic governance, and the preceding period of climate policy thinking.

Achieving a break in the dominant paradigm of market coordination was the result of a consensus, forged by progressives, which holds that green public investment is the solution to both the climate crisis and economic stagnation, insecurity, and rising inequality.

But the collapse of the IRA and the far-right campaign against Labour’s green inclusive growth agenda demonstrate the limits of this decarbonization strategy, premised on public investment and market intervention to subsidize or stoke private investment. Across both agendas, investment decision-making and the broader management of economic restructuring was left to private actors and market organization. Although they both broke with market fundamentalism, neither has pursued a more muscular agenda of green economic planning premised on public direct investment, provision, and coordination.

The relative green investment boom stoked by these policies has not achieved the necessary pace and scale, nor the character of transformation of key sectors and systems required — even in the power sector, where much policy is aimed.

Meanwhile, to secure this new policy regime, political deals in the US and the UK used geoeconomic competition as an alibi, which has hindered the global rollout of clean technologies produced in China. The new policy regime has also been inadequate to advance global decarbonization efforts, which are dependent on financing and political support from developed to developing countries.

Above all, this state-led but privately coordinated approach to decarbonization has proven its political vulnerability — dwarfed by right-wing political victory in the US and the unaddressed cost of living crisis in the UK, each weakening the fragile public mandate for green transformation. Neither well-designed subsidies to stoke investment in domestic green manufacturing, nor the broader fiscal policy-induced growth period, were able to endure the politics of inflation, or address the chronic and compounding economic insecurity that characterizes everyday life in the US and the UK.

The transatlantic turn to green industrial policy is part of a global trend. Industrial policy strategies explicitly organized around the energy transition define contemporary global political economy and are leading to the tremendous global deployment of renewable electricity generation capacity and remarkable feats of electrification. This process is being led by China, through its staggering domestic rollout of clean energy infrastructure, its global export of cheap clean energy inputs, and its foreign direct investment in expanding global green manufacturing capacity.

Yet, despite the impressive contributions that China has made, we should not assume that the Chinese model is neatly replicable in the US or UK. Nor do the extent and significance of the achievements of Chinese green developmentalism diminish the need for the US and UK to implement ambitious decarbonization policy frameworks of their own. Moreover, as Jeremy Wallace has argued, “a number of policy changes to China’s electricity markets and industrial policy over the past year suggest its government is now slow-walking the energy transition” as it politically struggles to “jettison older industries in favor of the higher-value added industries of the future”. And, as Ilias Alami, Tom Chodor, and Jack Taggart have noted, although green state interventionism is pervasive, it “is being deployed asymmetrically across the global economy. Both the capacity to pursue transformative industrial policies and the form that enacted industrial policies take remain enormously shaped by global financial and monetary hierarchies, integration into global supply chains, and geopolitical positioning”.

In an increasingly multipolar world, where the preponderance of global green energy technology is produced by China, a progressive climate agenda in the Global North must incorporate plans that are aimed at advancing the speed and scale of green energy production and electrification, linked to development goals in the Global South. A precondition for that agenda having political durability is the development of a green planning framework within the Global North itself.

The achievements and the limits of the transatlantic deviation from market coordination will form the next progressive decarbonization agenda. A new progressive climate consensus is needed, which takes the break with market coordination as its premise, but which absorbs the political and policy innovations and limitations that have taken place over the past decade and comprehensively advocates for a more robust green planning policy framework. Advancing the agenda of green transformation will require a serious vision for a new era of green democratic economic planning: direct public investment, coordination, and provisioning in key sectors to drive decarbonization, to maintain macroeconomic stability through an economy-wide restructuring process, and to drive deep transformative benefits, including security and power for working people.

Launching Common Wealth’s Green Planning Commission

This essay marks the launch of Common Wealth’s Green Planning Commission, a two-year transatlantic initiative which will convene leading thinkers and practitioners to contribute to this necessary work through a series of research and policy design publications and events.

The Commission will build on core premises that animate Common Wealth’s analysis of decarbonization: decarbonization is at once a technical and a political project, and, further, one that requires economic transformation. Achieving it, therefore, will require a shift away from fragmented, market-driven approaches towards public direction, investment, and collective planning.

A new green democratic planning architecture would be an overarching set of coordinated policy mechanisms premised on public direct investment, provision, and coordination across the economy. These policies would aim to direct economic activity towards socially beneficial outcomes — namely to deliver decarbonization at the required pace and scale, and on terms beneficial to working people. Absent this approach, where decarbonization happens at all it will be more expensive, uneven, uncertain, and unfair.

The Commission’s work will be organized around five hypotheses regarding the politics and practice of green planning.

[.num-list][.num-list-num]1[.num-list-num][.num-list-text]Decarbonization is an economic coordination problem, and market coordination is inadequate to the task.[.num-list-text][.num-list]

Market coordination is a form of economic planning premised on private control over investment and production, and in which distribution and provision are structured through market exchange. This approach can be highly effective in certain domains but has structural limits which prevent it from delivering decarbonization effectively. This is because decarbonization is, practically speaking, an investment and divestment led restructuring of key sectors. This will require countless investment and divestment decisions, many of which will need to be made outside the usual cycles of capital depreciation and expenditure.

For a successful transition, these decisions must prioritize systemic social outcomes and be sequenced to avoid disruptions in critical infrastructure and production networks — regardless of whether doing so will generate profit. Any misstep in coordination would risk underinvestment, breakdowns in critical production and consumption networks, price volatility, and, especially in developmental context, potential balance of payments crises and economic regression.

Market coordination has few tools for achieving this complex transition. Indeed, market incentives cut against it at every turn. Private investment is defined by the profit imperative and the liquidity preference, which poses barriers to necessary investment and divestment. Pinning decarbonization on privately financed private undertakings assumes that every necessary project to achieve system-wide goals can be made into a sufficiently profitable investment asset, in aggregate and across all subsystems, which will then indeed be invested in by a private investor. Market coordination is inherently asynchronous and reactive, constituted by predominantly uncoordinated private decision-making. As the economist JW Mason has argued, “[t]he faster and farther-reaching the changes in production, the harder it is for a decentralized market system to maintain coherence”.

The challenges posed by the profit motive, liquidity preference, and decision-maker fragmentation become even more pronounced when real, urgent, and time-sensitive goals require focused investment and managed restructuring.

Given the clear reasons to doubt the efficacy of market coordination of decarbonization and broader green economic transformation, the Commission will investigate:

The alternative policies and institutions needed to drive necessary investment, divestment, and macroeconomic governance to better coordinate the transition.
The benefits to working people that might come from building a green, mixed-ownership economy through and for the transition.
Relaxing or maintaining competitive discipline, market organization, and hard budget constraints in particular sectors or technical development systems.

[.num-list][.num-list-num]2[.num-list-num][.num-list-text]Delivering economic security and comprehensive decarbonization requires ambitious modes of democratic green planning.[.num-list-text][.num-list]

The green planning paradigm offers tools to deliver fairer, more secure decarbonization by overcoming the failures of market coordination. Public coordination of decarbonization offers the ability to: divorce investment (and divestment) power from the profit imperative and liquidity preference, integrate and coherently plan investments and economic activity, and employ collective risk-bearing capacity to restructure, stabilize, or expand production networks.

These are capabilities that will be critical to both sectoral decarbonization and wider economic transition. They can enable ambitious and synchronized programs of investment and divestment, better manage economy-wide transformation to prevent instability, and center the economic security of working people in the transition.

The possible policy toolkit for public coordination is potentially expansive and can be built iteratively. The Commission will explore:

The new forms of international governance required to cooperatively manage industrial and supply chain policy.
The new institutions of public investment and macroeconomic coordination matched to macrofinancial reform to better guide investment that are needed at the national level.
The design of robust industrial strategies at the sector level. New forms of corporate governance and industrial democracy at the firm level to plan decarbonization in a more decentralized and democratic fashion.

[.num-list][.num-list-num]3[.num-list-num][.num-list-text]There are many historical and present-day examples of economic planning, from which we can draw lessons, but nowhere has yet mastered democratic green planning.[.num-list-text][.num-list]

Decarbonization regimes in the US and UK feature increasing state intervention in the economy. However, these are premised on limited incursion into private control over investment, production, and provision. These regimes stand in stark contrast to the developmentalist regimes that have led industrialization and economic restructuring in the past — from the US New Deal and transatlantic post-war orders to Asian and postcolonial developmentalism, the programs of globally cooperative economic transformation such as that put forth by the NIEO, and the green developmentalist states such as China, are leading renewables deployment and green industrialization today.

These histories and current practices, we believe, contain powerful lessons and warnings. To harness these for a program and practice of democratic planning, the Commission will consider:

The policy tools and institutions we can draw from these past and present programs of global cooperative developmentalism.
Lessons from the limits of previous and contemporary programs of economic planning.
The possibilities and limits of existing planning frameworks within market coordination, such as the multinational corporation.

The Commission will examine these practices and histories of planning to understand what forms of economic coordination can best deliver rapid and fair decarbonization strategies.

[.num-list][.num-list-num]4[.num-list-num][.num-list-text]State capacity to administer investment and manage the transition is inadequate to the challenge of the present moment, and a new statecraft must be designed and built.[.num-list-text][.num-list]

A core policy problem is how to rethink and rebuild state capacity for effective planning. The Trump Administration is deliberately and dramatically attacking the administrative state, while the UK must contend with the long legacy of privatization alongside more recent economic stagnation. In both cases, the state has been stripped of economic competencies. Rebuilding the state will present political and technical challenges, but a return to the status quo ante will be insufficient relative to a more radical green reconstruction. State capacity was too weak and fragmented to fully implement the previous agenda and would likewise struggle to effectuate more ambitious decarbonization goals and socio-economic transformation.

We hypothesize that it will be necessary to develop state capacities through the construction of new institutions of economic coordination alongside a strengthening of the existing economic measurement apparatus to provide a clearer picture of the real economic terrain.

In a new moment we must articulate the need for and possibility of green public investment and economic restructuring. This must clearly grapple with and elucidate how a program of public investment can be administered in the face of different macrofinancial conditions.

A program of mass investment and economic restructuring must be designed and pursued through the prism of planning to politically restructure these macrofinancial constraints and simply deliver in technical and political terms. However, there is no planning off and on switch: state capacity to implement policy and discipline and displace private capital in the economy is relatively weak in both the US and UK. Such capacity building will require creating new institutions and policy apparatuses which will be challenging and cut against power structures and interests.

The Commission will investigate:

The concrete state capacities needed for green democratic planning.
Institutions suited to rebuilding state capacity.
The policies and institutions at the domestic and international levels necessary to build globally cooperative green development planning capacities.

[.num-list][.num-list-num]5[.num-list-num][.num-list-text]To build and sustain the coalitions needed to advance the green planning agenda, it must clearly deliver economic security and affordability for working people.[.num-list-text][.num-list]

The populist right has assembled a cross-class carbon coalition that is actively dismantling and reversing climate progress. Central to their argument is that decarbonization is a cost imposed on working people which makes life harder and economies less secure. Against this, it is our hypothesis that consent for the transition can only be maintained if a progressive climate agenda explicitly rebuts and disproves that claim by ensuring the project of decarbonization underpins a politics of economic security and affordability for the public. This requires more than relying on supply-side expansion to provide relief from rising costs in the medium term.

The Commission will test the hypothesis that it will require a more direct restructuring of core drivers of the unaffordability of essentials to end the cost of living crisis. That restructuring will in turn require more confident deployment of public techniques of coordination, investment and provision.

The Commission will interrogate:

How green planning for decarbonization sectors might point to avenues or institutions to deliver restructuring of other sectors key to driving economic security for everyday people.
How to reorganize the provision of life’s essentials, from energy to housing to transport, including to lower their costs.
The role for public provision and decommodification in expanding economic security for working people.

Research Agenda

We are launching the Commission to create a shared project which can encompass disagreement, policy competition, and critical thinking about planning and economic governance, and progressive politics.

In that spirit, to test these hypotheses and advance green planning as the next progressive climate paradigm we seek to:

Build an evidence base and cohort — including a community of practice and thought collective within and beyond the project’s Commissioners.
Test these hypotheses through intellectual argumentation and leadership.
Create opportunities for detailed debate and policy development.

Over two years, the Commission will test these hypotheses through a body of analytical and policy development work, seeking to probe, prove, refine, and build policy from our findings. This work will be focused on five policy areas:

Macroeconomic: how best to steer the economy through institutions of public investment and macroeconomic coordination.
Macrofinancial: reform of the financial system and tools such a credit guidance.
Sectoral coordination: industrial strategy within and between transport, food, land, housing, energy, and industry.
Corporate governance and industrial democracy: how to reshape firms and non-state planning.
International governance: cooperative industrial and supply chain planning, policy, finance, trade, and intellectual property regimes.

The Commission will develop an agenda as radical as reality demands: one that charts how to deliver deep decarbonization, traverse a fraught geopolitical context, rebuild the state, and deliver economic security and affordability to working people.

This is a difficult task. But we have been here before. Much like the previous decade of contestation and policy development, constructing such an agenda and program will require consensus-building debate, rigorous thinking, and policy development forging a progressive paradigm aligned on what are the policy problems necessary to solve and how to solve them.

That is the task and now is the time.

Melanie Brusseler, Mathew Lawrence, Sarah Nankivell

Footnotes