Threat to opportunity: the new logic of climate policy

In the clutches of recession, the Ryanair chief executive may now breathe a sigh of relief as binding emission reductions seem further off than ever before. Now, the only thinkable solutions to climate change are those which also provide an immediate, tangible boost to economic growth. But can market logic provide the solution to this ever-escalating crisis?

 

Nearly four years ago, back in February 2008, Ryanair chief executive Michael O’Leary said in an  interview about threats to his airlines’ profits: “We would welcome a good, deep, bloody recession”, explaining that it would end the “environmental bullshit among the chattering classes that has allowed Gordon Brown to double air passenger duty. We need a recession if we are going to see off some of this environmental nonsense”.

O’Leary may look back on his words with some satisfaction now (and incidentally, Ryanair announced a 20% rise in profits in November), particularly following the debacle that was the COP17 in Durban. Binding emission reductions will not come into force until 2020, and his environmentalist foes are describing the outcome of the summit as “feeble”. Talks that set a timetable for more talks are what the late John Kenneth Galbraith would have called a ‘no business meeting’: “called not because there is business to be done, but because it is necessary to create the impression that business is being done."

At the time of his comments, O’Leary appeared less a sage than a loner swimming against the tide. Following a succession of hard-hitting reports, most significantly the Stern Review on the Economics of Climate Change in 2006 and the IPCC’s Forth Assessment Report in 2007, the credibility of so-called ‘deniers’ in political discourse plummeted. The movements of ice-sheets made regular front page news, climate protests flourished, and David Cameron frolicked in the arctic snow with huskies in his bid to seize the growing ‘green vote’ from Labour. O’Leary’s fear was matched by environmentalists’ optimism. And indeed, the UK became the first country in the world to introduce legally binding emissions targets with the 2008 Climate Change Act.

The dramatic elite de-escalation of action and rhetoric on climate change since Copenhagen has little to do with a change in the scientific diagnoses. Warnings from scientists have remained dire; carbon emissions have kept increasing despite the recession and according to the Tyndall Centre will continue to do so at a rate of 3% per year. The ‘safe’ 2 degrees Celsius warming target now appears unattainable.

Pre economic crisis climate policy was based around the logic set out in the Stern Review – sacrificing a little short term growth through emission cuts was necessary for the long term good of the economy, preventing, Stern’s team calculated, an “average reduction in global per-capita consumption of 5 per cent, at a minimum, now and forever” should no action be taken.

The consequence of the crisis has been to make near-term solutions to climate change thinkable to governments only to the extent to which they also provide an immediate and tangible boost to economic growth.

Aside from face-saving politicians, the only people heralding Durban as any kind of success are found among the growing green business lobby. Rhian Kelly of the CBI described the outcome as a “great result” due to the progress made on the Green Climate Fund and the inclusion of carbon-capture and storage in the Clean Development Mechanism. Abyd Karmali of Bank of America Merrill Lynch called it “a Viagra shot for the flailing carbon markets”.

A week earlier, Bloomberg New Energy Finance chief executive Michael Liebreich celebrated the trillionth dollar invested in clean energy since it began keeping records in 2004. Over this period, investment has risen at a compound annual rate of 29% per year, from $52bn a year in 2004, to $243bn in 2010. This year is expected to break new records. “It should”, he said, “serve as a message to the UN and all those in Durban to stop obsessing about a binding deal to cap carbon emissions, and to think much harder about how to speed up investment in the solutions.”

Liebreich neatly encapsulates the new logic by which elites are addressing climate change: take advantage of the flourishing green market opportunities now, worry about actual emissions reductions as a second order priority. 

And the market opportunities are big. Projections from the International Energy Agency, for example, suggest that between now and 2035, there is a requirement for $38 trillion of investment in global energy infrastructure to meet growing demand. Renewable energy, they estimate, will account for half of the new capacity installed.

The worlds’ major economies are jostling for supremacy in this expanding industrial sector. Thus, while China and the United States threw sand in the wheels of the Durban negotiations, both have been upping investment in clean energy. According to the Pew Charitable Trusts’ report, ‘Who’s Winning the Clean Energy race?’, China’s rose by 39% in 2010 to $54.4bn, making it the worlds’ number one clean energy superpower even as it proceeds with a vast coal-fired power building programme

The UK’s coalition government has, so far, primarily addressed climate change to the extent to which economic benefit can be derived from it. In presentations on schemes such as the Green Investment Bank (GIB) and feed in tariffs – support for which the government has curtailed, apparently due to high demand – success appears to be measured more in millions of pounds than tons of C02. 

Indeed, following Vince Cable’s boosterism for the GIB last spring, leaked documents in May 2011 showed him to have attempted to block the “too aggressive” carbon reduction targets set by the governments’ independent climate change advisory body. The Chancellor George Osborne announced at the Conservative Party Conference in Manchester in September that same year, that the government would not reduce its emission targets in the event that the EU does not agree to more stringent targets, saying “we're not going to save the planet by putting our country out of business”. 

The scraps of the governments’ growth strategy emerging in Osbourne’s Autumn Statement comprised predominately high carbon measures: tax breaks to heavy polluters facing what he called the “ridiculous cost” of green policies, a postponement of the 3 pence hike in fuel duty, and new funds for road building dwarfing public transport. A less contradictory approach to climate policy and the green economy will, it seems, have to wait until economic growth has recovered. 

For a brief period when concerns with economic meltdown and melting icecaps overlapped more closely, proposals for a ‘green new deal’ were tabled, with Brown and other world leaders promising a massive Keynesian stimulus to kick-start a wave of green-tech manufacturing – the last remaining frontier for innovation and accumulation that could pull flagging western economies out of recession. 

Funds of the magnitude given to the banks were never made available for this purpose, but the hope remains. What though, should it be attained, could this green growth ultimately deliver? As Tim Jackson, economics commissioner on the UK government's Sustainable Development Commission, has pointed out, advocates of the green growth agenda hold a misplaced hope in new technologies and competitive markets achieving a decoupling of economic growth and emissions. Global energy intensity per unit of economic output is 33% lower than in 1970, but carbon dioxide emissions have risen by 80% since that year – increases in efficiency have been offset by the vast increases in the volume of consumption. Jackson argues persuasively that maintaining even low levels of economic growth throughout the coming century would, to meet IPCC targets, mean achieving a complete de-carbonization of every dollar of economic output, in conjunction with measures to remove carbon from the atmosphere. 

The world’s politicians can rightly be blamed for the debacle they have made of the UNFCCC, but regardless of how much cooperation they foster next time around, placing the interests of capital first creates a straightjacket that will make climate change an intractable problem.

 

About the author

Andrew Bowman is a researcher at the Centre for Research on Socio-Cultural Change and editor for Red Pepper Magazine and Manchester Mule.