Why do we need a European New Green New Deal ?
EUROPE IS NOT THE PROBLEM BUT THE SOLUTION: At the moment, the governments of each member state are reacting individually to the financial crisis, trying to preserve their own interests regardless – in fact at the expense – of their fellow member states and of the common European interest. And when coordination occurs, it looks more and more like the large member states – when they can agree among themselves – are trying to dictate to the others what needs to be done.
A basic ideal of the Europe Union is that every European citizen is equal; in the sense that a consumer or a worker deserves equal consideration regardless of whether he or she is a citizen of France or Hungary, of the United Kingdom or Greece, of Portugal or Latvia. In that sense, we need a plan that caters for the needs of all Europeans.
But quite apart from that ideal, single and uncoordinated national responses are doomed to fail, for three main reasons
- First, the economies of all member states are closely integrated with one another; we have a single market and most of the external trade of EU member states is done with other member states. Thinking that one or a few member states can find a way out of the crisis alone, leaving their EU partners deep in it, is a dangerous illusion.
- Second, if Europe wants to be at the forefront of the next industrial revolution, no single member state, even the largest of them, can be relevant and successful compared with economic giants such as the United States, China or India,.
- Third, most significant businesses in the industries concerned with a Green New Deal – energy, transportation, industrial equipment and of course banking and finance – are transnational; they cannot be addressed by national initiatives alone.
So both for idealistic reasons and for reasons of effectiveness and efficiency, national responses are not enough to successfully respond to the crisis. We need a European response. That is why Europe is not the problem, but part of the solution.
But is what the different Governments are doing at the national level not sufficient?
Clearly not; a careful analysis of the announced and voted recovery plans shows that the sums of money promised by EU countries fall short both in absolute and in relative terms.
Volume-wise, over this year and next year, the USA has already committed more than $110bn to green initiatives, and China, Korea and Japan combined more than $260bn, while the combined EU effort trails behind at $54bn (that is 0.2% of the EU’s GDP for that period). Percentage-wise, Asian recovery plans have an average 23% of green content, while European plans only have 16%.
As far as Europe is concerned, it should also be emphasised that the largest “green” components of the recovery plans are the various car replacement incentives, none of which have emission provisions (which means that there are incentives for replacing older small cars by newer cars emitting more CO2).
Finally, the $54bn mentioned hide the fact that most recovery plans announced by member states fail to include any green content. By comparison, most of the green contents of the Chinese plan go towards the expansion of the railway system and of the electric grid.
Current European leaders – both at EU level and in the member states – tend to be quite complacent, claiming that Europe is already at the forefront of the Green revolution. The figures above show that this is nothing but greenwashing and that Europe risks being overtaken by other economic giants.
What about the EU recovery plan that is currently being discussed?
First of all, this plan is still in discussion at the moment; we feel no real sense of urgency, and certainly not the need to take a leadership position in the Green industrial revolution.
Second, the EU aims to allocate the largest part of its green investment to carbon storage and sequestration experiments which a) are not ready to be started and b) is a technology which, if ever proven feasible and reliable, will take years to deliver any significant impact on our emissions.
Third, it relies strongly on traditional old-fashioned state aid tools instead of instruments such as loan guaranties, interest subsidies, direct equity participation or other tools that provide leverage, allowing the mobilisation of 10 to 20 times more funds (including private funds) than using classic , naked state investment.
Fourth, it will most likely end up allocating state aid only to the big energy and telecom oligopolies instead of supporting the more dynamic, innovative and creative economic actors such as small and medium-sized enterprises, cities, local authorities, etc. that are the real catalysts for the change Europe needs.
We believe the EU plan should be much more ambitious and focus on projects that can be started immediately and deliver both an economic and ecological impact in the short term.
Greens want the European Union to do more, but it lacks competencies in the economic domain.
This is not the case. While the inability to be more proactive in areas such as tax policies is certainly a weakness, Europe has several instruments at its disposal. Let us just mention two of them. Each year there is a broad discussion about the Common Economic Guidelines involving ECOFIN, the Commission, the Parliament and the Council. This provides a way to coordinate different economic policies including budgetary policies even if it is just a guideline and has no binding effect. Also the Gothenburg agreement offers possibilities to the Union to be more proactive concerning environmental and climate-related questions.
Furthermore, EU governments always have the liberty (and the duty) when the need arises to sit together and coordinate their actions and set national targets even if they are not bound to do so by the existing treaties. The Open Method of Cooperation has already been applied in the social domain and budgetary agreements showing that the possibilities are not so limited.
To illustrate this there are some good examples, even if from the Green point of view the goals of these coordination efforts should have been more ambitious. One very good example is the Climate Change Strategy setting a 20% reduction in CO2 emissions, 20% more renewable energies and a 20% increase in energy efficiency by 2020. Another more recent example is the effort that has been made at the time to coordinate the European position on the tools and instruments to re-regulate the financial markets with a view to establishing a common position for the G20.
This demonstrated that if there is a political will, instruments to implement it can be found.
Why invest in Green technologies and services?
The development model adopted by European (and North American) countries is unsustainable. It is based on present levels of consumption; it allows greenhouse gas emissions that will upset the balance of our climate and ultimately of non-renewable resources at a rate that would see many of them depleted in a few decades. This will not only threaten the survival of the human species on Earth; but it will leave a majority of the world’s population in a state of utter poverty. We need to radically change that development model, focusing instead on renewable sources of materials and energy, thus allowing current and future generations to live a decent life on the planet. It is a matter of necessity and of justice.
Also, no one doubts the next industrial revolution will be the Green revolution. There is a growing consensus that if we want to give a new horizon to our economies, there is no real substitute for the green transformation of our societies. It encompasses huge swathes of our economy: energy production and distribution, energy efficiency in all domains, transportation, construction, agriculture, education, … Europe missed the previous industrial revolution – that of information and communication technologies; if it does not want to repeat this mistake, and be at the forefront of the next one, it has to mobilise now. As mentioned before, the USA under the new leadership of the Obama administration, but also China, Japan or South Korea, are putting Green issues at the heart of their recovery strategies. Europe does not have a wide window of opportunity if it wants to be a player.
So it is both for reasons of necessity, of justice and of opportunity that an ambitious Green New Deal is needed. The current initiatives of the EU Member States are not going in that direction.
What kind of activities will be targeted by the Green New Deal?
Here are a few examples:
- Energy-smart construction and housing refurbishing, in order to drastically reduce heating and cooling costs for households and offices.
- Infrastructure, research and development in renewable energies – solar, wind, biomass, small scale hydro, tidal, geothermic,) etc. in order to make them affordable for everyone and make Europe nuclear-free;
- Developing a Europe-wide smart electricity grid that allows small energy producers to inject and sell surplus energy and combine different energy sources in an intelligent way;
- The introduction of new service concepts allowing us to combine heating, cooling and electricity production to serve neighbouring areas and green the cities;
- Improving pollution control, energy efficiency and material efficiency;
- Improving material management through recycling, taking back products and remanufacturing them, dematerialization of production processes, increasing durability and reparability;
- Improving the energy- and resource-efficiency of production processes, e.g. producing steel with 50% less energy consumption;
- Developing Green appliances and technologies e.g. drastically reducing the power consumption of everything we use on a daily basis, from computers to fridges;
- Shifting to more socially just and less wasteful transport systems: promoting and investing in public transport (including switching to electrified public transport; moving freight to less-polluting modes such as rail); including congestion charges or similar measures for big cities
- developing less-polluting cars like 3-litre and electric cars and the necessary related infrastructure
- Developing sustainable agriculture and food production
- Developing sustainable forestry and the preservation of biodiversity
This package must be supported by an education and training programme conceived by experts in the field and supported by governments, providing new job opportunities for young people and for people who are in danger of losing their jobs or have already lost them due to the economic crisis.
€ 500 bn over five years; are the Greens out of their minds?
Absolutely not. After all, this means on average € 100 bn a year, which is less than what the latest UNEP report on the Green New Deal urges the EU to spend (1% of GDP or €130 bn/year), and remains below what countries such as South Korea or Japan will actually spend on Green initiatives.
Remember that at the moment more than a trillion (that is 1.000 bn) Euros have been allocated to various recovery initiatives; and most of that is focused on the banking sector (with dubious effect on the real economy so far…) or on safeguarding existing industries without any consideration for their role and action in the next industrial revolution.
By the way, we should keep in mind that for the time being there is a lot of existing capital, for example. in pensions funds or bank assets built by personal savings, that are looking for secure and stable investment opportunities. Closing Tax havens and having tax evaders pay their dues also would provide states with extra money. This money needs to be funnelled into the Green New Deal.
Does this mean € 500 bn of additional government spending (and debt?)
No; our plan aims at mobilizing € 500 bn over five years; it should encompass all categories of investments: by private persons (e.g. for housing refurbishing), by enterprises and organisations (R&D, energy efficiency,…) and by governments.
A concerted action plan by European Governments should be made up of various means, e.g.
- Credit guarantees in order to ensure private citizens and businesses can borrow the money they need to invest from banks and national funds
- Providing targeted fiscal incentives to encourage investments in Green targets; among other things by reducing VAT with the aim of promoting green activities and the creation of green jobs
- Leveraging the financing possibilities of the European Investment Bank and allowing the EIB to raise money, using the unused reserves , etc.
- Reorienting already decided stimulus packages towards the Green revolution; if the political is there, a substantial part of the amounts allocated for recovery, rescue and bailout plans could be targeted for an amount of perhaps 20% to promote investments in green sectors and to create green-collar jobs.
- An EU-wide budget neutral carbon tax that would both help reorient production and consumption away from harmful products and services, and allow a shift of taxation away from a labour-base towards an energy-base;
- In the same spirit, the generalisation of the emission trading rights for the industry must be accelerated; the climate/energy package adopted in December 2008 allows the vast majority of businesses to escape paying for their emission rights until 2013.
- An EU-wide financial transaction tax (FTT) that would help finance the rescue and recovery initiatives for the banking sector; ultimately, a systemic risk insurance fund should be funded by such means (a study by Austrian economic expert Stephan Schulmeister et al (March 2008) shows that up to Euro240bn per year in the EU plus Norway and Switzerland could be raised with a tax rate of 0,1% of the financial transactions)
- Reorienting the EU budget giving green sectors the priority over the CAP (45% of the present EU Budget), but also setting clear environmentally friendly targets for Regional and other European Funds (€38 billion covered by Cohesion funds in 2008);
- Make drastic efforts to reduce the €250 billion a year that the present tax evasion costs to the member states, and channelling a percentage of this amount to finance green projects
- Link bank bailout efforts with green inspired credit policies
- Create a more friendly framework for venture capital for investments in green technology
- Get significant funds such as the KWF, the Norwegian Oil Pension Fund or the Caisse de Depots in France; the Margarite Fund, and many others involved and active in green projects.
- Reduce drastically the 170 billion Euros coming from the taxpayers that yearly are allocated to environmentally harmful and often unnecessary subventions
- Consider the possibility of authorising the EU to acquire assets by selling state bonds to private financial markets and promote the use of similar municipal or regional instruments
- Consider the possibility of introducing a mandatory fuel price that allows the creation of a fund for green projects, at least as long the oil prices are so low. Such a measure obviously needs to foresee social compensatory measures for the weaker part of the population.
- In any case, we should not forget that each year the EU is importing different fuels for between € 600 and 1000 bn. Redirecting part of this spending to a more domestic sourcing scheme offers huge possibilities to finance the European energy reconversion.
How do the Greens imagine they will safeguard or create 5 million jobs in 5 years?
It sound extremely ambitious, but it is a feasible target. Here are some facts that clearly indicate that this is not just a dream.
- According to the Wuppertal Institute, thanks to the promotion of green sectors in Germany 1.2 million jobs have been created in the last decade. The 2009 report of the German Environment Ministry claims that in Germany there are 1.8 million green collar jobs producing 5% of the GDP. The Commission calculates that there are more than 4.4 million people already working in the green economy in Europe.
- Different estimates agree that there are 2 million jobs that could be created in the EU in the sector of renewable energies alone; the time required to achieve that goal depends on political focus and determination.
- Green collar jobs are not just jobs created in housing insulation or in renewables. Green jobs are emerging in the industry but also in the service sectors. Already now there are more workers producing mass public transport means than producing individual cars.
- According to the study of A.T. Kearney on a “New Energy Deal”, in Germany alone 500,000 new jobs could be created with an investment of €25 bn.
- In other parts of the world, significant steps are already being taken towards the green industrial revolution. As an example, in the US there are currently more workers in the wind industry than in the coal industry. The Obama administration has promised to create several million jobs with 150 billion over 10 years
- A quick calculation of the existing data gives the following ratios between investments and jobs created:
|USA - Green Industries||Obama programme||5 m jobs/$150 bn/10 years||$30K/job|
|Germany - Green Energy||AT Kearney||0.5 m jobs/€ 24 bn||€48K/job|
|UK - Construction||UK Government||11-14 jobs/M€||€70K-90K/job|
|EU - Green industries||European greens||5m jobs/€500 bn||€100K/job|
|Germany - Construction||Statistical office 2001-2006||145K jobs/€19 bn||€131K/job|
|South Korea - Green plan||RoK Government||0.96m jobs/$36bn||$375K/job|
How do the Greens imagine getting the Green New Deal going in Europe?
We want to launch a large partnership for change with all stakeholders who would be directly affected by a Green New Deal. Banks, businesses and trade unions, international institutions such as the EIB, the Commission, member states, regions, cities and NGOs. At the same time we need the representatives of the banks and of course of the trade unions. It is in the context of this partnership for change that the concrete investment proposals have to be prepared, including their financial coverage.