Economic crash and environmental repair: put people and planet first


With recession now a reality in the United States, and highly likely in Japan and much of Europe, global business is coming out fighting against government policies that might restrict its ability to keep making profits. Measures aimed at limiting carbon emissions have come under fire.

But the corporations' efforts to roll back anti-emissions legislation is not going unopposed. A statement released last week, signed by 40 leading environment scientists in Australia, says: "The current global financial crisis must not be allowed to detract Australia's attention from the serious deterioration of the Earth's atmosphere with its potential effects on future generations.".

Other campaigners against climate change are asking: why not make action to preserve the environment a key part of efforts to limit the damage from capitalism's latest crisis?

When governments spend big to stimulate economic activity, why can't the focus be on creating renewable energy infrastructure? Why can't badly needed jobs be created in areas like insulating buildings to reduce energy loss?

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Climate activists are now talking of the need for an environmental "New Deal", drawing an analogy with the program of public works through which the US administration of Franklin Delano Roosevelt in the 1930s sought to overcome the effects of the Great Depression.

Care is needed in making this comparison — the central purpose of Roosevelt's New Deal was to revive US business, not to sustain and strengthen working people. Nevertheless, the money is clearly there for a genuine New Deal that would protect the environment and the mass of the population.

More than a trillion dollars is to be spent around the world to save the finance industry; an environmental New Deal would draw on this money to help save the climate we know and the civilisation we live in.


This is simple good sense, you might think, but the idea has not seized hold of the leaders of world capitalism.

To take just one example, the Australian newspaper on October 17 reported that European leaders were deadlocked on how to apportion agreed emissions cuts of 20% by 2020: "Italy suggested the financial crisis meant the commitment should be renegotiated, Germany sought free permits for emission-intensive industries, and former communist bloc members said they should shoulder less of the burden."

Not everyone in the political power elites is quite so crass. Take, for instance, the remarks of Nicholas Stern, the British government's adviser on climate change. "We're going to have to grow out of this [financial crisis]", Stern was quoted by the October 7 British Telegraph. "And [low-emissions technology] is an area which looks as though it could grow strongly and with the right support could be one of the major engines of growth."

Emissions reduction, Stern was hopefully suggesting, is a concept that might yet be sold to the super-rich investors who decide which economic sectors flourish and which die.

For the moment, the private investors seem to have other ideas. Figures quoted by the Australian on October 21 indicate that global prices of renewable energy stocks fell by about 45% over the previous three months. Renewables developers face daunting problems raising money in a shell-shocked credit market.

Still, hopes continue to be voiced that governments will fund new environmental technologies as a key tool for helping economies grow out of recession. Feeding these hopes are the "counter-cyclical" spending strategies that governments have mostly subscribed to — and at times employed — ever since Roosevelt's original New Deal.

In good times, the theory holds, governments should restrain their spending and build up budget surpluses in order to limit inflation. Then, when crisis ensues, the piggy-bank should be smashed, and the accumulated funds spent to sustain demand and stop the slump becoming too deed. Over the boom-and-bust cycle as a whole, the restraint and the largesse are supposed to cancel one another out.

Predictably, governments often operate in the red even during times of prosperity. In Australia, the John Howard and Kevin Rudd governments have been more scrupulous.

As of October 14, the Rudd Labor government had available a budgeted surplus of almost $22 billion. No less than $10.4 billion of this sum was then earmarked for stopping Australia's economy sliding into recession.

By putting this money into the hands of people likely to spend soon it — pensioners, hard-pressed families and first-home buyers — Rudd and Treasurer Wayne Swan aim to give the economy a quick hit of hot cash.

Globalisation has made this stimulation strategy less effective than it would once have been; many of the purchases will be of imports that have no linkages with Australian industry. But few of the pensioners, one suspects, will send the handouts back, and the quickening of the economy should be perceptible.

Sustained recovery from the slowdown, however, also requires deliberately targeted investment in the productive economy, to build mass demand in the longer term. Ideally, this spending would be planned so as to create more rational economic structures: carbon neutral, responsive to social needs and providing an abundance of useful jobs.

Rudd has indicated that more of the surplus will be spent if needed, but there is no sign that substantial amounts will be put into the renewable energy sector anytime soon.

Of federal funding available for renewables development, only relatively small sums of a few million dollars have so far been disbursed.

"Clean coal" technology has fared better, but environmentalists broadly agree that, even if this technology works at all, it will be expensive and come into operation too late to be of vital help in saving the climate.

Energy Innovation

Contrasting with this assistance — miserly where not ill-directed — are measures urged by Australia's best known expert on renewable energy. In a mid-October email to Adelaide's Climate Emergency Action Network, Dr Mark Diesendorf of the University of NSW argued for massively expanding research and development funding for renewables.

In Diesendorf's view, the federal government's Energy Innovation Fund (for research) should be expanded from $150 million over four years to $500 million. The Renewable Energy Fund (for development and deployment) should be raised from $500 million over six years to $6 billion.

As well, urban and rail infrastructure work should receive additional funding of $1 billion per year for six years, and an additional $100 million per year should be provided to cover rebates for the installation of hot water systems.

At about $2 billion per year, this extra funding would amount to some 0.7% of this year's federal budget and no more than about 0.17% of Australia's GDP. If anything, Diesendorf's demand is too modest; several per cent of GDP could reasonably be budgeted. The targets might include:

•Further development of concentrating solar thermal technology, and its installation alongside gas-fired power plants to supplement and replace in part fossil fuel use.
•Development of algal-based biosequestration as a means of capturing emissions from gas-fired generating plants and steel mills.
•Local manufacture of wind power equipment, most of which is now imported.
•Construction of power transmission lines to remote geothermal sites.
•Further development of carbon-neutral "eco-cement" processes, to take the place of emissions-intensive conventional cement production.
•Large-scale reforestation as a means of offsetting as much as half of Australia's greenhouse emissions.
•Construction in wide areas of rural Australia of a biochar industry based on plantations of trees such as mallee and brigalow. This would create a large number of rural jobs, raise the productivity of farmland, generate appreciable quantities of electricity and allow carbon corresponding to a large proportion of Australia's emissions to be sequestered.

Programs such as these would provide a high level of employment per dollar outlaid. In his book Greenhouse Solutions with Sustainable Energy, Diesendorf explains that a wind farm with 80% local content could be expected to create four to six times more local jobs per kilowatt-hour than coal-fired electricity.

Social Ownership

How might an environmental New Deal of this scope be administered? Since its goal is not to maximise profits but to help create a sustainable, job-rich economy, this is not a scheme to be handed over comprehensively to private ownership and the vagaries of the market.

Rudd's emissions trading would hinder many of the programs involved, introducing a whole crop of unneeded complexities and distortions.

For the main components of an environmental New Deal, the appropriate administering organisations would be state-owned development bodies subject to popular scrutiny, answerable to the people's elected representatives and with large elements of workers' control.

Other organisations involved could include worker and community-owned cooperatives, as well as small and medium-sized private firms.

The main organisations of an environmental New Deal could form the basis in the longer term for a broad socially owned sector of industry. The financial ties of this sector with the state would be determined by specific government decisions.

Meanwhile, the many non-state players — farmers' cooperatives running local biochar plants, for example — would need financing from sources more reliable than private banks speculating in toxic derivatives.

To fund these smaller, non-state enterprises, publicly owned environmental banks would be essential. These would extend loans on the basis of not just economic viability, but also social and environmental need.