By Tobias Franz and Angus McNelly
The transition from fossil fuels to green energy in the 21st century – driven by the urgent need to address anthropogenic climate change – represents a monumental shift in not just global energy systems but generally within global capitalism. This transition mirrors historical transformations in energy systems, such as the emergence of fossil capital in northern England or the shift from coal to oil in the 20th century, which have had profound impacts on the world economy. The ongoing green transition presents similar unique challenges and opportunities, requiring a fundamental reconfiguration of energy production and consumption patterns to avoid catastrophic climate collapse.
At the heart of this transition is the increasing demand for natural resources essential for the production of green technologies and renewable energy sources. These “transition minerals,” including lithium, nickel, copper, and cobalt, are critical components of batteries, solar panels, wind turbines, and electric vehicles. As the world shifts towards renewable energy, the demand for these minerals is expected to soar, leading to what experts predict as another commodity supercycle.
The initial impetus for the green transition came from activist groups, scientists, and progressive policymakers, who recognized the urgent need to reduce greenhouse gas emissions and transition away from fossil fuels. However, as the transition gained momentum, it became increasingly captured by agents of capital and intertwined with the logics of global capitalism, reflecting the dominant socio-economic and political dynamics of the modern world. Today, the green transition is not only a matter of environmental concern but also a central issue for governments and capital, as it involves radical shifts within the capitalist system.
There has already been a significant increase in political interest and demand for the transition minerals required for the green transition in recent years. Analysts predict that, leading to a surge in extraction activities around the world. This raises critical questions about how governments and private investors will manage the extraction and distribution of these resources, particularly in regions with abundant mineral deposits.
To understand the complex interplay between finance, extraction, and transitions in the green transition, our paper proposes a new conceptual framework: the “finance-extraction-transitions nexus“. This framework draws on insights from finance, development, climate governance, and Marxist ecology to examine how finance and extraction shape the trajectory of the green transition and its socio-economic and environmental implications.
At its core, the finance-extraction-transitions nexus recognizes the dialectical relationship between extraction and finance in driving the transition from fossil fuels to green energy. Extraction represents the physical processes of capital and labour involved in exploiting natural resources for surplus value, while finance facilitates expanded reproduction by mobilizing future value into the present. Together, these processes influence the speed, depth, and shape of the green transition, shaping the emerging geographies of resource extraction and energy production.
One aspect of the nexus explores how finance capital, supported by international financial institutions, directs the development of new forms of resource extraction and green technologies. Financial mechanisms such as de-risking, blended finance strategies, and public-private partnerships play a crucial role in shaping investment decisions and infrastructure development in the green energy sector. By understanding the role of finance in the green transition, researchers can gain insights into the power dynamics and vested interests driving the transition process.
Another aspect of the nexus examines the financialization of resource extraction and its implications for global capitalism. The increasing integration of financial markets with resource extraction industries has created new dependencies and power dynamics, particularly in resource-rich countries of the Global South. Financial frontiers, characterized by credit and insurance markets, extend the reach of global capital into previously marginalized regions, shaping the geographies of resource extraction and energy production.
To contextualize the finance-extraction-transitions nexus within the broader dynamics of capitalism, it is essential to understand capitalism as a socio-ecological system driven by the endless accumulation of capital. Capitalism expands by exploiting labour and appropriating nature, leading to the creation of new frontiers and the transformation of social relations. The green transition represents the latest phase of capitalist expansion, characterized by the opening of new resource and financial frontiers in pursuit of renewable energy sources.
The notion of “frontiers” encompasses both geographical and ideational dimensions, representing spaces where capitalism extends its reach through processes of extraction and financialization. Resource frontiers emerge through the physical extraction of minerals and energy resources, while financial frontiers are created through the expansion of credit and insurance markets. These frontiers reflect the complex interplay between capital accumulation, territorial expansion, and socio-environmental transformation in the green transition.
In conclusion, the finance-extraction-transitions nexus provides a framework for understanding the complex dynamics of the green transition and its implications for global capitalism. By examining the intertwined relationships between finance, extraction, and transitions, researchers can gain insights into the power dynamics, contradictions, and alternatives shaping the future of energy production and consumption. As the world grapples with the urgent challenges of climate change, understanding the socio-economic, environmental, and geopolitical dimensions of the green transition is essential for guiding policy and investment decisions towards a more sustainable and equitable future.
Tobias Franz is a Senior Lecturer in Political Economy at the Department of Economics, SOAS, University of London. His research focusses on political economy of institutions, natural resource governance, the green transition, and Latin America.
Angus McNelly is Senior Lecturer in International Relations at Greenwich University, London. His research sits at the intersection of international political economy, political sociology, political economy, and critical geography. His area focus is Latin America with a particular interest in Bolivia.
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