Green Indicative Planning

Energy transitions the world over are at an impasse. With the Trump administration’s scrapping of the Inflation Reduction Act and the mobilization of the European Far Right against existing climate legislation, the future of an effective market-based environmentalism that delivers real climate mitigation on time has been thrown into profound doubt. As the climate clock ticks, liberal democracies are being driven toward either a defensive and vague green liberalism or an aggressive and illiberal retrenchment of fossil capitalist growth.

Amid worrying climate forecasts, and unresolved political struggle for the future of the advanced economies, it is now more important than ever to envision a feasible course for the green transition. While some economists on the left have begun to invoke ideas such as “democratic economic planning” or “ecosocialist planning” to describe institutions that might achieve this transition,  the planning imperative—determining national and international goals on the size and composition of gross output of various economic sectors, and achieving the levels of public and private spending necessary to induce the desired supply responses—does not demand a revolutionary restructuring of national economies as a prerequisite for emissions reductions.¹ Rather, as we have argued recently, existing states can plan the coming energy transition despite the power of private capital—multinational corporations, credit rating agencies, sovereign bond investors, and global institutional investors—constraining them. In fact, planning may be the most direct route to states reclaiming power over private capital for public purposes.

Our suggested approach is more indicative in nature. It is responsive and complementary to political institutions, rather than supplantive of them in the way so many twentieth-century programs for the transition to socialism attempted to be. It is a continuation of the longstanding tradition of indicative planning in post-war societies, largely forgotten during the era of neoliberalism. But the history of the mixed economies bequeathed by the Great Depression and World War II shows that economic planning and intersectoral coordination is possible in liberal-democratic societies managing broadly capitalist economies. When the hierarchical dimension of planning remains tightly integrated with the deliberative processes of existing political authorities, the evolution of the mixed economies as democratic polities has allowed them to achieve their most durable forms.

Unapologetic commitment to economic planning by the state in a mixed economy is therefore the only clear-eyed path out of the current impasse of global climate politics. We define “green economic planning” as a system of coordination encompassing macro-financial architectures, industrial policy, and existing private-sector planning capabilities. It is a form of statecraft: repurposed for bold climate action, our existing mixed economies should be technically capable of achieving the hyper-growth of green sectors and the phase-out of high-carbon sectors in a short time span.

Historically strong coordination between states and corporate elites in Denmark, France, the Netherlands, and Japan led to a range of successful planning economic arrangements. The world’s most rapidly growing (albeit undemocratic) economy, which is China, is another example of planning mixed with a wildly entrepreneurial privately-owned capitalist sector—many strategies can be taken from China that do not require the party-state to implement. Several of these planning styles have persisted into the present, meaning they can be more easily embraced across capitalist democracies today.

History’s lessons: a playbook for the present

During the twentieth century, planning was not confined to Soviet economics, and neither was it strictly a wartime measure. Throughout the postwar period, capitalist governments framed transformational economic goals, facilitated negotiation between economic actors, and actively influenced market calculation through state credit, monetary policies, subsidies, procurement, and regulation. By forecasting desired investment and production targets for the economy as a whole, these states “indicated” how private capital might earn returns in line with national goals. Countries employed these tools with varying degrees of encouragement and coercion: Dutch and Japanese forms of indicative planning were less coercive and directed than their French counterpart.

In the Netherlands, indicative planning consisted of flexible geographic plans for ideal investment patterns, with corporatist institutions integrated into the decision-making process.² Plans were coordinated by government institutions at the municipal, provincial, and national level, with each one cultivating its own planning expertise. Though it was receptive to organized stakeholders, Dutch planning ultimately generated a layer of specialized elite planners who were largely insulated from public scrutiny or political interference. While a step away from the market-led logic of contemporary approaches to decarbonization, by being focused on territorial rather than intersectoral development, this form of planning would be too weak for our purposes.

French indicative planning, by contrast, was more extensive and more politicized—aiming not only at aligning spatial investment decisions with the interests of organized actors, but transforming the foundation of the French economy.³ Its plans came in three parts: technocratic design, democratic vetting, and technocratic implementation. National growth rates were initially set by the Finance Ministry and Planning Commissariat (which consisted of economic and sectoral divisions). The Commissariat assembled issue-specific commissions responsible for designing a policy path to realizing the plan’s targets. This was then submitted for deliberation by a corporatist body with two hundred representatives of various interest groups, as well as to the High Planning Council, which included government ministers, employers’ federations, and trade union groups. Planning enrolled both private and state-owned corporations in finance, railroads, aviation, and electricity. Managed under rules of autonomy, they had to be persuaded by the planning bureaucracy to participate in implementation.

Large state ownership was key. As the economist Eric Monnet has demonstrated, two-fifths of national income and half of gross investment during the postwar period came from the state.⁴ Leveraging control over credit, the state used the planning apparatus to pick the sectors that would benefit from cheap and patient financing. The Planning Commissariat, the Credit Council, the central bank, and state-owned banks acted in sync, enrolling private capitalists for the ride. For example, the French central bank, through tools such as credit allocation and selective credit policies, played a crucial role in directing economic growth, industrial modernization, and structural transformation, taking France to the top ranks of global industrial prestige by the 1970s.⁵ The systemic transformation of the French energy sector following the 1973 oil shock was nothing short of spectacular, with a wholesale shift from fossil fuels to nuclear achieved in a little over fifteen years, even with a planning apparatus already diminished by liberalization.⁶ This was a developmental state in which the government, acting as banker, planner, and owner of key industrial assets, was in the driving seat of systemic transformations from manufacturing to infrastructure. The state led on structural transformations, but the system it created also delivered substantial gains to private capital, ensuring its representatives had skin in the planning game: marginal returns on capital for each sector over the period 1954–1974 were positively correlated in every year of the sample.⁷

On this spectrum, Japan’s successful post-war economy fell in the middle between Holland and France. Like France, Japan used indicative planning during its infant industry phase—but unlike France’s boldly dirigiste state, Japan’s planning apparatus had more modest indicative ambitions, limiting its interventions to cartel competition restrictions, patient public finance for industrial policy, and joining research teams at various firms.⁸ Of essence for green planning is Japan having the state plan the phase-out of declining industries like coal as early as the 1960s. Similar to France, Japanese planning initially developed in a context of militarism and catastrophe, with a planning agency established in anticipation of the war in 1937. As a consequence of the war, massive shortages of goods and widespread industrial destruction ensured the continuation of economic planning during the US occupation and, in subtler forms, after Japan regained its independence in 1952. Like France, Japan used five-year indicative plans well into the neoliberal era (with similar instruments based on expenditure, tax, public credit, and administrative guidance). These plans contributed to Japan’s diversified and complex industrial boom in new and high-value sectors while stabilizing growth and smoothing out the business cycle. Furthermore, unlike in France, the degree of centralized institutional dirigisme was more limited in the implementation phase.

Indicative planning paved the foundations for post-war recovery and subsequent industrial upgrading from Western Europe to Japan, with macrofinancial and industrial policy coordination by central bureaucracies caught between the imperatives of accountability and technocratic autonomy. What brought this planning system into crisis during the late 1970s was the combined processes of stagflation, unanticipated by the prognosis devices of the planners, financialization of state debt, and the ideological ascent of neoliberalism. States taking decarbonization seriously can benefit from resuscitating these capabilities, building on selective sectoral planning experiences that survived in the interstices of neoliberalism with often remarkable outcomes.

A new green statecraft

The French model of intersectoral coordination finds its contemporary manifestation in the policies of China. Since China accounts for 90 percent of the growth in global emissions since 2015, the greening of Chinese monetary and financial resources is of planetary importance.⁹ Fortunately, the Chinese government has embarked on a historic climate shift in its planning apparatus, yielding remarkable results—including the world’s most extensive decarbonization of transportation and the largest deployment of green energy capabilities. With Trump pulling the plug on US participation in the green transition, and likely pulling its allies in the same direction, China’s mighty investment machine remains geared overwhelmingly in favor of decarbonization.

Indeed, China’s version of “developmental environmentalism” is structured by five-year plans and enforced by macroeconomic, administrative, and financial channels—a combination of administrative command and corporate incentives that harnesses the benefits of both centralization and decentralization.¹⁰ In this regard, China’s planning institutions rely on the mobilization of bottom-up stakeholders at the provincial and municipal level, with few centralized mandates regarding implementation.¹¹ For example, provincial and city governments endowed with their own financial institutions that include innovation-oriented venture capital firms work with state-owned firms and private firms as part of a large tapestry of economic experiments¹² that, for all its inefficiencies, has put China in a leading position on cleantech innovation, cleantech deployment at home, and cleantech dominance abroad.¹³ Indeed, a system such as China’s, where homegrown technological innovations quickly advance to mass production and retail—frequently shaking Western stock markets—deserves careful scrutiny of its coordinative mechanisms in the search for the most effective planning practices. Rather than being treated as an exotic anomaly, it should be studied in depth.

Perhaps most striking is the Chinese planning system’s reliance on a French-like macro-financial architecture: credit allocation on favourable terms to strategic sectors targeted by the plan and public ownership over systemically important financial institutions. Within this system, the People’s Bank of China pioneered green monetary policy by reducing the cost of capital for green activities and actors within the economy.¹⁴ Since 2015, the government’s indicative inter-sectoral planning—supported by resources and incentives (“carrots”) from state-owned banks and SOEs—has been directed toward recalibrating the economy, shifting investments toward cutting-edge cleantech industries in a manner that unexpectedly blends the ideas of Marx and Schumpeter.¹⁵ In this process, the state turned financialization into a state-led process for accelerated decarbonization¹⁶ even as the process was severely shaped by US weaponization of global financial networks to constrain China’s rise.¹⁷

Notably, government-owned venture capital firms, rather than private ones, dominate China’s innovation finance regime, challenging skeptical accounts that question the capacity of China’s authoritarian state to foster bottom-up green technological innovation. In achieving this, China relies heavily on the large-scale, top-down conversion of state assets into risk capital, integrated within central and provincial planning processes. Furthermore, it depends on the execution of geographically targeted investments in sector-specific innovation objectives, facilitated through the country’s multi-level administrative state.¹⁸

Democratic paths

If you were a planning skeptic, you might  think that democracies are too fractious, too slow, too…democratic for strong forms of planning. China’s party-state is thus considered a poor guide for Western governments. Yet, as Thea Riofrancos has argued, democracies are well-suited to planning because democracies, by being more transparent and accountable systems, enable accurate information flows and reduce incentives for misreporting achievements in the planning mechanism.¹⁹ Denmark’s praised energy-system transformation proves the point.²⁰ By weaving centralization together with grassroots participation, it marries efficiency with legitimacy. Denmark boasts the most sustainable and secure energy system in OECD, the result of an energy planning process it has developed since the 1970s. The Danish Energy Agency (DEA) is at the center of the administrative part of the planning apparatus. It deploys multi-year plans for all sectors relevant to the production, transmission, and utilization of energy in the country. The actual plan, however, is designed by the energy ministry which issues the DEA with National Energy and Climate Plans after involving both democratic actors (political parties represented in the Danish legislature) and technocratic actors (Danish Utility Regulator, Agency for Data Supply and Efficiency, Danish Meteorology Institute). The DEA takes the plan, models it, generates scenarios and runs it through hearings and decentralized strategic planning with municipalities, companies, and independent suppliers who act as power producers. In the end, after regional consultations with the Nordic countries and the EU, the Danish Parliament debates the plan, adopts it and gives it the status of a democratically and technically sound strategic document.

Following this procedure, the DEA then turns the plan into a framework for state subsidies, loans, grants, and tax exemptions (and, respectively, tax increases on fossil fuels), as well as regulations facilitating renewable energy investments and discouraging polluting sectors.²¹ Furthermore, by turning local farmers and residents into renewable energy cooperatives at the municipal level using loan guarantees from the state-owned Energinet.dk, the planning process gained a stronger democratic facet in its implementation as well.²² Danish green planning maximizes democratic input not just at the national level, but also at the municipal levels, where much green industrial policy takes place. As the capital intensity of this transformation increased, its economic basis was diminished, with a derisking state emerging alongside the planning state—yet overall the erosion of this democratic process was more of a choice than an inevitability.²³ Energy decarbonization in Denmark shows that centralization did not lead to authoritarian drift. Indeed, the Danish lesson is that accelerated centralization was accompanied by heightened democratic input in terms of both planning procedures and collective ownership.

Where do we go from here?

Green planning is not just a theoretical promise; it has been a practical success under specific historical crises—war, post-war recovery, energy shocks, or the crisis of state socialism. However, as these cases illustrate, the legitimacy of intersectoral planning under capitalism often hinges on existential crises. Calls for urgency might risk elite capture and authoritarian tendencies, necessitating a research agenda for green economic planning that would seek to clarify how to balance democratic legitimacy and geopolitical realities.

This agenda could unfold in three dimensions. First, we need more granular work on hierarchical coordination institutions that have historically characterized indicative planning in order to provide more than theoretical outlines of green planning institutions. For example, based on our case studies, we can suggest that such institutions can use control over credit conditions, guarantees for public-private liquidity (liquidity issued by financial institutions backed by central banks), capacity to socialize innovation functions, enhanced state ownership in finance and energy, or capacity to entice and coerce private finance to align state decarbonization targets and business incentives. As such, decarbonization might appear in part as a functionally hierarchical system with the coordination institutions of state planning on top, the macro-financial regime in the middle, and industrial policy or economic statecraft policies for firms at the bottom. Diminished since their post-war halcyon days, these capabilities are being bolstered by current geopolitical concerns in ways that remain poorly understood. This begs for reconciling the hierarchical nature of coordination institutions with the imperatives of geoeconomic competition and democratic legitimacy.

Second, green economic planning suggests that large corporations with intricate multinational operations could serve as the perfect experimental laboratories for revisiting the old neoclassical objection that market interactions are simply too complex for the state to plan. Indeed, a micro-founded approach to planning within capitalist economies, armed with contemporary calculative tools, might elegantly sidestep liberal objections to socialist calculation (Morozov 2019). To be sure, extrapolating from firm-level planning to the intersectoral coordination we advocate is a herculean challenge. Technocracies, often constrained by their own institutional inertia, may instinctively recoil at the sheer scale of the task. Yet, in this era of technological revolution, such objections should not close the conversation but rather make us conscious of our historical turning point—when the very tools of this revolution, such as artificial intelligence, are conscripted into the service of decarbonization objectives. After all, if we are to take the promises of AI seriously, surely its finest achievement would be to master not just our chatbots, but the planners’ calculative devices as well.

Keeping the hierarchical dimension of planning confined to the implementation phase is absolutely critical. The democratic facet of planning clashed with France’s fiercely competitive democracy. Despite its rise in the shadow of technocratic power, this political system rose to meet the challenge, particularly during the “Thirty Glorious Years” (1940–1970). Remarkably, technocrats, communists, liberals, capitalists, labour unions, and academics all found themselves at the same table. Before the hierarchical logic of implementation took over, the public deliberation phase was alive with vigorous—and often downright unpleasant—debates. Yet it was precisely this contentious process that lent the planning system its legitimacy, demonstrating that robust democratic engagement could coexist with, and indeed underpin, effective economic coordination.

Third, if our analysis holds water, states with weak institutions and poor state-business coordination would do well to bolster institutions first and therefore initially steer clear of green planning—for failure in this domain risks not only operational setbacks but the broader delegitimization of planning itself. That said, such deficiencies are not immutable. Political mobilization has the potential to bridge these gaps, and further research could fruitfully explore how this might unfold under the pressures of geoeconomic competition and climate degradation co-occurring.

Fourth, there is a pressing need to delve deeper into the scope for planning in global South countries, where structural constraints loom large. These include the straitjackets imposed by global and regional trade regimes, geopolitically-charged protectionism from core economies, and the relentless financialization of state debt. The challenge is formidable, but so too is the opportunity to uncover planning strategies that break free of these constraints and craft pathways toward sustainable and equitable development. The current historical moment may make such promises ring hollow but few studying Korea or Singapore in the 1950s would have expected to see high-performance developmental states flourish there from the 1960s onwards.

Last but not least, green economic planning, for all its promise, carries the lurking specter of technocratic overreach and corporate capture—a dilemma familiar to anyone who’s studied the revolving door of finance and government. The challenge is clear: how can democratic states draw hard lines against corporate capture without triggering an investment strike that stalls the very sustainability transformations they seek? If private finance is co-authoring the macro-financial architecture of decarbonization, what tools can green planning institutions wield to keep financiers in check? And when high-emitting sectors face the inevitable reckoning, how do we ensure that their workers and communities are both democratically represented and adequately compensated, without turning the democratic process itself into collateral damage? Finally, how can planning institutions scale up green practices democratically developed in municipal and regional prefigurations, as suggested in emerging degrowth planning theory,²⁴ while ensuring the territorial homogeneity that effective decarbonisation entails?²⁵

These are not just idle questions; they cut to the heart of how political economy must evolve to tackle the climate crisis. The answers, if they emerge, will require breaking out of our research silos and grappling head-on with the messy, contested terrain of climate governance. The research agenda we propose builds on this tradition—not just to map the complexities of green planning, but to carve out a normative horizon where democratic aspirations are not only preserved but amplified in the face of existential environmental challenges.

The green state must rise from the ashes of the derisking state and its climate risk-loading foe, not as an anachronism but as an instrument of survival. The choice will be stark: plan for a future of resilience or resign ourselves to chaos and the perils of climate adaptation under authoritarianism.

This article is adapted from the authors’ latest in the April issue of New Political Economy.