Just Who Gets Paid-Off in a “Just” Transition? Some difficult lessons from BlackRock and French populists


This paper links two things that are often dealt with separately when discussing what we mean by the word “just” in the notion of a “just transition”. On the one hand, activists and reformers see this as an opportunity to empower marginalised populations and redistribute wealth-generating assets using the state in the form of green industrial policy. On the other hand lies private finance, especially in the form of asset managers, who own huge swathes of global companies. These competing notions of “just” are used as a way to discuss how to have a transition that leverages the investments of the private sector without once again simply giving capital everything it wants at the expense of everyone else.


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This paper links two things that are often dealt with separately when discussing what we mean by the word “just” in the notion of a “just transition”. On the one hand, activists and reformers – especially those promoting the United States (US) version of the Green New Deal (GND) – see this as an opportunity to empower marginalised populations and redistribute wealth-generating assets using the state in the form of green industrial policy. On the other hand lies private finance, especially in the form of asset managers, who own huge swathes of global companies. Their investment decisions are critical to the transition, but they have no intention of allowing such a redistribution of assets and power. Indeed, they see the function of the state as using its balance sheet to insure private investors against losses. We use these competing notions of “just” as a way to discuss how we can have a transition that leverages the investments of the private sector without once again simply giving capital everything it wants at the expense of everyone else.

Just a “just transition”?

Discussions of decarbonisation, especially in the US and the United Kingdom (UK), often invoke the image of a “just” transition – that is, some version of the future when those most affected by the crisis emerge, if not better off, then at least no worse off than when they started. This imaginary is ingrained into most versions of a GND whereby a diverse coalition of urban dwellers and unionised workers are enabled by an activist state to construct a green future.[1] In such a vision, transition compensation bails out workers and transforms employment, housing, and transport. In doing so, the carbon-saturated neoliberal world of inequality, racism, and hierarchy is swept away with the construction of a new green (and just) economy. “Just” in this instance, means redistributive justice for the majority of citizens.

Although it is seldom said out loud, this version of the transition is not only a revolution in the production of energy, but also a revolution in the distribution of assets, wealth, and power. Carbon assets may only constitute around 0.2% of the total financial assets of the planet, but their destruction promises to impact certain geographies much more than others.[2] The core states of the US Republican Party’s coalition and other oil and gas producers such as Saudi Arabia, Russia, and Australia will need to find a whole new business model post-transition.[3] This creates a rather acute distributional problem, and one aspect of this is distribution across places.

Although in theory a GND can provide the funding to transition carbon-heavy areas to new growth models within states, doing so between states is another matter entirely. West Palm Beach may be willing to bail out West Virginia, but there is no way that the UK will offer to bail out Saudi Arabia. As such, we can expect carbon producers at all levels to treat GND ideas as an existential threat and resist. Moreover, GND-thinking tends to elide other important sources of resistance, even within states – specifically from asset holders.[4][5] Recent pronouncements by the CEO of the global asset manager BlackRock put these sources of resistance into bright relief.

Throughout 2020 and 2021, BlackRock made the positive case for the CEOs of the companies in which they invest to ready themselves for the green transition.[6] As the world’s largest asset manager, this matters. By embracing the Task Force on Climate-Related Financial Disclosures[7] and Sustainable Accounting Standards Board[8] disclosure standards; providing ESG (environmental, social, and governance)-linked exchange-traded and index funds; and by pushing firms to commit to such standards, BlackRock is – along with other parts of finance – putting carbon assets on notice, to the point that legal authorities and regulators in carbon-heavy states are pushing back against such pressures.[9]

But there is also something else going on at BlackRock. As was widely reported, BlackRock’s CEO, Larry Fink, has recently embraced a particular version of the green transition, whereby the state’s balance sheet needs to be activated to the fullest extent. Firms can do a lot on their own, so the argument goes, but collectively their actions are insufficient. Only the balance sheet of the state is large enough to make the transition possible.[10]

So is BlackRock embracing a vision where the state builds post-carbon assets, as the GND crowd imagines? Not at all. What BlackRock imagines the state doing instead is to act as the “insurer of first resort” so that current asset holders can take the upside of the investment risk of the transition while the state acts as insurance against losses on current assets and future bets.[11] As the world’s largest asset manager and actual owner of companies, this matters.[12]

BlackRock calls this “de-risking” the transition, and it is. But the risk being insured here is quite different from that in the original GND model. Rather than the income and employment of workers being insured, here we have existing asset holders being insured so that they do not book any losses during the transition and get the upside of new investments on the way there. Here the question of justice is subtly reframed, from one where the vision shifts from “redistribution by transition” to one of a “short squeeze” by asset holders on everyone else.

Short Squeezes

A short squeeze in finance comes in two forms. The first was seen in 2020 with the US retailer GameStop. A large hedge fund had taken a short position in the stock, basically, borrowing shares in the company in the hope that they could buy them back cheaper and pocket the difference. Small investors united via a Reddit board called “Wall Street Bets” to buy the stock and push up the price, making the short position of the hedge fund so expensive that they had to abandon it.[13] The second type of short squeeze is more generic and occurs when a fund needs a particular stock in its portfolio (Apple or Tesla for growth or for an ESG rating) but the fund can only buy them from a seller who has taken a large position in the available stock. You can get the stock, but at a price you really do not want to pay. You get squeezed.

BlackRock exemplifies both strategies. The one type of squeeze is its explicit marketing of its own ESG-friendly products while placing pressure on other asset managers to buy them. The second type of squeeze is telling states everywhere that BlackRock – the world’s largest owner of capital – is willing to play ball on the transition, so long as the balance sheet of the state is used to absorb its losses, and still get the investment upside.

In short, if you pardon the pun, BlackRock is saying: “You can’t transition without our investment, and we are not going to invest unless you (the state, and ultimately the taxpayer) take the losses.” In other words, current asset holders are short-squeezing the entire global economy, effectively saying, “You can have a transition, but not a ‘just’ one” – unless justice is defined as existing asset holders suffering no losses while getting all the gains.[14] You can see how this leads to two quite irreconcilable views of what the transition is and how to get there.

In the middle of these two positions lie governments, who seem to be mainly concerned with another form of justice, that is, avoiding moral hazard in order to safeguard their balance sheets, thereby demonstrating their fiscal probity to their taxpaying populations. States in this world, particularly in Europe, have only been partially freed from the fiscal binds of perma-austerity by the pandemic. As the new German government exemplifies, such states want to use their balance sheets to effect the transition but are terrified of piling “debt” onto the balance sheet to do so – even if those debts have a zero-interest rate and are used to build new assets. As such, a variety of off-balance-sheet vehicles are being used to disguise the nature of investment, while states fret quite obsessively and publicly about the moral hazard problems of the transition to justify this move, that is, worrying about such things as hedge funds buying coal mines to fuel power stations to mine bitcoins.[15]

Although laudable, the actual macroeconomic effects of such diversions are minimal and constitute a diversion from the main task of the transition – weaning the economy off carbon while building substitute infrastructure. As a conception of justice, this also misses the mark. The French experience with decarbonisation is particularly salient when thinking through possible pathways to a post-carbon future, and it exemplifies the trade-offs involved in maximising any criterion of justice. According to the World Bank, France collects more carbon tax revenue than any country on Earth, serving as an experiment for comparatively aggressive carbon pricing.[16]

French Carbon Taxation and Les Gilets Jaunes

In order to enact their carbon tax – after over a decade of failed attempts at more equitable designs – the French state resigned itself to a policy that provided abundant exemptions for industry (including those regulated under the European Union’s Emissions Trading Scheme) with much of the revenue earmarked for a corporate tax credit.[17][18] Five years later, when the carbon tax rate took a scheduled increase, the Yellow Vest movement exploded onto the streets of France. Initially, the movement was labelled as anti-climate and anti-carbon tax. However, new research reveals that while the Yellow Vests uniformly support climate action, they simply disagree with a carbon tax that burdens households at the expense of businesses. Not unreasonably, being the folks paying the tax, they want participation in the climate policy-making process.[19]

In terms of the vision of justice being promoted in the French case, we see a short squeeze in action. Repeated attempts by the state to tax business failed. The French state needs the assets of business to make the transition happen, and business was not willing to pay the price that the state was offering for joining in – the carbon tax. As a result, the state effectively did what BlackRock wanted before they even asked. They put the cost of the transition onto consumers and workers, even pouring the revenue earned into a subsidy for business. The French carbon tax advantaged “business elites” and asset holders, which, although instrumental for the policy’s implementation, strongly violated equity concerns, eventually triggering a revolt as the tax rate increased. The result was a backlash that is both predictable and yet entirely missing from the transition vision of BlackRock.

What makes the French example particularly instructive is that the French economy is comparatively less carbon-intensive than many other states facing the same problems.[20] Less than 10% of French electricity is sourced from fossil fuels, whereas more than 80% of global energy is sourced from fossil fuels . Given this, to paraphrase Sinatra: if you can’t make it [carbon taxes] there, you can’t make it anywhere. Meanwhile, a new European study has found that individuals living in rural, fossil-fuel dependent, and poor communities are more likely to deny the reality of climate change.[21] This suggests that, like states with heavily carbon-dependent growth models, there may be many “pro-carbon” versions of the Yellow Vests who will vehemently oppose aggressive decarbonisation in countries (and sub-national areas) with higher carbon dependencies.


To counter this, a pragmatic, and difficult, strategy involves bribing both workers and business elites. The problem we face is that we cannot seem to be able to bribe one without shorting the other. If we double down on the BlackRock strategy, we risk a generalised Yellow Vest response. If we double down on workers, asset holders can effectively go on an investment strike, derailing an already late transition. If states sit in the middle and fret about moral hazard, nothing actually happens. So how do we get out of this impasse?

Carbon taxes are naturally regressive. Therefore, if a carbon tax is utilised, a carbon tax-and-dividend method that rebates the income to workers seeks to offset this regressivity. Furthermore, carbon tax revenue can be graduated across income groups so that lower-income households receive more support. Canada and Switzerland utilise versions of the tax-and-dividend strategy – political opposition to their carbon taxes remains unclear and the policies themselves are often misunderstood by the public.[22][23] Still, those national policies were successfully enacted, which is a difficult achievement for any country.

As Matto Mildenberger recently argued, however, tax-and-dividend schemes risk creating a kind of “pass the buck” logic that keeps carbon polluters in place.[24] Given this, conditionality offers much more leverage on the problem. Conditionality can be applied to a variety of policies to decarbonise and protect workers, including carbon taxes. For instance, rather than spending their carbon tax revenue, Denmark returns it to firms on the condition that the capital is used for sustainability transition investments.[25] Denmark’s carbon tax is one of the few successful carbon tax implementations and has since decreased emissions while aiding the expansion of the renewable energy sector and related jobs.

Alternatively, states can implement contingent carbon taxes. Here, states would utilise exactly the types of data reporting frameworks favoured by BlackRock (plus other metrics such as the Scopes framework) and use the threat of carbon taxes as a contingent liability that can be imposed on a firm’s balance sheet if they do not meet specific transition targets derived from these frameworks.[26] Beyond carbon taxes, conditionality can also be applied to bailouts. Recently, the French government awarded a €5 billion Covid-19 bailout to the car company Renault, but it was contingent upon their moving towards EV batteries and keeping factories in France open to protect key jobs.[27] This application of conditionality, crucially, not only moves towards decarbonisation, but also protects workers and includes them in the transition. This offers citizens an alternative future to the status quo.[28] There are many applications of conditionality that will vary by context. As Markard writes, policy learning and adaptation to context will be key moving forward.[29]

Regulations, investment, and spending that are conditional can create a strong incentive for business to join in the transition[30] without being able to “pass the buck” onto either workers or the state. With asset holders deprived of the ability to “short squeeze” everyone else, the state can stop worrying about moral hazard and get serious about leveraging its balance sheet to keep both sides happy. Workers do not get taxes without labour benefits or representation, and asset holders get positive incentives to take on the risk (investment) needed to make the transition work without perverse subsidies. After all, we can worry about moral hazard all we like, but at the end of the day it is easier to (partially) insure asset holders than it is to disempower them. Although this may be discomfiting to those who see the transition as an opportunity to transform the asset structure of the economy, limited time means more limited goals and priorities. That is, if you want a green transition, it may be one where making asset holders “whole” becomes the only justice framework that can decarbonise fast enough.[31] But that does not mean that they get to short squeeze everyone else in the process.


[1] US Congress (2021-2022), H.Res.332 - Recognizing the duty of the Federal Government to create a Green New Deal, https://www.congress.gov/bill/117th-congress/house-resolution/332?r=50.

[2] T. Whipple (2020), “The $900bn Cost of ‘Stranded Energy Assets’”, Financial Times, February 4, https://www.ft.com/content/95efca74-4299-11ea-a43a-c4b328d9061c. A report by Credit Suisse estimates the global wealth stock at $418 trillion by the end of 2020, by which calculus the Financial Times estimates that stranded assets account for 0.2% of global wealth stock. See A. Shorrocks et al. (2021, June), Global Wealth Report, Zürich: Credit Suisse.

[3] T. Oatley and M. Blyth (2021) “The Death of the Carbon Coalition”, Foreign Policy, February 12, https://foreignpolicy.com/2021/02/12/carbon-coalition-median-voter-us-politics/.

[4] B. Braun (2021), “Asset Manager Capitalism As a Corporate Governance Regime”, in The American Political Economy: Politics, Markets, and Power, ed. J. S. Hacker, A. Hertel-Fernandez, P. Pierson, and K. Thelen (Cambridge: Cambridge University Press), 270-294.

[5] D. Gabor (2020), “Critical Macro-Finance: A Theoretical Lens”, Finance and Society 6(1):45-55, http://dx.doi.org/10.2218/finsoc.v6i1.4408.

[6] L. Fink (2022), “The Power of Capitalism”, Letters to CEOs, https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter.

[7] See website at https://www.fsb-tcfd.org/.

[8] See website at https://www.sasb.org/.

[9] See E. Bolstad (2021), Oil-Friendly States Fight Back Against Sustainable Investment Trend, PEW Charitable Trusts, https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2021/03/16/oil-friendly-states-fight-back-against-sustainable-investment-trend.

[10] E. Schatzker (2021), “BlackRock’s Fink Urges World Bank, IMF Overhaul for Green Era”, Bloomberg, July 11, https://www.bloomberg.com/news/articles/2021-07-11/blackrock-s-fink-urges-world-bank-imf-overhaul-for-green-era.

[11] D. Gabor (2021), “The Wall Street Consensus,” Development and Change, https://doi.org/10.1111/dech.12645.

[12] Three asset manager firms – Vanguard, BlackRock, and State Street – own 20% of every S&P company and 80% of the ETF market. For more on the power of these firms, see A. Tooze (2021), “Chartbook #82: The rise of asset manager capitalism and the financial crisis of 2008”, https://adamtooze.substack.com/p/chartbook-82-the-rise-of-asset-manager.

[13] E. Lopatto (2021), “How r/WallStreetBets Gamed the Stock of GameStop”, The Verge, January 27, https://www.theverge.com/22251427/reddit-gamestop-stock-short-wallstreetbets-robinhood-wall-street. Note that Robinhood (the main outlet for small traders at the time) shut down all trading of GameStop in the end, aligning with mainstream asset managers, see V. Tenev (2021), “Robinhood Chief Apologises over GameStop Affair”, Financial Times, February 18, https://www.ft.com/content/69c0b5b0-9d49-4d0e-8f32-fe9428bff5b1.

[14] If you don’t like the short squeeze analogy, a Kaleckian Capital Strike is the other obvious model, see M. Kalecki (1943), “Political Problems of Full Employment,” The Political Quarterly.

[15] That actually happened, see T. D. Chant (2021), “Private-equity Firm Revives Zombie Fossil-fuel Power Plant to Mine Bitcoin”, Ars Technica, May 10, https://arstechnica.com/tech-policy/2021/05/private-equity-firm-revives-zombie-fossil-fuel-power-plant-to-mine-bitcoin/.

[16] D. Driscoll (2021), “Drivers of Carbon Price Adoption in Wealthy Democracies: International or Domestic Forces?”, Sage Journals, https://doi.org/10.1177/2378023121992252.

[17] A. Rocamora (2017), The Rise of Carbon Taxation in France: From Environmental Protection to Low-Carbon Transition, Arlington, VA: Institute for Global Environmental Strategies.

[18] P. A. Durand (2018), “Comprendre la taxe carbone en huit questions”, Le Monde, December 7, https://www.lemonde.fr/les-decodeurs/article/2018/12/07/comprendre-la-taxe-carbone-en-huit-questions_5394292_4355770.html.

[19] D. Driscoll (2021), “Populism and Carbon Tax Justice: The Yellow Vest Movement in France”, Social Problems, https://doi.org/10.1093/socpro/spab036.

[20] See website at https://ccpi.org/.

[21] C. Lübke (2021), “Socioeconomic Roots of Climate Change Denial and Uncertainty among the European Population”, European Sociological Review, https://doi.org/10.1093/esr/jcab035.

[22] Financial Times (n.d.), “How to Save Climate Policy from the Culture Wars”, https://www.ft.com/content/25f0d270-f528-4789-b390-37ad7f9d091b.

[23] See M. Mildenberger, E. Lachapelle, K. Harrison, and I. Stadelmann-Steffen (2022), “Limited Impacts of Carbon Tax Rebate Programmes on Public Support for Carbon Pricing”, Nature Climate Change, 1–7, https://doi.org/10.1038/s41558-021-01268-3.

[24] To exemplify, the price of gasoline goes up due to the tax. The revenue agent rebates the tax to the consumer as an offset. As such, the pressure to stop using gasoline, and thus disempower the producer, fades as the tax effectively becomes a subsidy. See M. Mildenberger, Carbon Captured (Cambridge, MA: MIT Press), 238.

[25] M. Prasad (2008), “On Carbon, Tax and Don’t Spend”, New York Times, March 25, https://www.nytimes.com/2008/03/25/opinion/25prasad.html.

[26] E. Lonergan and C. Sawers (2022), Supercharge Me, London: Agenda Books.

[27] DW (2020), “France Unveils Stimulus Plan Worth €8 Billion for Car Industry”, May 27, https://www.dw.com/en/france-unveils-stimulus-plan-worth-8-billion-for-car-industry/a-53578294.

[28] D. Rosenbloom, J. Markard, F. W. Geels, and L. Fuenfschilling (2020), Why Carbon Pricing Is Not Sufficient to Mitigate Climate Change—and How “Sustainability Transition Policy” Can Help, Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences 117(16): 8664-8668.

[29] See Markard (2022) in this series.

[30] J. Meckling , N. Kelsey, E. Biber, and J. Zysman (2015), “Winning Coalitions for Climate Policy”, Science 349(6253): 1170-1171, https://www.science.org/doi/10.1126/science.aab1336.

[31] After all, private finance has the most untapped capital ready to mobilize. See van Lerven (2022) in this series.