World debt and the Gulf oil spill should spur a Green New Deal
If we enact a green economic recovery today, events like oil spills and debt crises could become relics of the past. But until we fully embrace a Green New Deal, we’re going to be repeating mistakes.
Bennington, Vt. — What do the Gulf oil spill and Europe’s debt crisis have in common? Both are the result of a missed opportunity. And though the world is dealing with the consequences of both, more severe repercussions could be forestalled with a serious look at instituting a Green New Deal.
In late 2008, when financial markets tripped on their big, overextended feet, the United States and its Group of 20 cohorts had the chance to not only stave off a crisis but to tackle the underlying problems that led us to the brink: rising energy prices and structural imbalances in the world economy.
With food shortages, job losses, and the credit freeze, the connection between finance, food, energy, and ecology became clear and people realized the need to invest in the environment, the bedrock of global trade and sustenance.
What happened? With the recession, energy demand slackened and prices went down. Stimulus money kicked in, which got the world economy moving again, though sluggishly. And the public in the United States, Europe, and elsewhere, lapsed into getting-by and wait-it-out mode.
But the urgency – and opportunity – for a global Green New Deal are still with us.
The plan for such a Green New Deal, which was launched in London in 2008, calls on world leaders to promote redirection of investment away from speculation and carbon-heavy industry and into programs to create green jobs and restore the world’s economy.
What’s needed now is political will and supportive policies that address systemic vulnerabilities.
Fortunately, the financial investment required is within reach. It should only cost about 1 percent of a nation’s gross domestic product (GDP) over the next several years to carry out a new green deal. For the US and the European Union (EU), that’s $180 billion - a little under the market value of BP.
This monetary outlay should be accompanied by a swath of domestic and international policies including: removing harmful subsidies, taxing or trading carbon emissions, instigating clean energy tax credits, and financing the transfer of green technologies to developing countries.
Without such a commitment the more than $3 trillion in stimulus money spent globally will wither and go to waste – and not just the $520 billion “green” funding contained in this stimulus, since any resulting recovery will inexorably lead to another collapse.
Last year the UN Environment Program (UNEP) formulated their Global Green New Deal strategy. In my research for this, I found most G-20 countries are falling woefully short of UNEP’s recommended 1 percent of GDP for green investment.
The EU nations devoted 50 percent of their stimulus to green spending, but this amounts to only 0.2 percent of GDP. In the US, 12 percent of the various stimulus packages, or 0.9 percent of GDP, went green.
But look east, and China put more than one third of its stimulus, or 3 percent of GDP, toward a green economy and South Korea dedicated 80 percent to low-carbon development – a whopping 5 percent of GDP. Compared with other nations, China and South Korea have bounced back bigger and faster postrecession.
Plus, this puts them in the forefront of green technology and exports and in creating a low-carbon economy.
It’s clear that investing in clean energy not only reduces dependence on foreign oil, but saves money: In my research for UNEP, I calculated that every $1 billion put toward energy efficiency and clean energy in the US could save $450 million a year.
Job-wise alone, green energy would generate 20 percent more in employment than traditional stimulus activities, including spending on oft-touted “shovel-ready” projects.
Now for another biggie: By scrapping the $300 billion in fossil-fuel subsidies worldwide, global greenhouse-gas emissions would drop 6 percent and global GDP would rise 1 percent.
The $200 billion the G-20 would save annually by stopping these payments more than covers the $177 billion needed to bring low-carbon investments up to 1 percent of GDP.
Without these entrenched industry giveaways in the first place, it’s unlikely that BP would have been drilling deep into Gulf waters. Global economic imbalances too, are related to energy, as many debtor nations are large oil importers.
It’s worth noting that Greece, whose debt crisis has triggered huge market sell-offs worldwide, depends on imports for nearly three-quarters of its energy. Mechanisms for carbon taxes, permits, and trading would create income streams to reduce national debts.
Addressing the asymmetry inherent in huge national debts would also reduce the trade surpluses of fossil fuel exporters and the chronic trade glut in Asian and other emerging market economies. They should then spend more domestically on social programs, ecological preservation, and clean energy development.
Green investment brings environmental benefit, but also economic ones – with appropriate policies supporting existing green stimulus packages, governments could increase the G-20’s GDP. Nations working together will bring more gains. Instituting carbon-pricing strategies in concert will help entire industries shift green-ward, rather than merely transferring smokestack activities elsewhere. By coordinating green policies, G-20 GDP could rise by 1.1 percent to 3.2 percent.
If we enact a green economic recovery today, events like oil spills and debt crises may indeed become relics of the past. But until we fully embrace a global Green New Deal, we’re going to be stuck with the same old deal.
Edward B. Barbier, the John S. Bugas professor of economics at the University of Wyoming, is author of “A Global Green New Deal: Rethinking the Economic Recovery.” Judith D. Schwartz is a Vermont-based journalist who writes about environmental economics.
[Editors note: The original version of this essay mischaracterized the market value of BP before the spill.]