It should be the environment and the economy, stupid

In the last part of our series on fixing the financial crisis, we look at how green policy can save the planet as well as economies

Terry Macalister
The Guardian, Saturday 28 March 2009

Hopes that Gordon Brown and other world leaders would solve the financial crisis and global warming through a series of "green New Deals" are fading faster than solar power on a rainy day.
The vast bulk of new public spending announced in global economic stimuli seems largely "business as usual", with major cash injections being directed towards banks and car companies rather than renewable energy firms.
Some countries - notably the US and China - have been more adventurous, while wind energy and other sustainable technologies certainly stand to gain from wider ministerial efforts to unlock financial lending. But the air in recent weeks has been thick with the sound of "green" schemes dropping off the corporate agenda at top firms, such as Shell, rather than the gentle hum of increased activity.
And despite a barrage of green rhetoric, Britain has only committed £1.5bn to sustainability as part of its £25bn reflationary package, less than a third of France, a sixth of Germany and 100 times less than China, according to analysts at HSBC Bank.
Barack Obama is heavily promoting solar and clean technology, but even the popular new US president is struggling to convince Congress that his green plans will build wealth instead of destroy it. What more could G20 ministers do now to rebuild their economies in a more sustainable way?
1 The UN should set up a renewable energy agency to promote sustainable schemes and match the atomic energy agency. There also needs to be a UN climate change commissioner who would encourage governments to present a coherent green message across all aspects of public policy, from housing to healthcare, and not just specifically on the economy. A network of low-carbon innovation centres across key developing countries should be funded by G8 members, which could develop local and small-scale field trials on biomass and other sustainable energy projects. A similar system has already successfully been used in agriculture.
2 Major banks have been nationalised by governments around the world, providing a perfect opportunity for ministers to steer lenders in a new direction. Private money needs to be siphoned into a sustainable future through more forward-looking banks and finance houses. These key institutions need to abandon their sole focus on short-term profit maximisation in favour of a long-term, non-profit performance view. The Irish government has already indicated it will require ring-fenced programmes for investment in renewable energy from the banks it is supporting.
3 Much more public money needs to be pumped into research and development of new energy sources as well as directly into large-scale renewable projects. Industrialised countries should encourage the development of massive solar farms being constructed in places such as northern Africa with huge long distance and subsea cables allowing them to pump electricity to "smart grids" around continental Europe and beyond. The intermittent nature of this power should be backed up by smarter demand management, special power storage - and nuclear. There should be a relentless drive to electrify the transport network - with a timetable for discontinuing the operation of all petrol-driven private cars, buses and other forms of public transport.
4 Energy efficiency is one of the quickest and most important ways of dealing with the impending power crunch. Financial incentives should encourage people to lag the loft, put in draught-proof windows and use condensing boilers - or better still heat pumps - along with compact fluorescent lamps and other measures. When the property changes hands, the outgoing homeowners would have to prove they had taken all steps to make the property energy-efficient - or face penalties. Industry has been taking steps to improve the amount of energy it uses to produce a certain amount of goods, but Britain and others could follow Japan which has made enormous steps forward to improve its industrial efficiency.
5 Carbon taxes should be used to restructure the EU's emissions trading scheme and ensure a higher and more stable price for carbon, which would drive change across the economy.The scheme needs a system of carbon tax-based floors and ceilings to make it function more effectively. There should also be more auctioning of the pollution certificates so the price can be driven up from its existing low level of €11 per tonne, which has undermined the system and put a brake on the clean development mechanism used to fund new clean energy schemes in the developing world.