Varieties of capitalism and clean energy transitions in the European Union: When renewable energy hits different economic logics

Abstract

Renewable energy sources are central to building low-carbon energy systems but there is little secured knowledge about the structural factors that shape national renewable energy policies and energy transition pathways. Drawing on the literature on ‘varieties of capitalism’ , this article offers an in-depth account of the evolution and impact of renewable energy policies in two countries that are commonly labelled in the literature as two opposite forms of capitalism: ‘coordinative market economy’ (CME) in Germany and ‘liberal market economy’ (LME) in the UK. Based on recent political economy literature, this dual perspective is complemented by including a third subtype, ‘dependent market economies’ (DMEs), which are found in the transition states of central and eastern Europe. The analysis reveals an initial convergence of the three varieties of capitalism towards stronger government involvement and CME-style targeted policy measures. The effectiveness and scope of these measures, however, continues to be constrained by the political economic settings. More recently, centralization and market-based renewable energy governance has gained the upper hand at both national and EU-level. The article concludes with emphasizing the risks of national and EU climate and energy policies driven by short-termism and cost-effectiveness for both renewable energy and climate change goals in the long-run.Policy relevanceThe article has policy implications for EU and national policy makers and stakeholders concerned with renewable energy and climate change governance. It underlines the need for comprehensive renewable energy policies targeting domestic market creation and industrial development as well as civic participation. Domestic and external constraints that different varieties of capitalism within the EU face in advancing these three components of renewable energy development are emphasized. The article stresses the need for enhanced coordination and balanced development of renewable energy sectors across all EU economies as essential for achieving climate change goals and a genuine low-carbon energy transition.