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Will the downturn save the planet?
A Green New Deal?
Alongside government intervention to bailout the
sinking world economy, there has been a revival of calls for
environmental Keynesianism: pumping in state cash to save the planet.
PETE DICKENSON reports on the issues being raised and assesses whether
such a deal is likely.
BARACK OBAMA MADE a call for an environmental ‘new
deal’ a centrepiece of his presidential campaign, promising to spend
$150 billion on sustainable technology. This echoed the Keynesian
response to the Great Depression of the 1930s of president Franklin D
Roosevelt. In Britain, calls have been made for a ‘Green New Deal’ by
Brendan Barber, TUC general secretary, and Larry Elliot, economics
editor of The Guardian. These reactions reflect the failure of market
economics – revealed by probably the most severe financial crisis in the
history of capitalism – which has raised serious doubts among sections
of the bourgeoisie about their present reliance on largely free-market
approaches to mitigate the effects of anthropogenic global warming.
Some argue that the policy response to the economic
crisis of 2008 – direct state intervention and increased regulation –
should now be applied to tackle environmental threats. Others, however,
are already saying that the economic downturn makes action on climate
change less urgent, since the crisis will result in lower consumption,
meaning less greenhouse gases are produced. This controversy raises key
questions. Firstly, is it true that emissions will fall anyway,
eliminating the need for immediate action? If not, will green
Keynesianism be effective in tackling climate change? And, perhaps most
significantly, what will be the chances of the adoption of a Keynesian
approach on a world scale that would be necessary for it to have a real
impact?
Many climate change sceptics and eco-fundamentalists
will welcome the economic crisis, although some more openly then others.
The former are claiming that action to tackle global warming now will
make the situation worse. For example, in the USA a sceptical Republican
congressman from Texas, Joe Barton, led the charge saying that the
proposed Senate bill to introduce a Kyoto-style carbon trading system
will lead the country ‘off the economic cliff’. However, massive
investment in sustainable technology could, potentially, not only
transform the environment but also create millions of jobs.
On the other hand, eco-fundamentalists, many of whom
define themselves as anti-capitalist, realised that the contradictions
inherent in the market system made a major crisis, possibly a slump,
inevitable at some point. Unlike Marxists, though, many welcomed this
prospect, since they despaired of any other way to tackle climate change
apart from economic collapse, which they think could result in a big
reduction in greenhouse gasses. Whether they are correct in that
assumption is another matter.
Professor Paul Crutzen, who won the Nobel prize for
his work on the depletion of the ozone layer, was quoted by the Reuters
news agency on 7 October: "It’s a cruel thing to say… but if we are
looking at a slowdown in the economy, there will be less fossil fuels
burning, so for the climate it could be an advantage… we will have a
much slower increase of CO2 emissions in the atmosphere… people will
start saving [on energy use]".
If the professor is right in predicting a cut in
emissions, to what extent could they fall, and what would be the policy
implications? Some eco-fundamentalists have pointed to the collapse of
the Soviet Union 17 years ago, where there was a disintegration of the
economy resulting in a fall in gross national product (GNP) of
approximately 50%, significantly more in some of the former Soviet
republics. In Russia, where figures are available, there was a fall of
about 40% in GNP that resulted in a reduction of greenhouse gas
emissions of about the same magnitude. Figures supplied to the UN
Framework Convention on Climate Change showed that, in 1990, emissions
totalled 3,046 million tonnes equivalent, falling steadily to 1,869
million tonnes in 1998.
(globalis.gvu.unu.edu/indicator_detail.cfm?Country=RU&IndicatorID=196)
Market forces, Chinese policy
ON THE FACE of it, these figures seem to indicate
that there is, indeed, a possibility of serious reductions in greenhouse
gasses due to the economic crisis, even if it is significantly less than
the extreme example of Russia. A closer look, however, reveals that it
is unlikely that an economic downturn will significantly mitigate
climate change effects, particularly in the medium or long term, for
several reasons.
Firstly, Crutzen, in addition to predicting falling
emissions due to the crisis, also made the point that the downturn could
result in less being spent on research, which could make global warming
worse, a fear that is already being justified. Latest figures show that
global investment by firms in renewable technology has slumped, even
before the current deepening of the crisis, falling 24% from the second
to the third quarter of this year, from $5.8 billion to $4.4 billion
(Financial Times, 11 November).
The markets clearly see no future in green
technology in the short term, either, as various indices of share values
in the sector have fallen from between 50-80% over the past twelve
months. Market forces are now working strongly against renewables, with
the fall in the price of oil undermining profitability projections and
the credit crunch cutting off access to funding for new projects. In
California, a leading renewables firm, Ausra, had plans to raise money
to develop a promising new type of solar energy. This is called solar
thermal power, that uses mirrors to concentrate the sun’s rays to heat
water to use in turbines to generate electricity, which could turn out
to be far cheaper than solar panels. Now, sources of finance have dried
up.
The second reason not to expect the crisis to solve
global warming is that production in the Soviet Union was heavily biased
to highly polluting ‘smokestack’ industries, whereas in the G7
countries, which account for most of world production, output is much
more oriented to services, IT and consumer goods. For this reason, any
downturn will result in much smaller reductions in emissions, since
these sectors are very significantly less energy intensive.
Thirdly, the scale of a downturn is extremely
unlikely to approach that of the Soviet catastrophe. To get a
comparison, output in the USA in the Great Depression fell by about one
third – significantly less in some countries such as Britain. On a world
scale, the economy in the 1930s fell by a fraction of that in the Soviet
Union in the 1990s. Also, while a slump rather than a recession may
still happen today, the lessons that have been learnt by the bourgeoisie
since mean that a downturn probably will not happen on a similar scale
to the 1930s. For example, policy interventions in downturns since the
second world war have resulted in world production falling only once, in
1975/76, and then only marginally.
An uncertain factor is China, which has become the
world’s biggest emitter of global warming gasses, partly by expanding
energy intensive industries such as steel in the past seven years. There
is some evidence now that a significant fall in production is taking
place. If this is repeated across other previously rapidly expanding
energy guzzling sectors in China, significant falls in greenhouse gasses
could happen. However, the Chinese government has just launched a
stimulus package, which has got massive accumulated resources to back it
up, and which could significantly mitigate any overall fall in
production in that country.
Even if a deep slump unfortunately does occur,
following the suffering and devastation, at some point an upturn will
take place that will reverse ultimately any falls that had taken place
in greenhouse gasses, if the capitalist system is allowed to continue.
Also, whatever the severity of the economic crisis, there are enough
global warming gasses trapped in the atmosphere already to drive global
temperature rises for decades to come. The reality is that there is no
way to deal with climate change except through the transformation of the
mode of production, the global application of sustainable technologies
(see Planning Green Growth, by Pete Dickenson, Socialist Publications
and CWI, 2003).
Green Keynesianism
SINCE THE ECONOMIC crisis will not stop global
temperatures from continuing to rise, urgent action is clearly still
needed. So, how effective would the proposed green ‘new deals’ be? Is
Susan George, the well-known critic of globalisation, right when she
claims: "Politically, ecological Keynesianism is a win-win scenario"?
(New Scientist, 18 October)
Such approaches promise to overcome the
ineffectiveness of free-market measures to address global warming,
combined with developing new industries based on sustainable
technologies that would create hundreds of thousands, even millions, of
new jobs on a world scale, since they would be relatively labour
intensive. A good example of this type of initiative from the New Deal
in the USA in the 1930s was the construction of the Hoover dam, that
created tens of thousands of jobs and produced (coincidentally) carbon
free energy for millions (global warming was not a political issue at
that time). In Britain, the New Economics Foundation first proposed a
programme along Keynesian lines called the Green New Deal, co-authored
by Larry Elliot, ten years ago. But the Keynesian government policy
response to the present economic crisis has given the initiative a fresh
lease of life.
The key points of the Green New Deal are a massive
programme of investment in energy conservation and the development of
renewable energy generation capacity as part of a ‘vast environmental
reconstruction programme’. This would be delivered mainly by significant
increases in fossil fuel taxes to drive energy efficiency, a windfall
tax on oil companies, minimising corporate tax evasion, big cuts in
interest rates, issuing government ‘green’ bonds and, on the
international plane, setting a target for emissions and establishing
Kyoto Two ‘with teeth’.
Apart from green bonds, there is not much new in
this largely neo-Keynesian programme. Its emphasis is on interest rate
cuts although, to be fair, it was written before the present crisis and
the authors with hindsight may have changed their priorities to enhance
the role of the state. In particular, they may now regret saying that
their programme’s difference with the New Deal of the 1930s is that it
will have a much bigger role for investment from private savings,
pension funds, banks and insurance companies. Obama’s proposals are
similar to the Green New Deal in that they call for a big increase in
spending on green technology and support for a Kyoto-style carbon permit
trading system, but there is not much more detail at this stage.
Elliot is clearly right when he calls for a vast
environmental reconstruction programme that could both address global
warming and reduce unemployment. Of course, a programme that could
achieve these goals would be very welcome. However, using a ‘make the
polluter pay’ tax system, which would include a beefed-up Kyoto, as a
centrepiece to promote the use of renewables has two main problems.
First, it is unlikely to deliver change on the scale
needed – an 80% reduction in emissions – since the market will not
respond to price signals in the critical area of power generation. This
is because, under present near monopoly market conditions, if the carbon
energy generators face big tax hikes they will pass them on to the
consumer, who has virtually no prospect of having a ‘green’ power
generator to ‘choose’ to move to in order to avoid paying higher bills.
Therefore, very little environmental gain will be achieved. Some sectors
are more price sensitive, such as the public/private mix in
transportation. Even here, however, consumer ‘choice’ is often bogus,
such as in country areas where there are effectively no public transport
services and an increase in taxes on petrol just has the effect of
impoverishing commuters, again with little environmental gain.
This highlights a more general drawback with carbon
taxes in that they hit the poorest hardest because they spend a
relatively big percentage of their income on fossil fuels for heating
and car use. Subsidies are fairer and more effective in encouraging
public transport use, as shown by Ken Livingstone’s initiative under the
Greater London Council (GLC) in the 1980s, when he slashed fares on
public transport in his Fares Fair campaign. Of course, subsidies are no
panacea either if implemented in a capitalist context, as Ken found to
his cost when Margaret Thatcher abolished the GLC.
Also, the Green New Deal does not explain how it
would achieve its aim of generating a large number of new green jobs in
this country. If government money is channelled to new sustainable
technologies most of it would go abroad, to the USA, Denmark and
Germany, since this is where the expertise lies. This would not result
in many new jobs in Britain and would also produce a net drag on the
economy when the equipment is imported. It could take ten years to make
the UK a leader in this technology, since it would mean starting from a
low base following de-industrialisation under the Tories and New Labour.
Moreover, creating such ‘national champions’ would
be impossible on a market basis, without protecting the fledgling green
sector with import controls or subsidies, something not contemplated by
the New Green Deal. (It does recognise, though, that globalisation is a
problem by calling for the re-imposition of capital controls.) This
raises a broader issue, which is that building ‘national champions’, in
green technology or anything else, particularly in conditions of
economic crisis, requires some form of protectionist,
beggar-thy-neighbour policy. This would clearly militate against the
need for the international co-operation that is a prerequisite for
effective action on global warming. Also, protectionism, as has been
explained many times by Marxists in the past, deepens the crisis by
accelerating the downward spiral of the global economy.
Leaving aside the specifically environmental aspects
of the Green New Deal, does Keynesianism really have the answers to the
economic crisis? In particular, can it overcome the instability and
boom-and-bust tendency of capitalism? In the USA in the 1930s, a huge
spending stimulus produced only a short-lived boost to the economy,
although it probably prevented it sinking into oblivion. Before the end
of the decade, however, another downturn was developing, from an already
low base. It was only the international rearmament that preceded the
second world war, from which US companies enormously benefited, that
revived the economy.
When Japan entered a deflationary spiral after the
huge crash in 1990, the government resorted to an unprecedented
injection of capital in order to recapitalise the banks and try to
restart the economy. This had only a limited impact, however, eventually
pulling the economy into sustained growth only in the past few years –
even though for most of this time Japan’s large export sector benefitted
from worldwide growth, a factor that will be absent in the present
downturn. As a result, the national debt eventually reached nearly twice
gross domestic product (GDP), a huge sum that will have to be repaid by
workers and farmers, in addition to the costs of the current crisis.
More generally, since Keynesianism does not fundamentally challenge the
rule of capitalism, the tendency of competitive markets to degrade the
environment will remain.
Loopholes & backtracking
THE ARGUMENTS ABOVE suggest the limited
effectiveness of the proposed ‘green new deals’ in successfully
addressing the urgent threat posed by climate change, particularly since
they rely on dubious ‘make the polluter pay’ market mechanisms.
Nevertheless, what are the chances of even these limited programmes
being implemented in conditions of economic crisis?
The initial reaction of corporations and their
political mouthpieces is not encouraging. Significantly, Senator John
Warner, a lead sponsor of the bill in the US to introduce a Kyoto-style,
‘cap-and-trade’ permit system, has said that the state of the economy
could delay when reductions of carbon dioxide could start. Even
Democratic Party supporters of climate action in the Congress are now
saying that the permits in the trading system, rather than being
auctioned off, should be given away free, thus removing any pretence
that the polluter will pay and, with it, abandoning the whole rationale
of the system.
In Europe, The Guardian has seen documents that show
the EU will use the economic crisis as an excuse to renege on climate
change commitments. The EU will allow countries to avoid having to cut
their own emissions by letting them purchase a large proportion of
‘carbon credits’ from overseas. This means that one of the most
notorious loopholes in the present Kyoto system, where firms can sponsor
bogus climate improvement programmes in poor countries and get
exemptions to continue polluting as a result, will continue. Also, if
the planned international agreement is reached next year, the EU
commitment to reduce emissions by 30%, rather than the present 20%
target, will be dropped, according to the leaked documents. This will
mean that the UK could build a new generation of coal-fired power
stations without exceeding its legally binding climate targets.
Ed Milliband, the UK climate change minister, has
said that "now is not the time to row back on our ambitions in tackling
climate change". (The Guardian, 9 October) At the same time, the British
government is lobbying for aviation to be excluded from an EU plan to
boost renewable energy. Robin Webster from Friends of the Earth said:
"The UK government is acting disgracefully. It must stop attempting to
sabotage European renewable energy plans and trying to wriggle out of
its promise to deliver 15% of our power from green sources by 2020". (FoE
press release, 26 September) It is not the first time that it has been
reported in Socialism Today that New Labour has faced two ways at once
when trying to address an irresolvable conflict between the short-term
interests of the capitalist system and the imperative to reverse climate
change.
These attempts to dilute commitments to strengthen
climate policies have developed quickly since the onset of the crisis in
September. They underline that individual countries will not take
meaningful unilateral action to tackle climate change that involves
higher carbon taxes. Partly, this is because that would reduce the
competitiveness of their own firms internationally, particularly in
crucial sectors like vehicle manufacture, which is facing collapse.
Partly, it is because they understand that action by one country would
have a limited effect in reducing emissions – a global solution is
needed for a global problem.
What chance of an international deal?
SO, IF UNILATERAL action is not going to happen,
what are the chances of an international deal being agreed to cut
greenhouse gas emissions, based on a replacement of the existing Kyoto
treaty with another cap-and-trade system? Despite the inherent
limitations of these approaches, will a beefed-up treaty to really make
the polluter pay be agreed by the deadline that has been set, the
UN-sponsored climate summit in Copenhagen, December 2009? Some sort of
deal will probably emerge as too much political credibility is at stake,
particularly Obama’s, for there not to be. There will be agreement to
make huge cuts, probably 80% in emissions, but only by 2050,
sufficiently far away to be ignored. But, if the treaty is largely
cosmetic (in the tradition set by Kyoto), no cut in greenhouse gasses
will result at all.
Kyoto has been a fiasco from beginning to end,
flawed by the refusal of the main polluters in the industrialised
countries to take it seriously, since the multi-national companies that
really call the shots refused to take even the small hit on their
profits that would have resulted. This was particularly true of the USA
which was the biggest polluter when Kyoto was negotiated and, therefore,
had the most to lose. The US administration refused to take part,
fatally undermining its credibility. The countries that did sign up also
ended up hardly feeling any pain, since they exploited the loopholes
built into the treaty, which nullified its environmental effect
entirely. The two main loopholes were that governments issued so many
carbon-emission permits that they became worthless, giving firms a free
ride. As mentioned earlier, the sponsoring by firms of bogus climate
improvement schemes in poor countries gave them an exemption from having
to cut emissions.
Will the capitalists take a first step to seriously
tackle climate change by closing the loopholes in Kyoto? At the moment,
Obama is insisting that the permits to pollute should be sold and not
given away, but pressure is mounting from Democrats in Congress to
abandon this position. In the EU, there are indications that the
exemption system will continue.
Why do the capitalists find it so hard to agree on
action on global warming that is clearly in their own long-term
collective interests since, as the Stern report into the economics of
climate change pointed out, the costs of immediate mitigation are far
less than the long–term costs? Since the end of the 19th century,
capitalism has become a world system based not only on a massive
expansion in the trade of goods, but also the export of capital on a
huge scale, carried out by competing multi-national corporations.
Despite these manifestations of globalisation, the nation state
simultaneously has grown in importance as the defender, by force if
necessary, of the monopolies that lie under its jurisdiction, as
competition for profit between firms based in different countries has
intensified.
This is the contradiction, undiminished today, that
led to the wars and horrors of the 20th century, a contradiction
enormously intensified by the current crisis, that stands against the
international agreement that is necessary to reverse global warming. The
500 multi-national companies that dominate the world economy resist
fiercely anything that could threaten their profits in the short term,
even to a small extent, and look to their ‘home’ countries to assist
them. This is particularly true of US corporations because the US
accounts for 22% of all greenhouse gas output and its firms would stand
to lose more than its key rivals, with the exception of China, from any
effective action to reduce global warming that made the polluter pay.
The ozone precedent
COULD THIS US intransigence change in the future
under president Obama as, without American participation, any
international agreement would be virtually worthless? There is a
precedent for the USA to participate in international action to tackle
environmental pollution. In the 1980s, under UN auspices with the
Montreal protocol, it reached agreement to cut out the use of CFC
chemicals in aerosols sprays, which were causing the breakdown of the
ozone layer in the upper atmosphere. Could this be a model for future
action on climate change, as many environmentalists think?
Before reaching this conclusion, there are some
crucial differences that have to be considered. Firstly, the scale of
the problem is entirely different. The cost of eliminating a single
chemical from a production process, when substitutes were already
available, was insignificant compared to replacing, ultimately, the
world’s entire energy generating capacity.
Second, the cost of removing CFCs affected all the
industrialised capitalist countries on a roughly even basis, when GDP
per capita is considered. Even so, the USA dragged its feet for years
before ratifying the Montreal agreement, and only did so after one of
its chemical corporations, DuPont Inc, made a technical breakthrough
that enabled it to dominate the CFC substitute market.
In the case of greenhouse gas emissions, the USA is
the biggest polluter after China in absolute terms, as with CFCs. In
contrast to them, however, it accounts for 22% of emissions with only 5%
of the world’s population – ie its per capita consumption is nearly five
times the world average, and nearly twice the EU emissions per head.
This means that if the polluter pays proportionately, as the other
industrialised countries insist, the USA will be in by far the worst
position, making it very difficult for Obama to use the example of CFCs
to support his case. Crucially, it is extremely unlikely that
concessions on the vastly greater scale required now will be made in the
present conditions of profound economic crisis.
Systemic flaws
ANOTHER MAJOR FACTOR that could undermine ‘Kyoto
Two’ will be the role of China, now the world’s biggest producer of
greenhouse gases. The aim of the industrialised countries is to involve
China in the process in a general way, as a signal of future intent, but
not for it to participate in the trading scheme. This is recognition
that the Chinese bureaucracy would not be prepared to make concessions.
It will also conveniently free firms owned by foreign capitalists in the
country from any obligations under the treaty. Considering that
emissions have rocketed up in China, virtually unchecked by any
enforcement of environmental laws, then ‘Kyoto Two’ will be compromised
from an additional direction.
Despite the very poor prospects for meaningful
agreement to tackle global warming there is, theoretically, one outcome
that could result in significant reductions in greenhouse gasses in the
coming period. Like the elephant in the drawing room, some environmental
activists are increasingly choosing not to mention nuclear power –
rather than condemning it outright – but it is still there. Others, such
as George Monbiot, are openly supportive (see Socialism Today
No.121, September 2008).
Until the recession began, the intention of the
bourgeoisie was to press ahead with this option as a way of meeting its
commitments on climate change at the least possible cost to the
capitalists, thereby disregarding the appalling risks inherent in
producing energy from this source and the dangers of storing toxic
waste. A nuclear outcome still cannot be ruled out, but the depth of the
crisis means that the money to finance the switchover may not now be
forthcoming. However, if the nuclear power route is followed then it
will not represent a sustainable solution, it will just be partly
replacing one profound threat to the environment by another.
In conclusion, the prospects for a meaningful and
effective Green New Deal in conditions of capitalist crisis look
extremely poor. Capitalist governments adopting a Keynesian response to
the economic crisis will have other priorities, shaped by the needs of
the big corporations to survive a severe downturn. In particular, the
car industry internationally is facing its biggest crisis since the
Great Depression and will probably be propped up first, because of the
immediate impact a collapse in this sector would have on the wider
economy.
Capitalism’s failure to reduce the intensity of
environmental resource use to the level needed for environmental
sustainability is in significant part due to structurally embedded
conflicts of interest between the major powers. It is these that have
prevented meaningful action to tackle climate change, a contradiction
that the current economic crisis will deepen. More generally, while
capitalist relations persist there will be a tendency to appropriate and
degrade the environment, something that regulation applied in a market
context is unable to overcome due to competitive pressures. The ability
of the big corporations to evade and undermine regulation when it cuts
against what they see as their vital interests is graphically
demonstrated by the failure of the Kyoto treaty. These flaws explain the
failure of capitalism to solve the grave ecological threats we face and
point to the need for the alternative: democratic socialist planning.
What is needed is a socialist green deal, which
would require the dismantling of the capitalist system on an
international scale – based as it is on the relentless, short-term,
destructive pursuit of profit – and its replacement by a democratically
planned socialist economy. In such a society, the genuine international
co-operation that is necessary to tackle global warming will be possible
for the first time, something that is ultimately impossible under the
capitalist profit system.
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