Opinion: We can kick start the economy… and might just save the planet too

With all eyes on the elections in Greece and the future of the Eurozone, the Earth Summit in Rio is unlikely to be headline news. But it should be. As Nick Clegg wrote on LDV last week 'sustainability and growth go hand in hand, and it's for us as Liberal Democrats to make that case loud and clear.'

As Liberal Democrats we have been making the case for decades, and over the last two years Liberal Democrat Cabinet Ministers have been forceful advocates around the Cabinet table and around the world. We may know that tackling climate change is essential for the future of our planet and our way of life, but the truth is that the move to a low-carbon economy is also essential for the future of our economy.

In the past global recessions have led to dramatic falls in energy and material prices, helping to kick-start the economic recovery. Uniquely during our current recession the high costs of accessing remaining resources and booming demand from Asia have led to no reduction at all in commodity prices. McKinsey predict high and volatile commodity prices for at least the next  20 years, and urge businesses to put resource efficiency at the heart of their business model. If Britain is to compete as a world economy it is essential we also put resource efficiency at the heart of our economic recovery strategy. Chris Huhne made this argument strongly in the Guardian last month claiming that 'the real choice is between green growth and no growth at all.' On the eve of Rio two recent studies make this case even stronger.

Firstly a report last week by the Centre for Economics and Business Research on the macroeconomic benefits of investment in offshore wind found that it could lead to an increase in UK GDP by 0.2% by the time of the next election in 2015, and add 0.4% to GDP by 2020. Importantly the report also found the offshore wind industry could wipe out nearly three-quarters of the UK's current balance of trade deficit.  There is a real UK economic advantage to replacing imported fossil fuels with investment in British manufacturing and export in the offshore wind supply chain.

Secondly the highly respected International Energy Agency recent report Energy Technology Perspectives 2012 bluntly set out that investing in an energy mix likely to lead to global warming peaking at 2 degrees will be expensive, but a lot cheaper than the alternative. From now until 2050 the IEA say it would globally require $36 trillion more in investment than under a scenario in which controlling carbon emissions is not a priority. But in two sentences that debunks the views of many economically illiterate as well as scientifically illiterate climate change sceptics, the IEA goes on to say:

"However, investing is not the same as spending: by 2025, the fuel savings realised would outweigh the investments; by 2050, the fuel savings amount to more than USD 100 trillion. Even if these potential future savings are discounted at 10%, there would be a USD 5 trillion net saving between now and 2050."

Even using a conservative discount rate and fuel prices the IEA finds a net saving of $5 trillion dollars. And we might just keep climate change under control too.

As Liberal Democrats in government we should be proud that we are leading the fight for tough energy efficiency standards and investment in offshore wind and other renewable technologies which are in our clear economic interest as well as the interest of the planet.

Unfortunately the fact that, with some notable and honourable exceptions, our Conservative colleagues just don't get it might make us look longingly at the Opposition benches, with the freedom it gives to say what you truly think. So be under no illusion that the Labour party are no better. Ed Miliband is the only party leader not to have made a speech about climate change since the election. And Ed Balls, the Shadow Chancellor who some paint as a new economic sage, has not made a single reference to green growth, climate change or even the environment in all of his appearances at the opposition dispatch box.

Only the Liberal Democrats stand by our commitment to act on the environment - as Nick Clegg has said, it is not always easy but we will remain the green party of government.

* Photo of Rhyl Flats Offshore Wind Farm provided under a Creative Commons license by FreeFoto.com

* Joel Kenrick is a Liberal Democrat member and independent climate change consultant. He was Special Adviser to Chris Huhne at DECC from 2010 - 2012.

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15 Comments

  • Thanks for this, Joel. Resource availability and costs are the huge elephants in the room. Whether you are a “growth at all costs” person, or an austerity merchant who believes that deficit and debt is the only problem, and that when deficit is cleared “we can get back to normal”, the message to you is that the world is finding it extremely difficult to both supply goods and services to continue a “western” lifestyle at an affordable price, and to meet the aspirations of many people in China, India, Brazil etc, without even considering less developed countries. To do it without accelerating climate change, or in other ways damaging the one planet we have is pretty well impossible.

    So not only do we have to keep ensuring our message about climate change and greening the economy gets out there, but we need to consider wider economic and political factors. First, in a new world which fully takes on board the message surrounding Rio +20, we need urgently to re-examine our traditional economic indicators, such as GDP and GDP growth. Under Agenda 21 following the first Rio Summit, we were asked to build any long term politics on three “legs”, social, environmental, and economic. Attempts to do this over the years have foundered, and unless we start looking at this on a world footing, as well as in narrow national terms this will probably founder again. Also, a lot of focus has been placed by the austerity merchants, on the unfairness of borrowing without limit from future generations. How much more will future generations regret our actions if we fail them on the overall future of the planet?

    I don’t understand your point, Joel, by the way, about Opposition being attractive, but look at Labour. Being on the Opposition benches does not mean agreeing with other opposition parties automatically – we certainly didn’t do that with the Tories while nuLab were in power!

    Can you clarify your name please? Kenrick on your Twitter icon, Kendrick on your header etc?

  • Making all manner of industrial processes and production more expensive does not create growth, rather the opposite. That doesn’t mean it’s not worthwhile – the losses to CO2 damage or whatever else may be even greater – but it’s dishonest to suggest you can impose substantial additional costs on the market and somehow make more money. Especially when you combine it with all the pre-existing problems of state central planning that major government direction of the energy sector is going to involve.

    btw: any debunking of anything won’t be done in two sentences in an executive summary, which are designed to give politicians (ie. everything-illiterates) buzz-phrases to repeat without needing to wade through difficult reasoning. The full report costs money, so I don’t know what it says, but be sceptical of counter-sensical claims that sound too good to be true. To the extent that the proposed investments are economically worthwhile (which may well be substantial – see the improvement in coal turbine efficiency in recent years), they will be done by the market without politicians’ “help”.

  • With regard to climate and fossil fuel resource issues :
    There was an, All Parliamentary Party Group on Peak Oil, set up in 2007 and chaired at the time by Lib Dem MP John Hemming. The group promoted an excellent study originated by a Dr David Fleming, and Shaun Chamberlin titled TEQ’s – Tradable Energy Quotas.
    It [TEQ’s], was/is not a perfect system, but is a detailed and far more sophisticated policy idea than any I have come across, in dealing with this problem, and a very enlightening read, if you are interested in these issues. You can download a .pdf of the report from this House of Commons link.

    http://www.teqs.net

    The study seems to have stalled around 2011 for some reason, which is unfortunate since it was doing some excellent work on this problem.
    If anyone has any info as to where this project is up to I’d be very interested to hear?
    J.D.

  • Also the short videos on the bottom of the page, of the link I gave on TEQ’s, are also well worth the time to watch.

    Thanks

    J.D.

  • I am absolutely amazed – and disappointed – that only 3 of us have seen fit to comment in 6 hours on this article of opinion on the Rio +20 Summit. This is, after all, a Lib Dem site, the issues involved crucial to the future of the planet as we know it and the human race.

  • Mark Valladares Mark Valladares 19th Jun '12 - 3:46pm

    Tim13,

    That could be because;

    a) most readers agree with the article and see no need to say so;
    b) it’s during office hours and people are busy;
    c) it hasn’t attracted angry people who don’t like Liberal Democrats because it’s a complex issue

    The number of comments doesn’t correlate to quality or interest…

  • Yes, Mark – we’ll soon see about b)! I can see complexity as a deterrent… but the sort of economic theory people comment on on here (and during office hours I may say!) is also very complex, but that doesn’t seem to deter.

  • OK, Tim13 asked for comments so I’ll stick my head above the parapet and ask because somethings have been puzzling me for a while and I can’t seem to find an answer.

    The idea was to produce renewable energy as fast as possible but we seem to have gone down the offshore wind farm route, the cost of this is being borne by the public (through subsidies and actual energy costs). So why was wthis route chosen? For the cost involved couldn’t we have started on the solar front first, perhaps starting in the South where the initial return is better and then moving further North as unit costs reduce (thus making panels more economical).

    My local council actually came to a deal with one of the power companies to install panels on the housing stock at the same time as they were getting major work done (rewiring etc on pretty much every council house in the area). The council tenants won as they get so many free hours power a day, the power company wins as it now has a new source of cheap power and the council win as they probably got a sweetener (including the enhanced value of the housing stock).

    If the government did something similar for private housing stock the knock on effect in the economy would be far better, people would feel that they are getting something for their tax buck (immediately), they’d probably have a better feeling about the whole renewable issue, they would save some money that they could spend in the economy, there would probably be a lot more newly created/existing protected jobs as well.

    Next Q, admittedly I’ve only read the link to the ETP doc, but why aren’t we spending on energy storage as we need that to fully utilise either solar or wind generation. I know the ETP doc is only a summary but it only gets the briefest of mentions.

  • Great idea, Chris sh. Agree on oth your solar and energy storage points.

  • Richard Dean 19th Jun '12 - 10:53pm

    @Tim13. I apologize for not commenting. Actually, I did comment, but then I read what I had written and thought it was a waste of anyone’s time reading it. So I didn’t press the magic “Post Comment” button.

    One of my comments was that, unlike Bruce Willis, we can’t save the planet ourselves, because we are not the only polluters, or even the worst. The worst is yet to come – think of traffic jams in Mumbai! The developing world is a lot bigger than the developed one, so unless environmentally friendy energy systems are developed fast – for things like cars – then the planet is probably doomed. On the bright side, it’s something the developed countries may have a competetive advantage in – doing the research needed to find the solutions.

    I was a little disappointed that this article uses the environment as a tool to attack other parties, but I suppose that is inevitable.

    I did actually click through to read the executive summary of the CEBR report. My feeling was that it lacked somethng – where is the investment going to come from? If it will be funded by debt, have the debt repayments been factored in to the calculations? Maybe this is in the main text ofm the report which I had no time to read.

    I asked myself how you end up with 5 trillion if you are trying to calculate 10% of 100 trillion.

    I said to myself – have these green people gone nuts? How can green be the only solution to the growth problem? Surely nthere are other aspects to this problem which also need sorting out, such as what appears to be a very deep misunderstanding of the important concept of RISK. If I take a small risk enough times, then the bad thing ends up being BOUND TO HAPPEN SOMEDAY, so there has to be a concurrent focus on techniques of damage limitation.

    Well I hope you are mollified by this abject and humble apology. To be honest, I’m only doing it as a way of putting off some really boring work I have to do, which I have to do now. Oh dear, the birch again! But after that I have a nice piece of environmental engineering to do, so here goes 321….

  • Sorry all for clearly coming over as lecturing! As Richard says above, I will also try to put a further comment on during the day, if I find time between various other work much of which will not be computer-based!

  • Stephen Donnelly 20th Jun '12 - 11:40pm

    Can we stop claiming that ‘it will kick start the economy’ is the justification for every policy. Action on climate change does not need an economic justification, and anything based on the idea that ‘government must invest’ will tend to end failure. Government must allow the conditions for private industry to invest, not take part itself.

    This is so far down the page now that my comment will probably never get read – the Universities must be out for summer.

  • Richard Dean 21st Jun '12 - 12:01am

    Susan Kramer’s contribution to the Orange Book, entitled “Harnessing the market to achieve environmental goals”, is well worth a read. She very intelligently identifies the different roles of regulation, taxation, user charges, and market trading schemes.

  • @Stephen Donnelly
    “This is so far down the page now that my comment will probably never get read – the Universities must be out for summer.”

    Lucky I kept my dunce hat then so that I can reply 😀

    “Action on climate change does not need an economic justification”
    I’m not certain of the context of that statement, I would say that of course it needs justification, you can’t just start spending huge chunks of money without justifying it (whether that is to the electorate or to share holders).

    “anything based on the idea that ‘government must invest’ will tend to end failure. Government must allow the conditions for private industry to invest, not take part itself.”
    You may be interested in http://www.spiegel.de/international/world/rio-summit-shows-need-for-business-to-take-leading-role-on-environment-a-840188.html

    But there shouldn’t be anything to stop government at any level from taking part in the sense of commissioning work (as per the example I gave from my own Council).

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