Whitewashing Green Swans: Sustainable Finance and the Epistemic Foundations of Policy Paradigms
Published in Uncertainty in Global Politics (Routledge), Eds. Miriam Matejova and Anastasia Shesterinina
Abstract: Anthropogenic climate change poses consequences that are difficult to anticipate or predict. The sheer complexity and non-linearity of global planetary systems and their interaction with the political, economic, and social world implies that grappling with “radical uncertainty” is necessary to fully understand the problem and build out appropriate solutions, even in the short to medium term. Yet, the world of sustainable finance—and in particular, institutional investors, asset managers, and banks—puzzlingly persists with a conceptualization of climate change as a risk that can be measured, managed, and hedged. Using the policy paradigm framework, I argue that groups may choose interpretations of uncertainty that best cohere with their interests and policy objectives, where epistemology forms a bedrock upon which problem conceptions, goals, and policy instruments are justified. I examine the plausibility of this argument by analyzing discourse in the case of the Climate Finance Leadership Initiative, a UN-convened agenda setting exercise drawing on some of the world’s most influential pension funds, insurers, and banks. I find that the initiative largely overrides concerns over radical uncertainty, a position inalienable from present interdependencies with fossil fuel corporations.
Rethinking Complementarity: The Co-Evolution of Public and Private Governance in Corporate Climate Disclosure
With Amy Janzwood, Steven Bernstein, and Matthew Hoffmann, published in Regulation & Governance (2023)
Abstract: CDP has been enormously successful in its 20 years of operation as a private governor of corporate climate risk disclosure. Despite an influx of potentially competitive government-led disclosure initiatives and interventions, the use of CDP’s platform has nonetheless accelerated. To explain this outcome, we argue that public interventions augment the value of private governance for firms when the costs of compliance overlap, benefits of compliance with private rules are undiminished, and normalization helps kickstart positive feedback effects. These conditions of complementarity are made possible by private governors utilizing attributes of authority, access, and adaptability as public responses materialize. We illustrate our argument with two cases: the Non-Financial Reporting Directive in the European Union and the G20’s Taskforce for Climate-Related Financial Disclosures. In elaborating the conditions for complementarity beyond a functional division of governing labor, our study helps clarify how mutually reinforcing co-evolution of public and private governance emerges and is sustained.
States and New Markets: The Novelty Problem in the IPE of Finance
With William O'Connell, published in the Review of International Political Economy (2023)
Abstract: Finance has changed, and the study of finance needs to change with it. Previously marginal actors—hedge funds, index providers, tech firms, etc.—have become lynchpins in the global financial system. Likewise, the traditional subjects of international political economy (IPE)—states, international organizations, banks, central banks, etc.—are engaging in once-peripheral spheres. Yet, these novel trends have been largely ignored in mainstream political science and international relations venues for IPE scholarship. We demonstrate this through a discussion of two trends—the rise of shadow banking and central bank involvement in climate change—and an analysis of publications in top international relations and political science journals. While previous commentaries identify a methodological and epistemological divide in IPE, our results suggest an empirical one. We then construct a practical framework to remedy this problem by returning to the work of Susan Strange. Strange’s approach embodied a radical ontology, a focus on structures and their interaction, and an analytical eclecticism that provided keen insights into the politics of finance. We argue that these principles, often embraced in Review of International Political Economy, should be applied more broadly by IR scholars to better contribute to debates on emerging political economic issues.
Credibility Dilemmas Under the Paris Agreement: Explaining Fossil Fuel Subsidy Reform References in INDCs
With Steven Bernstein and Matthew Hoffmann, published in International Environmental Agreements: Law, Politics, and Economics (2022)
Abstract: Fossil fuel subsidies are a market distortion commonly identified as an obstacle to decarbonization. Yet due to trenchant political economic risks, reform attempts can be fraught for governments. Despite these concerns, an institutionally and economically diverse group of states included references to fossil fuel subsidy reform (FFSR) in their Intended Nationally Determined Contributions (INDCs) under the Paris Agreement. What conditions might explain why some states reference politically risky reforms within treaty commitments, while most others would not? We argue that the Article 4 process under the Paris Agreement creates a “credibility dilemma” for states–articulating ambitious emissions reduction targets while also defining national climate plans engenders a need to seek out appropriate policy ideas that can justify overarching goals to international audiences. Insomuch as particular norms are institutionalized and made salient in international politics, a window of opportunity is opened: issue advocates can “activate” norms by demonstrating how related policies can make commitments credible. Using mixed methods, we find support for this argument. We identify contextual factors advancing FFSR in the lead-up to the Paris Agreement, including norm institutionalization in regimes and international organization programs as well as salience-boosting climate diplomacy. Further, we find correspondences between countries targeted by transnational policy advocates and FFSR references in INDCs, building on the momentum in international politics more generally. Though drafting INDCs and NDCs is a government-owned process, the results suggest that understanding their content requires examining international norms alongside domestic circumstances.
Continuity and Change in Carbon Market Politics
With Carley Chavara, Matthew Paterson, and Matthew Hoffmann, published in the Oxford Handbook of Comparative Environmental Politics (2021)
Abstract: The Paris Agreement institutionalized decentralized and national approaches to climate change policy through Article 4 and the Nationally Determined Contributions (NDC) process. In this new context, what can be said about the prospects for a global carbon market, and how might that analysis benefit from a comparative political perspective? In this chapter, the authors argue that, given the shift to the NDC process and considering the history of carbon market linkage and diffusion, understanding the past and future of carbon markets requires an analysis of the variation in institutions and the political economies of countries. To illustrate this point, the authors unpack continuity and change in five cases: the European Union, China, Canada, South Korea, and Indonesia. The authors conclude that making sense of carbon markets requires an integrative view of the comparative institutional dynamics as well as the transnational processes of diffusion and learning that promotes policy ideas.