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February 20, 2009 - Green New Deals

Green 'New Deals' would appear to be breaking out all over. In response to the global financial crisis, governments have thrown all their remaining ideological scruples to one side in going for great big dollops of public money, over-riding market forces, picking 'winners', and doing it 'big' rather than via the pathetic drip-feed processes we have seen over the last decade.

The race is really on. And one intriguing aspect is all about jockeying for competitive position in the multi-trillion dollar environmental industries that are materialising on the horizon.

Heading up the field is, of course, the Obama ‘big bang’. $888 billion in all, of which around $150 billion could be said be genuinely green or sustainable. Over the longer term, the US President is talking about $150 billion just for clean energy and energy efficiency over 10 years – with the "double dividend" of up to 5 million jobs. And Obama didn’t beat around the bush in getting Congress to accept all this: "We don’t want the US to lose the competitive edge that has served as a foundation for our strength and standing in the world." Not to be outdone here, Yuta Okazaki, Japan’s Environment Minister put it as follows: "If Japan does not start this kind of New Deal, we lose our chance to export our environment-friendly goods to other countries." Japan wants to see its environmental technologies sector grow to more than $1 trillion over the next five years, creating 800,000 new jobs in the process.

Elsewhere, South Korea has pledged $38 billion for new transportation and energy networks (creating one million news jobs); France and Germany are weighing in with mega-packages of their own, as are Denmark, Spain and Australia. The EU has its own programme, and the World Bank is creating a new fund of at least $10 billion. And China has ambitions to outspend the lot of them many times over.

So where does that leave the UK? Right now, it leaves us looking somewhat inadequate. In the Pre-Budget Report (when £12.5 billion was given away on VAT), Alistair Darling announced around £3 billion on 'brought-forward' investment, £500 million of which carries some kind of green tag, and about £150 million of which could be seen as new money.

The global sum the Treasury prefers to talk about is the £50 billion of net investment in the low carbon economy that was outlined in the Comprehensive Spending Review – both private and public sector spend on all sorts of things for the period of time between 2008 and 2011. Frankly, this is pretty hard to pin down and includes everything that it already happening anyway on renewable energy, energy efficiency schemes, public transport and so on. So it doesn’t really count as a stimulus package.

So the debate is joined: what should the scale of a UK green recovery package be?
Gordon Brown’s speech in Davos a couple of weeks ago mapped out the territory, but not the scale of involvement:

"So we cannot afford to relegate climate change to the international
pending tray because of our current economic difficulties. Instead, we
must use the imperative of building a low-carbon economy as a route to
creating growth and jobs, the path that will see us through the current
downturn

And already, together, we have begun the long walk down that road. In
the EU's economic recovery plan, in President Obama’s "Green Jobs"
package, in the stimulus packages of China, Japan, Australia, South
Korea, France, Germany, Spain and Denmark, and in my own
Government’s forthcoming Green Industrial Strategy, the contours of a resilient, low-carbon recovery are becoming clear."

As the Environmental Industries Commission has pointed out in its excellent paper, Peter Mandelson at BERR has got to get his head around the new competition going on out there. Our already somewhat fragile and seemingly unloved green industries could find their competitive position totally undermined as governments the world over pile in billions of dollars in good old-fashioned subsidy programmes.

Posted by Jonathon Porritt on February 20, 2009 3:21 PM | | Comments (15) | TrackBacks (0)

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