Project Syndicate: The Entrepreneurial State Must Lead on Climate Change

In recent weeks, several members of the Glasgow Financial Alliance on Net Zero (GFANZ) – a group of 450 financial institutions – have quit over concerns about the cost of delivering on their climate commitments. In dropping out, they have given the lie to the notion that private financial institutions can lead the transition to a carbon-neutral economy. What the transition really needs is more ambitious states that will go beyond market-fixing to become market shapers.

The market-led approach is rooted in the belief that private financial institutions allocate capital more effectively than anyone else. The implication is that states should refrain from “picking winners” or “distorting” market competition, and confine themselves to “de-risking” green investment opportunities to make them more appealing to mainstream private investors.