The (European) Derisking State

The emerging green capitalist state in the Global North is a derisking state. The derisking state enlists private capital into achieving public policy priorities by tinkering with risk/returns on private investments in sovereign bonds, currency, social infrastructure (schools, roads, hospitals and houses, care homes and prisons, water plants and natural parks) and most recently, green industries. The concern with the production of investibility forges a state-capital relationship where capital dominates. Yet the specific architecture of regulatory, fiscal and monetary derisking interventions varies across polities, is activated at different speeds and with different degrees of coordination, contingent on specific macrofinancial constraints and vulnerable to political strains. Both in the EU and the US, derisking has emerged as the method to organise green industrial upgrading in the Green Deal Industrial Plan and the US Inflation Reduction Act, successfully generating elite support for taboo-breaking autonomous strategic visions, in contrast with the state-directed approach in the CHIPS Act that disciplines private capital into national security priorities for semiconductor manufacturing. In the EU, 'whatever it takes' derisking does not easily translate from monetary to fiscal and industrial policy, because it requires Member States to agree on relaxing the distinctly European macrofinancial constraints around the provision of state-aid. The institutional response to these constraints, the European Sovereignty Fund, reinforces the derisking imperative. Furthermore, the limited scope for disciplining (carbon) capital raises serious doubts about the overall suitability of derisking for governing decarbonisation.