Is the Green New Deal a dead duck?

Four years ago it was hailed as the cure for our economic and environmental woes. So what’s happened?

1 March 2012

New Internationalist

Four years ago it was hailed as the cure for our economic and environmental woes. So what’s happened?

We are facing three crises: finance, energy and climate.

The global financial (and economic) crisis is ongoing and may yet get worse.

As to energy and climate, the exact time of “peak oil” – the point at which oil extraction rates decline and prices rise inexorably – is controversial. It may have already happened, could lie decades in the future, or might even occur this year. Proponents of large, new fossil fuel sources – such as tar sands – assure us that their reserves could keep the world economy lubricated for decades. But one thing is certain: energy will be more expensive and harder to get.

The International Energy Agency (IEA) predicts that by 2030, global energy demand will increase by 45 per cent – requiring four times the current output of Saudi Arabia in new production capacity. The impact of this “business as usual” scenario on climate will be extreme, precipitating a global temperature rise of six degrees Celsius, according to the IEA. In 2006, a year before the financial crisis hit, leading British economist Nicholas Stern warned us that due to climate change: “We will be faced with the kind of downturn that has not been seen since the Great Depression and two world wars.” The costs of repairing the damage would exceed the costs of preventing it happening in the first place by a factor of 20.

Since Stern made his calculations, the predictions and pace of climate change have grown ever more alarming. We have probably about a decade to stabilize our emissions, and need to reduce them by 80 per cent by 2050.

Global Green New Deal

This “triple crunch” of finance, energy and climate demands a response that many economists and analysts think ought to resemble a war effort, as articulated by the group that launched A Green New Deal in Britain in 2008.

In March 2009 the United Nations Environment Programme (UNEP) proposed a Global Green New Deal, advocating the uptake of a suite of policies. Edward Barbier, a professor at the University of Wyoming, was asked to produce a consultancy report. He calculated that a “green” stimulus would produce a 20 per cent increase in job creation over more traditional fiscal measures. Plus, it had the potential to reap eventual savings of $450 million for every $1 billion invested.

By investing in the right projects – combined with the right pricing policies such as carbon taxes and subsidies for clean energy – millions could be employed, as the global economy “powered down” to prepare for the double challenge of energy scarcity coupled with climate change. Investment would be in: wind farms; solar panels; flood defences; sustainable agriculture; research and innovation. The energy efficiency of buildings would be improved by employing thousands of newly skilled workers to insulate roofs and double-glazed windows. The potential is enormous.

The idea stems from the original New Deal, launched in 1933 by US President Franklin D Roosevelt as an emergency measure to provide work and income for millions made destitute in the Great Depression that followed the 1929 Wall Street crash.

Under the guidance of British economist John Maynard Keynes, Roosevelt stipulated that the equivalent of four per cent of the nation’s Gross Domestic Product (GDP) be spent on public works. The national deficit was increased and federal debt expanded in the belief that it would pay off.

More than four million people were put back to work. Over seven years, the government spent $21.1 billion building 40,000 schools, 120,000 bridges, 600,000 miles of roads and over two million public toilets. Rural America was electrified. Safe drinking water and sanitation raised the living standards of millions. Literacy boomed.

Though it would not have been labelled “green” at the time, the New Deal reforested the US: the Civilian Conservation Corps planted over three billion trees with the aim of mitigating the soil erosion resulting from deforestation and poor agricultural practices which had led to infamous “dust bowl” storms.

Known as “demand-side economics”, Keynes’ programmes aimed to stimulate spending and kick-start the economy by putting money directly into the hands of consumers who – so the theory went – would spend the money and stimulate the rest of the economy back towards economic growth.

Then – as now – some fiscal conservatives balked at the idea, deriding it as socialist in philosophy and detrimental to American industry.

Second time around

In 2007 history looked set to repeat itself and the world invested over $100 billion in renewables. When the financial crisis started to bite, fiscal stimulus measures were introduced to try to get the economy moving. There were encouraging signs at first. According to Barbier’s calculations, 16 per cent of all fiscal stimulus spending worldwide from September 2008 to December 2009 was devoted to “green” measures and investments.

Investing more than any other nation, South Korea apportioned 80 per cent of its stimulus to green investments, the countries of the European Union (EU) 60 per cent, the US 12 per cent and China 34 per cent.

These figures sound impressive but they need to be examined as a percentage of gross domestic product (GDP). Conservatively, the UNEP had recommended just one per cent of GDP be spent on green improvements. Britain’s Sustainable Development Commission and the New Economics Foundation advocate two per cent.

But few nations actually met even the one per cent benchmark. Britain, Canada and the EU in general spent just 0.2 per cent of their GDP on the green stimulus. The US managed 0.7 per cent while Australia reached 1.2 per cent.

Meanwhile, large subsidies to the fossil fuel industry continued. In 2008 these reached $557 billion, roughly one per cent of total world GDP.

Barbier labels such subsidies “perverse” as they encourage energy consumption and greenhouse gas emissions, distort the market and do not reflect the true cost of using them. He has calculated that scrapping $300 billion fossil fuel subsidies alone could reduce greenhouse gas emissions by six per cent and add 0.1 per cent to world GDP.

Meanwhile, many of the small incentives designed to foster green energy vanished. For example, the British Conservative-led government recently slashed by half the feed-in tariff available to small domestic producers of solar energy.

Is growth green?

Emerging economies in Asia have been keener on green investment than their Western counterparts. South Korea invested the equivalent of five per cent of its GDP in green measures, China three per cent. Both nations saw the initiatives as a means to develop green industries as part of a long-term export strategy, and to ensure global dominance in the future green economy. China is already the world’s largest producer of solar panels.

In 2009 South Korea launched a five-year Green Growth Investment Plan, spending another $60 billion on reducing carbon dependency and on environmental improvements to create up to 1.8 million jobs through to 2020.

But the true “greenness” of some of these packages is questionable. A number of the Korean projects classified as “green” are environmentally questionable, to put it mildly.

Take the Four Rivers dam project, which accounts for eight per cent of the Korean budget (drawing funds from other projects such as railway construction). The dam project, due to be completed this year, is disrupting ecosystems and using enormous volumes of construction materials, especially concrete  – a significant greenhouse gas emitter in its production.

“The situation in Korea really speaks to the heart of the debate: how exactly do we define the green economy?” says Andrea Harden-Donahue, Energy and Climate Justice Campaigner with the Council of Canadians in Ottawa. “Mega-dams and massive construction projects are not the green economy that we want to see built.”

For some, the very nature of a Green New Deal – even in the most ambitious forms advocated by policymakers and think-tanks – needs to be examined for the kind of economy that it supports. Will the end result of short-term relief measures be a return to the conventional economic system as we know it?

Or, could a Green New Deal be used as a stepping stone to achieve a permanent solution – the kind of economy that does not rely on growth and consumption for prosperity?

This is what economist Tim Jackson, author of Prosperity Without Growth, thinks would be the best use of it.

But that’s not an easy message to acommunicate in today’s economic and social a climate. “When you talk about growth, people get itchy,” comments British environmentalist Colin Hines, one of the authors of A Green New Deal.

“We would be better off talking about ‘economic activity’ rather than the concept of “growth”. We have a situation now where people are insecure, worried and anxious. And the NGO movement has never experienced a prolonged period of continuous economic downturn and the effect that that has on people’s psychology. If we don’t learn to couch what we want within the parameters of dealing with people’s insecurities, then we will never get anywhere.”

Whatever the approach, the logic of the Green New Deal still seems irrefutable: create work for the millions unemployed, reduce our environmental impacts, shrink the chance of dramatic climate changes, lower the costs of energy now and save money in the long term.

How could a solution that seems so sensible fail to be manifest?

According to Barbier: “There initially was an attempt to be open to new ideas – but then the severity and depth of the recession saw people retreat back to their old ideas of trying to get the economy ‘going’ at any cost, and worrying about the environment later.”a

Hines has a slightly different take: “The Green New Deal had its year in the sun in 2008 – there was a lot of talk about the idea as nations looked into the economic abyss. But once it appeared as though we were no longer looking into an abyss, the austerity lunatics emerged and took over the asylum. Now we can’t do green things because they ‘get in the way’ of economic recovery.”

History has taught us that the original New Deal and the logic of demand-side economics can create seismic shifts for the better. Even if some historians and economists continue to dispute the efficacy of Keynes’ ideas, the legacy of the New Deal speaks to its success.

We now have the chance to learn from history’s example. Will we?

Hines is hopeful: “I think we will see a return of the basic Green New Deal concept this year,” he says. “Why? Simply because there’s nothing else in town.”