Asset Specificity in Climate Politics: How Brown Industries Can Become Green

The Political Economy of climate literature has focused on the obstacles of displacing incumbent brown with incoming green industries. This view misses one vital question: How can brown industries become green? The auto sector is a paradigmatic case with some legacy car manufacturers supporting the phaseout of the internal combustion engine. I demonstrate that firms' ability to repurpose their existing assets for electric vehicle production can explain the intra- and inter-industry variation in the auto sector's engagement with the European Union's phaseout of the internal combustion engine. Firms in emissions-intense but low-asset-specificity industries are chameleonic. Initially brown, they can turn green and repurpose their low-specificity assets. They do so when they expect their repurposed assets to provide a competitive advantage in emerging green markets. I contribute to Political Economy literature by introducing asset specificity as a second dimension, alongside emissions intensity, to explain firms' economic and political behavior.