/ 3 March 2009

Green light to spend

The American stimulus package includes a great global experiment — to see whether such unprecedented spending can also tackle climate change, writes Suzanne Goldenberg

With governments around the world pumping colossal sums into their plunging economies, a grand global experiment is under way: can the unprecedented spending fix economic catastrophe while also dealing with global warming?

Many hope so, and Barack Obama is foremost among them. He sees his presidency as a rare moment in history when crisis can be converted into opportunity, and his $787-billion economic recovery plan is putting that theory to the ultimate test.

His goal is to seize the opportunity to install the architecture of a low-carbon, sustainable economy. Environment ministers at a United Nations meeting in Nairobi last week saw the US plan as a powerful signal to other governments to raise the green quotient in the next round of recovery plans. The G20 leading industrialised states will be grappling with those choices when it meets in London in April.

”It’s very clear that many countries are watching the green component of the Obama plan because they are very interested in quick wins,” said Ed Barbier, a University of Wyoming economist and author of a United Nations Environment Programme report on a green recovery.

American environmentalists are delighted. ”We would never have imagined legislation funding developments on this carte blanche scale,” said Kert Davies, research director of Greenpeace. ”Now you have an opportunity within this crisis, so let the experiment begin.”

Elsewhere, the verdict is mixed. The $100-billion in green measures represents just under 13% of the total package, falling short of the benchmark in a recent report led by economist Nick Stern, that green measures should account for 20% of global economic recovery plans. It also fails to meet the UN target of 1% of GDP.

China allocated about a third of its $580-billion recovery plan to green measures, concentrating on energy efficiency, whereas South Korea devoted two-thirds of its $36-billion recovery package, or about 3% of GDP, to green investment.

The green portion of the EU recovery plan comes in a notch higher than the US proposal at 14%. Germany’s green investments account for 19% of its plan, and France’s just 8%.

Poland’s recovery plan has no green component whatsoever and Italy’s efforts are also negligible, according to a climate change study by HSBC.

”I suspect that one reason some governments, including European ones, are reluctant to adopt green stimulus initiatives is they are still stuck in the ”old-school” thinking that we have to revive the economy first, before thinking about long-term low-carbon strategies,” said Barbier.

The green recovery plan was incubated at liberal think tank the Centre for American Progress. Its founder, John Podesta, was Bill Clinton’s White House chief of staff and led Obama’s transition team.

The think tank produced a plan late last year for a green new deal and many of those ideas survived in the 1 100-page package passed by Congress. The green elements include funding to insulate domestic and public buildings, tax breaks and loans for solar and wind-power firms, investment in a new electric grid and expansion of subways and inter-city trains.

American environmentalists say it is not worth quibbling about a few percentage points, given the huge sweep of the package and its swift passage. ”The US a year ago was still in denial on issues of energy conservation,” said Earl Blumenauer, a Congressman from Oregon and champion of the environment.

Nick Robins, who heads the climate change centre at HSBC, argues the plan more than makes up in breadth for what it lacks in total spending levels: ”It gives a very comprehensive stimulus to the green economy across the key pillars: renewables, building efficiency, auto vehicle efficiency, mass transit and water.”

The American plan also meets Stern’s other prescriptions — a concentration on building efficiency and renewable energy. Efficiency measures, such as insulation, sealing and double glazing, account for the largest share of the $100-billion.

It is also thought to score well on its most basic purpose: rapid job creation. It is projected to create two million jobs over the next two years, half of the four million total envisaged by the package.

Congress, in giving shape to Obama’s proposals, was adamant that programmes should be ready to go within the two-year deadline. But that meant that some of the most transformative measures — modernising the electrical grid and developing electric cars — were scaled back because the institutions involved could not handle such vast sums of money in a short time frame.

Davies would have liked to have seen estimates of the emissions reductions promised by each measure in the package.

Ultimate success will depend on whether Congress manages to push through legislation expected this year in three areas: expanding public transport, developing wind and solar energy and moving to cap carbon dioxide emissions.”You can’t just flip a switch on the green economy,” said David Foster, director of the Blue-Green Alliance, which combines labour and environmental groups.

”But if we do all three, in addition to the down payment, we will be well down the road.”

High alert for a raging summer
British police are preparing for a ”summer of rage” as victims of the economic downturn take to the streets to demonstrate against financial institutions. Britain’s most senior police officer with responsibility for public order raised the spectre of a return of the riots of the 1980s, with people who have lost their jobs, homes or savings becoming ”foot soldiers” in a wave of potentially violent mass protests.

Superintendent David Hartshorn, who heads the London Metropolitan police’s public order branch, said that middle-class individuals who would not have considered joining demonstrations may now seek to vent their anger.

He said that banks had become ”viable targets”. So too had the headquarters of multinational companies and other financial institutions in the City of London blamed for the financial crisis.

The warning comes in the wake of violent protests against the handling of the economy across Europe. In recent weeks Greek farmers have blocked roads over falling agricultural prices, a million workers in France joined demonstrations to demand greater protection for jobs and wages and Icelandic demonstrators clashed with police. Intelligence reports suggest that ”known activists” are also returning to the streets.

”Those people are good at motivating people, but they haven’t had the foot soldiers,” Hartshorn said.

He also expected large-scale demonstrations this year on environmental issues, with hardcore green activists ”joining forces” with middle-class campaigners over issues such as airport expansion at Heathrow and Stansted. With the prospect of angry demonstrations against the economy, that could open the door to powerful coalitions.

”All you’ve got to do then is link in with the environmentalists, and look at the oil companies. They’re seen to be turning over profit in issues that are seen to be against the environment.” —