Financialisation, energy transition, and the looting of clean energy business corporations in the United States

• Published in: Energy research & social science 2024-08, Vol.114, p.103614, Article 103614
• Main Authors: Wu, Jingjing, Li, An, Dan, Ariana K., Hernandez Orozco, Maria J., Khan, Mahnoor A., Nie, Jialin, Parides, Christian J., St Luce, Brandon K., Vorm, Elena T.R.
• Format: Article
• Language: English
• Subjects: Climate change; Corporate governance; Energy transition; Financialisation; Shareholder value
• ISSN: 2214-6296
• DOI: 10.1016/j.erss.2024.103614

The shift to clean energy is crucial for mitigating climate change. Although finance and clean energy corporations are both essential for the transition, the financialisation of clean energy business corporations can impede the energy transition and contribute to the persistence of inequality, which contradict the goals of a green and just transition. In this paper, we examine the financialised business model of clean energy corporations and investigate its incentive structure geared towards generating rapid financial returns. We present the newest systematic evidence using data from the United States that shows that the incentives of clean energy corporation executives are tightly bound to financial sector interests such that the clean energy corporations have become venues for excessive value extraction. As a result, the clean energy corporate sector contributes to the persistence of inequality in society, and a large share of funds invested in the sector is not used to innovate technologies that will benefit the energy transition in the long run. We show that stock-based compensation of clean energy CEOs has led to growing inequality between CEOs and workers. Shareholder payout by clean energy corporations has increased, leaving less to invest in innovations and job creation. Capital-raising instruments allowed financial institutions and investors to extract value from clean energy corporations, dampening the potential for a green and just recovery after the global pandemic. This paper stresses the importance of engaging taxpayers and workers in managing the energy transition.