Protecting the Planet (a WEA course)
Additional notes on Economics and the Environment.
Aberdeen Books Build Back Better Dark Money Degrowth Doughnut economics Europe Green Economy Green Recovery Just Transition Sustainable Green Economy Tax for a Just Economy
Aberdeen – from oil to green energy? https://www.theguardian.com/politics/2020/jun/25/britain-beyond-lockdown-can-we-become-cleaner-coronavirus Wind power is very successful in Aberdeen of course.
Books that might be relevant:
Stephanie Kelton: The Deficit Myth (book of the week June 2020 Richard Murphy)
Zachary D Carter: The Price of Peace: money, democracy and the life of John Maynard Keynes (Richard Murphy recommends)
‘Build Back Better’ – recovery from the pandemic requires changes: https://buildbackbetteruk.org/
To do so we must heed the lessons it has taught:
That as a society, for many years, we did not listen to the scientists about the risks of such a pandemic and were not prepared.
That for decades our health and social care systems were both dangerously under-resourced and in need of reform.
That many key workers in our economy - many of them women, and many not born in this country - are among the least valued and lowest-paid.
That longstanding inequalities in our society have left too many vulnerable.
And that no country can stand alone in the face of common threats.
Yet we can also draw on new sources of hope:
That when faced with a crisis, government can spend wisely, at speed and at scale.
That care, neighbourliness and mutual support are the threads that bind our communities together.
That clean air and a concern for wellbeing can inspire more sustainable and enjoyable ways of living.
And that by working with other countries we can find common solutions to the gravest problems.
Some have compared this crisis to the Second World War. Then, as now, it was widely agreed that there was no going back.
But #BuildBackBetter must be more than just a slogan. We must answer these profound questions:
Many will have other questions too: like how to create a better democracy, to harness technology for public good, to build a fairer and more cooperative world.
Answering these questions, and more, is a challenge to us all; to governments, businesses, trade unions, civil society and citizens.
But it is a challenge to which, together, we can rise.
With the best of human values, and the determination of politicians and citizens, we can emerge from this crisis a stronger, fairer, greener country.
We must #BuildBackBetter.
See also 38degrees petition, and references:
 The Financial Times: Sunak pushes back stimulus
plan until autumn:
Dark Money: (from key industries):
George Monbiot on the influence of ‘dark money’ on Brexit:
When Fox married another doctor in 2005, Werritty was his best man. What they had in common intellectually was their pro-Americanism, which was channelled through an organisation (a charity until that status was removed) called Atlantic Bridge, which Fox had set up to promote US-UK relations, with Werritty as its chief executive. After Fox became defence secretary in 2010, Werritty had business cards printed that described him as Fox’s adviser, though he had no security clearance and the source of his funding and the purpose of his presence in Fox’s official life were obscure. An investigation led by the then cabinet secretary, Gus O’Donnell, found that over 16 months Werritty had called on Fox 22 times at his office in the Ministry of Defence and attended 40 of Fox’s 70 official engagements; and that Fox sometimes barred civil servants from meetings where Werritty was present. Fox resigned in October 2011.
Degrowth or Green New Deal?
17th April 2020. Jasper Jolly: Bank of England will buy debt from oil companies as part of its Coronavirus stimulus programme. The Bank says that purchases of £200bn in government and corporate bonds will encourage lending to get the economy going. Critics – such as Positive Money (Fran Boait executive director) - say the oil companies etc should not be supported in this way as it is incompatible with our target of net zero CO2 emissions by 2050. ‘Corporate QE is another subsidy for multinational companies and is not necessary to save the economy or to save lives’.
Link to Richard Murphy on QE etc. And to ‘divestment’?
Europe: The EU has notably already pledged to ensure that green finance is a “key focus” of its Covid-19 recovery plans. In April, the Commission launched a public on its “Renewed Sustainable Finance Strategy”, part of a €1trn package to make the European economy greener by 2030. The package forms part of to create a carbon-neutral, bloc-wide economy by mid-century, whose financial components build on previous initiatives such as the Commission’s 2018 and the reports of the (TEG).
Finance Watch believes that the EU can create a 1.5C-compatible finance system using “far less radical or costly” measures than it is employing as a result of Covid-19 and notes that it is “already empowered and equipped to act”. The EU had already pledged to end fossil fuel subsidies by 2025 and encourage banks to act accordingly. However, found that no EU member states had begun making plans for this transition.
From European Environmental Bureau, June 2020: https://meta.eeb.org/2020/06/18/pressure-mounts-on-eu-governments-to-deliver-a-green-recovery/
Green Economy. From Fiona Harvey, 22nd May: a green recovery can produce higher returns on public spending and create more jobs in both the short term and the long term, compared to the alternative of pouring stimulus cash into the fossil fuel economy. Those findings come from a study of the potential for a green recovery, based on a survey of finance ministries and central bankers, and a comparison with the aftermath of the financial crisis of 2008, conducted by the Nobel prize-winning economist Joseph Stiglitz, former World Bank chief economist Lord Stern, and leading economists from Oxford University.
[After the last financial crisis there was a 16% rise in money going to green economy], ‘If that was possible from just 16% of stimulus spending, what could be done if the proportions were reversed? We are much better prepared to create green jobs now, according to the Oxford study. Shovel-ready projects, from insulating homes to widening cycle lanes, abound. Electric vehicle charging points are needed around the world, and the slack in public transport can be used to upgrade rail networks.
Car companies, with government incentives, could hasten the move from petrol and diesel engines. The renewable energy industry has progressed in the last decade, making home solar installation cheap and offshore wind farms viable. All of these are labour intensive and would provide quick returns on taxpayer cash.
There are fledgling industries that could soar with a government boost. Fatih Birol, the widely respected executive director of the International Energy Agency, points to hydrogen and batteries as two major areas “now ready for the big time”. Hydrogen, in the form of ammonia, will be key to decarbonising shipping, but take-up has been slow due to lack of investment.
... Much of the public discussion so far has focused on attaching “green strings” to bailouts for established industries such as airlines, fossil fuels and car manufacturing. Those are certainly needed – as the failure to attach conditions after the 2008 crisis clearly shows – but can seem like punishing industries already on their knees. Workers on airlines and in shale fields are workers too, with mortgages to pay and families to care for. Shrugging off the loss of their jobs as the casualties of a cleaner future is not good enough: there must be a clear path to high-quality alternatives.
From Richard Murphy (June 2020): Greening the economy is not a peripheral project: it may be the biggest economic project we’ve ever tackled
Posted: 04 Jun 2020 02:08 AM PDT
I worry that the scale of the green stimulus that our economy requires is misunderstood. Business Green has reported that:
[A new report from WWF] - entitled Keeping us Competitive and produced by Vivid Economics - suggests transitioning to net zero emissions could offer at least 210,000 jobs in 2030 and 351,000 in 2050 from sectors such as green buildings, electric vehicles and power.
It also calculates the net zero transition could yield over £90bn of annual benefits to the UK through improved health and living conditions, delivering economic gains that significantly outweigh any costs.
"A green stimulus is the best way to support economic recovery and build resilience," the report states. "Investment in low carbon infrastructure can boost long-term productivity and high returns, as every pound spent on low-carbon investment options returns 3-8 times the initial investment."
This comes amid many reports that the government is planning a green stimulus package next month.
But let's get clear the scale of the change required.
To get to scale it would probably cost £100 billion a year.
To tackle unemployment it needs to create vastly more than 210,000 jobs: there are going to be many millions unemployed.
And to create real change it is going to have to be big.
Just think of it like this. There are 30 million properties in the UK. Most are hopelessly energy inefficient. To upgrade them all between now and 2050 (which is far too late) will require that 20,000 a week are tackled. That's 20,000 sets of windows, and insulation, and heat pumps and solar panels, every week.
That's the scale of what is required.
That's a massive investment.
Alone that requires a large part of £30 billion year, which is what WWF are suggesting spending.
And it's only a part of the green agenda. The real cost could easily be £100 billion a year.
We need to stop playing on the peripheries of this issue: the scale of action required is enormous and more than enough to sustain this economy. Besides which, we really have no choice.
Green recovery: part of this newsletter from Unearthed links to two articles on this:
https://www.nytimes.com/2020/05/29/climate/coronavirus-economic-stimulus-climate.html - survey of different approaches
https://www.bbc.co.uk/news/science-environment-52848184 how a green new deal could go global...
From the FT, business leaders call for green recovery plan: https://www.ft.com/content/49cac3b5-6463-4a21-9452-643b750431d9
Housing as the way to move on from the Covid-19 pandemic (and to deal with climate change):
As COVID-19 and other factors force an unmanaged decline of oil and gas, a new peer-reviewed study by Greg Muttitt and Sivan Kartha outlines how policymakers can plan for a better future, with an equitable phase-out of fossil fuels. The paper was published in the journal Climate Policy on May 31, 2020. The PDF available on this page is the accepted manuscript.
The study examines the world’s largest fossil-fuel-producing countries and considers how an energy transition would impact their workers, communities, economies and governments. It finds a stark difference between developing countries and wealthy ones – namely, that fossil-extracting developing countries are far more dependent on oil and gas revenues and on coal mining jobs. For example: oil and gas revenues provide 60% or more of public revenues in Timor Leste, Equatorial Guinea, and Iraq, while they account for close to 0% of these revenues in the UK and US.
Based on this review, the study’s authors examined common equity approaches and propose five principles to ensure a just transition:
1. Phase down global extraction consistent with 1.5°C. Countries can do this through both economic and regulatory approaches, including extraction taxes and licensing moratoria.
2. Enable a just transition for workers and communities. Key elements of this principle include sound investments in low-emission sectors, social protection for fossil-fuel workers, and local economic diversification.
3. Curb extraction consistent with environmental justice. Ending fossil fuel extraction should be prioritized where communities disproportionately experience the harms of extraction (such as pollution) and not the benefits.
4. Reduce extraction fastest where social costs of transition are least. Wealthier, diversified economies – such as the US, Canada, UK and Norway – should phase down production quickly, as they can better mitigate and absorb the adverse impacts on workers and communities.
5. Share transition costs fairly. The largest burden should be borne by those with the “broadest shoulders,” or ability to pay. In practice, this means wealthy countries – who have already benefited the most from past extraction – should bear the most cost.
Labour and a Green New Deal: To: The Labour Party National Policy Forum
CC: Keir Starmer MP, Ed Miliband MP, Alan Whitehead MP
After Covid, we need a People’s Green New Deal
The coronavirus pandemic has exposed the injustices at the heart of our society. Our key workers are among the lowest paid. Working class people – particularly communities of colour – are forced to live and work in unsafe environments. Billionaire tax exiles pay dividends to shareholders, while cutting tens of thousands of jobs. Our exploitative economic system entrenches inequality and accelerates the climate crisis.
Covid-19 has shown we are only as secure as the most precarious among us. It has revealed the power of the state to transform industries, provide a safety net and tackle injustices. It has shown that profound social and economic change really is possible.
As we emerge from this crisis, Labour must argue for a new social settlement – a Green New Deal to rebuild the country. The party must fight for a society in which public health always comes before private profit; advocate for public ownership of key industries and utilities to get there; and fight for climate justice across the world. The wealthy must bear the costs, not ordinary people. Where we are in power, Labour must act to put the interests of workers and planet first.
Labour has insisted we can’t go back to normal, with Ed Miliband rightly calling this our 1945 moment. The conference motion for a socialist Green New Deal passed overwhelmingly at 2019 conference by members and trade unionists must now be taken up. As it sets out its plan for post-pandemic recovery, Labour must demand:
1. Millions of green jobs – with a huge programme of investment in renewable energy, home insulation flood defences and a resilient health and care service. Everyone should have the chance to build the new economy through secure, well-paid, trained and unionised public sector apprenticeships and jobs. Labour should build on the 2019 regional manifestos to propose green jobs and industry for left-behind parts of the country.
2. Healthy neighbourhoods – with Labour reiterating demands for a government Warm Homes for All programme to insulate 27 million houses and for full-fibre broadband free at the point of use. Every community should have a right to clean air, cycling-safe streets and green space. Recommit to universal rights to water and energy, run in public hands.
3. Green public transport for the many – with railways nationalised, electrified, expanded and made affordable. Electrified, regular buses should be expanded to serve every community, operated for the public good, not private profit. Invest in green transport, not roads and aviation.
4. A global Green New Deal – with the government supporting the cancellation of Global South debt to enable investment in public health. The UK must take strong action against tax evasion, end fossil fuel finance at home and abroad, and rapidly step up financial support for a just global energy transition.
5. Bailouts for workers and planet – with a sector-wide aviation deal and public stakes taken in failing airlines to manage a just transition. Any bailouts through Project Birch should be subject to stringent commitments to workers’ rights, fair taxation and rapid decarbonisation. An Office for Green Skills should be established to provide retraining to green jobs for those who need it.
Yours, the undersigned
Sustainable green economy:
From Richard Murphy’s blog, May 2020: I share this post from the Tax Justice Network blog with permission. There are small points where I would put this emphasis in a different place, but the key message that it is for government to fund the Green New Deal and run deficits to do so is spot on.
Last week we published the second part of our Tax Justice Focus special on climate crisis and tax justice. This blog reproduces the lead article by famed German economist Peter Bofinger, in which he argues the case for a radical transformation of our understanding of how economics works, and why the state must take the financial lead in investing in a fossil fuel-free future. Please note that this article was written before the Covid-19 pandemic required neoliberal-leaning states to actively intervene to protect their economies from total meltdown. Click here to download the first and second parts of our Tax Justice Focus special.
By Peter Bofinger
To take climate change seriously, we must completely transform how we generate, transmit and store energy. We need to change the ways in which people and things move around. We must retrofit and refurbish our homes and offices and public buildings, to make them friendlier to the climate. As Jeremy Rifkin has rightly said, we need a Third Industrial Revolution.
This raises a big question. How can we pay for it?
To raise finance on the enormous scale required, only a few options are possible.
The first could be to tax carbon. But the big problem here is that this will tend to make fuel more expensive, which will in turn tend to hurt poorer sections of society the most. When French President Emmanuel Macron tried to impose new fuel taxes in 2018, protests by the Gilets Jaunes (or Yellow Vests) erupted on French streets, eventually forcing him to reverse course. The way around these potentially insurmountable political difficulties is to return the proceeds of carbon taxes (or the revenues from carbon trading schemes, as Prof. Jim Boyce argues elsewhere in this edition,) directly and equally to each citizen, as ‘carbon dividends’. So if such schemes are put in place, the revenues will likely have to flow back to the population, instead of being invested in green projects. Wealth taxes and higher corporate taxes can contribute, but to raise funds at the vast scales required are unrealistic.
Could we finance a third industrial revolution through public-private partnerships, where financial institutions raise the funds to finance green projects? This may help in some situations, but governments can generally borrow so much more cheaply than private sector actors can, so this is an extremely expensive option. (Elsewhere in this edition, Prof. Daniela Gabor raises additional warnings in about relying heavily on private finance.)
The only other solution that is big enough to address the challenge is for governments to borrow to pay for the green transformation. Interest rates are at historically low rates – bonds issued by some governments currently enjoy negative yields. There is no sign of inflation, and ample room for borrowing. So in this environment, government borrowing is by far the best way to pay for the green transformation.
But there is an obstacle. That obstacle is a mindset, which says that governments must not borrow, they must not add to the national debt, and they must not spend more than they receive in revenue. Budget deficits must be zero. We Germans call this Schwarze Null, or Black Zero.
And here is the crux of the current problem facing Europe. If Black Zero says you cannot borrow to invest, then we cannot pay for a credible green transformation, at least without savage, economy-damaging cuts elsewhere.
Yet in Germany there is a broad consensus that while climate change is important, Black Zero is much more important. We need Black Zero, the thinking goes, to protect our children and our grandchildren from large public debts. Black Zero first, climate second. And Germany is the most powerful country in Europe – so this way of thinking suffuses European policy-making.
Where does this bias against deficits come from? In Germany there are historical reasons for its existence: old memories of hyper-inflation, and more? But in fact, it is taught in standard economics textbooks around the world, and a generation or more of economists has fallen under its spell.
For instance, in his popular book The Principles of Economics, Greg Mankiw says that public debt “crowds out” private debt. That is in the main introductory text that millions of students have read, and it’s presented as a fact of life: that whenever a government increases its debt and runs a deficit, this reduces private savings and private investment. They do not qualify this in any way in this main text book.
But this argument is completely wrong. It rests on the outdated classical logic of a corn economy. The idea is that if a household saves corn, and the government grabs some of that corn, then there is less corn to plant or to eat. That may be true for a household that saves corn. But they are untrue if there is a financial system. The government does not absorb someone else’s money when it borrows and spends. As John Maynard Keynes explained, you don’t have to consume less to get financing: it comes from banks or from capital markets. The financial system creates money. And when the government borrows it spends the money into the economy immediately. (This idea is also embedded in Modern Monetary Theory, by the way.)
Another related theory, known as Ricardian Equivalence, says that the government is like a household, and if it borrows today it must repay it eventually through higher taxes in future years. So, this theory goes, it is kindest to our children to reduce government debt eventually to zero.
But again, this makes no sense. If you can borrow money at a one percent annual interest rate, for example, and invest the proceeds in a project that will yield four percent returns, your economy – and likely your children – will be better off? The ensuing growth of your economy means that this productive borrowing could also reduce your debt as a share of your economy. And if you can borrow at negative interest rates – as you can now – this equation becomes even more attractive. Not only that, but government bonds are safe assets: people in the financial sector right now are worrying that there are not enough safe assets. And there is high demand for green bonds.
The money is there for the taking. Yet this anti-borrowing obsession has been embedded into German and European institutions for decades. For example, in the 1992 Maastricht Treaty that established the European Union, it was decided that governments should bring their debts down to or below 60 percent of GDP. But 60 percent is a totally arbitrary number! A doctor who tried to treat a patient on such a basis would be sued. It inflicts pain. If a debt limit means you spend less on the things that matter, then it is almost criminal.
Germany’s climate package approved in December last year is another case in point. It says that we do not want to tax carbon immediately: we can wait until 2021. If you subtract revenues from trading carbon certificates, Germany envisages spending just 0.2 to 0.3 percent of GDP. This is peanuts. It will not tackle climate change effectively.
China, by contrast, has been running double digit deficits for years (if you include national and provincial government budgets). It has borrowed enormous sums, spent more on renewable energy in the past decade than the United States, Japan and Germany combined, and enjoyed large economic growth at the same time. Especially for large economies, there are almost no limits to the deficits that countries can run.
Public debt is a bit like drinking. Excessive drinking is obviously bad. So what is the right amount?
A good way to decide is to avoid textbook theories and to follow the “Golden Rule” for fiscal policy. If governments make investments from which future generations benefit – as with green investments – why should it pay for those from current revenues? And green investments can be highly productive: if we retrofit the whole housing stock for energy efficiency, for instance, there can be major energy savings, potentially making these investments very profitable in economic terms.
There is more good news here. The Euro area could stabilise its current debt to GDP ratio at around 90 percent, while running a 2.7 percent fiscal deficit, assuming a reasonable nominal GDP growth rate of 3 percent per year. People are talking about a Green New Deal (GND) requiring €150-200 billion per year, which is worth just 1.3 – 1.7 percent of GDP. So we could finance the European GND, with plenty left over for other spending priorities, and without even increasing European debt levels. (And even if we did increase the debt, it would likely harm neither us nor future generations anyway.)
We could increase borrowing in several ways. One would be to exclude green investments from the European Stability and Growth Pact, which forces European governments to curb deficits and borrowing. Another way is to issue Euro-bonds with joint liability, justified by the fact that the climate isn’t a national issue but a European (and global) one. A third way, suggested by Paul de Grauwe, is for the European Investment Bank to issue bonds to finance green investments, and for the European Central Bank to then purchase these bonds as part of its long-term asset-buying programme.
I only see two potential constraints here. One is labour: massive green infrastructure investment requires a lot of labour that cannot be done by robots. But with widespread automation and digitalisation threatening many jobs, job creation is likely to be highly positive for Europe.
The second obstacle is Germany. The mindsets on debt in Germany are rigid, even if some economists are at last starting to think differently. This is the real constraint on financing the Green New Deal.
The money is there. The Golden Rule has never been more appropriate than today, when we have such low interest rates, and even negative rates. Almost nothing can go wrong if we borrow more to finance this productive investment.
If not now, when?
A video of Mr. Bofinger’s talk can be seen here.
 Peter Bofinger is a Professor of Monetary and International Economics at the University of Würzburg, and was a member of Germany’s five-strong Council of Economic Experts from 2004-2019.
Tax for a green and just recovery: https://neweconomics.org/2020/06/redesigning-tax-for-a-just-green-recovery?mc_cid=39fcc38384&mc_eid=3dd466b44f