Pluralizing and problematizing carbon finance

Abstract

Growing emphasis on finance as key to decarbonization requires social science research that critically attends to the emergent and diverse forms taken by carbon finance. First, we pluralize research into carbon finance, building on existing work to identify four main forms: carbon markets; ecosystem services; natural capital investment; and, capital allocated to low-carbon enterprises and projects. Second, we propose that research should problematize the processes through which carbon is variously translated into financial value. Illustrated with reference to low-carbon investment in electricity generation, our agenda thereby extends from the difficulties of producing carbon-as-commodity to the uncertainties of constituting carbon-as-asset.

Assets and assetization in financialized capitalism

“…Similarly, as Sullivan (2018) shows for the development of conservation finance, the complex calculative framing of nature as 'natural-capital' is driven by a logic of investment that results in nature being more or less literally assembled as 'a bank of financial assets' (p. 56). Indeed, assetization is actually a core problem in the wider-ranging development of 'green' or 'carbon finance', the financial sector that is seeking to mobilize investment for climate change mitigation and adaptation (for review, see Bridge et al, 2020). Carbon finance is beset by the difficulties of valuing carbon and turning it into an asset; that is, how to make a specific carbon sequestration initiative or low-carbon investment project valuable, able to bear debt and capable of generating returns to investors.…”

Climate change and international political economy: between collapse and transformation

“…To date, to the extent that IPE scholars have engaged the financial dimensions of climate change, it has focused the implications of climate change policy for finance and the roles and interests of the financial sector in climate policy (see references in the introduction). Where climate policy is the object it is only recently that some in IPE and closely related fields have framed it as a transformational problem, turning their attention to how finance might help accelerate low carbon transitions (Bridge et al, 2020;Christophers et al, 2020).…”

“…(e.g. Steckel et al, 2017, for a similar criticism, see Bridge et al, 2020). Finance is not understood well either in terms of the specific financial processes that are the bread and butter of IPE studies of finance, or in terms of a specific economic sector with particular forms of power and particular interests.…”

“…IPE scholars of finance could overcome this blind spot by making major contributions to the understanding of transformation dynamics through, among other things: their understandings of the specific qualities of various sorts of financial instrument and their potential for use to accelerate low carbon transformations (such as the differences between green bonds, project finance, or carbon trading, see e.g. Bridge et al, 2020); their analyses of policy or governance interventions and how they shape the incentives for financiers to engage in specific investment strategies; their understanding of the spatial or scalar qualities of finance and thus the potential to take advantage of the spatial qualities of renewable energy or other low carbon infrastructure; understanding of the political dynamics of central bank regulation and novel forms of public financing (such as 'Green Quantitative Easing', see Dafermos et al, 2018); or their analyses of the shift to 'assetization' (Langley, this issue). Each of these could make important contributions to understanding the key types and sites of intervention that could accelerate transformative action on climate.…”

Conclusion: The Future of Assetization Studies

“…Notably, over a decade ago now, Leyshon and Thrift (2007) had called precisely for this sort of critical examination of "new asset geographies," but such an intellectual project has taken some time to get off the ground. That being said, there is now a growing interest in how material things are transformed into assets, especially through new forms of finance and investment logics (e.g., Bridge et al 2019;O'Brien et al 2019). Here there is an indication of the need to think about the particular financial and other knowledges, practices, and processes that enable specific things to be turned into assets in place, at the same as thinking about the wider capitalist (or other) logics that configure these transformations as necessary or inevitable.…”