Green New Deal makes sense but unlikely
With Europe and the United States staring recession in the face, a growing chorus is calling for massive public investment in clean, green energy to revive economic growth while fighting climate change.
Under the slogan of a “Green New Deal”, leaders from U.N. Secretary-General Ban Ki-moon to former U.S. Vice-President Al Gore and German Foreign Minister Frank-Walter Steinmeier argue that industrialized countries can kill two birds with one stone and create millions of “green collar” jobs.
The idea of using tax breaks and extra public spending to promote energy efficiency, mitigate carbon emissions and develop renewable power sources, inspired by U.S. President Franklin D. Roosevelt’s New Deal public works program during the 1930s Great Depression, sounds like common sense.
But it may not happen fast enough, or on a sufficient scale, to stimulate the economy, arrest global warming or durably bring down oil prices that reached $147 a barrel earlier this year.
“This is the big opportunity to get off the oil hook, but governments have to be bold, do it on a large scale and stick to it,” said Tom Burke, co-founder of environmental consultancy E3G and an associate professor at Imperial College, London.
He advocates sustained public investment in wind farms, photovoltaic and solar energy, developing clean coal technology, connecting European electricity grids, and combining heating and power from gas to make offices and homes more fuel-efficient.
Yet governments which have collectively found about $5 trillion to rescue banks and galvanize economies are hesitant to focus fiscal stimulus measures on clean energy because of the long lead-time for many projects.
Indeed, there are signs that financial crisis is causing cutbacks in public and private-sector investment in wind farms, solar and wave power, and economic angst may make the European Union scale back ambitious legislation to fight climate change.
President-elect Barack Obama said in a campaign debate that the credit crunch could slow his plans for a $150 billion clean energy program, designed to reduce U.S. dependence on imported oil and create 5 million “green collar” jobs.
Research group New Energy Finance says new investment in clean power will decline by 4 percent this year compared with 2007 due to the crisis although the conditions for growth are intact. Total new investment in low carbon technology is estimated at $142 billion in 2008, down from a record $148 billion in 2007.
Germany, Europe’s biggest economy, earmarked just a fraction of this month’s 50 billion euro ($62.45 billion) stimulus package for measures to renovate buildings and reduce emissions.
Governments are tempted to give money directly to voters in tax cuts or one-off payments to trigger an immediate spurt in consumption rather than take the slower route of investing in green infrastructure schemes, economists say.
A recession is also a difficult time to introduce new green taxes that promote environmentally sustainable behavior.
Some governments have found ways to combine the two, but so far mostly on a modest scale.
Britain has spent public money on insulating old people’s homes. Lagging roofs and filling wall cavities cuts pensioners’ fuel bills, reduces energy consumption, curbs CO2 emissions and creates jobs. It’s a win-win-win-win proposition.
France has created tax incentives to buy low-emission cars, with corresponding tax hikes on gas guzzlers, that are changing driving habits and have prompted auto makers to advertise their vehicles’ green performance rather than acceleration or power.
To make an impact on gross domestic product next year, European countries would have to do far more, especially on energy efficiency, where environmentalists and EU officials say the biggest and quickest gains are to be made.
Achim Steiner, executive director of the U.N. Environment Program, says Britain could create thousands of jobs within two years by reducing the carbon footprint of buildings.
The European Commission’s Strategic Energy Review, published last week, offers plenty of longer-term projects awaiting funds.
They include a European gas and electricity supergrid, giant North Sea windfarms connected by underwater cables, pipelines across Turkey to central and southern Europe and a Mediterranean energy network to harness North African solar and gas potential.
There’s no shortage of work, but it takes political courage in a recession to think big.