Hesitation in pursuit of a Green New Deal

By Paul Taylor Reuters
Published: November 17, 2008

LONDON: With Europe and the United States staring recession in the face, a growing chorus is calling for heavy public investment in clean, green energy to revive economic growth while fighting climate change.
Under the slogan of a "Green New Deal," leaders from the UN secretary general, Ban Ki Moon, to Al Gore, the former U.S. vice president, and the foreign minister of Germany, Frank-Walter Steinmeier, argue that industrialized countries can achieve two goals through a single effort and create millions of "green collar" jobs.
The idea of using tax breaks and extra public spending to promote energy efficiency, mitigate carbon emissions and develop renewable power sources, inspired by a U.S. public works program put in place during the Great Depression, sounds like common sense.
But it may not happen fast enough or on a sufficient scale to stimulate the economy, stop global warming or bring down for any length of time oil prices that reached $147 a barrel earlier this year.
"This is the big opportunity to get off the oil hook, but governments have to be bold, do it on a large scale and stick to it," said Tom Burke, co-founder of the environmental consultancy E3G and an associate professor at Imperial College, London.

He advocates sustained public investment in wind farms, photovoltaic and solar energy, developing so-called clean coal technology, connecting European electricity grids and combining heating and power from natural gas to make offices and homes more fuel efficient.
Yet governments that have collectively found about $5 trillion to rescue banks and galvanize economies hesitate to focus fiscal stimulus measures on clean energy because of the long lead time for many projects.
Indeed, there are signs that the financial crisis is causing cutbacks in public and private-sector investment in wind farms and solar and wave power, and economic angst may make the European Union scale back ambitious legislation to fight climate change.
The U.S. president-elect, Barack Obama, said in a campaign debate that the credit crunch could slow his plans for a $150 billion clean energy program, designed to reduce U.S. dependence on imported oil and create five million "green collar" jobs.
The research group New Energy Finance says new investment in clean power will decline by 4 percent this year compared with 2007 because of the crisis although the conditions for growth are intact. Total new investment in low-carbon technology is estimated at $142 billion in 2008, down from a record $148 billion in 2007.
Germany, the biggest economy in Europe, earmarked just a fraction of this month's €50 billion, or $62.45 billion, stimulus package for measures to renovate buildings and reduce emissions.
Governments are tempted to give money directly to voters in tax cuts or one-off payments to bring an immediate rise in consumption rather than take the slower route of investing in green infrastructure schemes, economists say.
A recession is also a difficult time to introduce new taxes that promote environmentally sustainable behavior.
Some governments have found ways to combine the two, but so far mostly on a modest scale.
Britain has spent public money on insulating homes of the elderly. Filling wall cavities and insulating roofs cuts pensioners' fuel bills, reduces energy consumption, curbs CO2 emissions and creates jobs.
France has created tax incentives to buy low-emission cars, with corresponding tax increases on gas guzzlers, that are changing driving habits and have prompted automakers to advertise their vehicles' green performance rather than acceleration or power.
To make an impact on gross domestic product next year, European countries would have to do far more, especially on energy efficiency, where environmentalists and EU officials say the biggest and quickest gains are to be made.
Achim Steiner, executive director of the UN Environment Program, said Britain could create thousands of jobs within two years by reducing the carbon footprint of buildings.
The European Commission's Strategic Energy Review, published last week, offers plenty of longer-term projects awaiting funds.