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We can have a golden future with a Green Recovery Act

The climate crisis cannot be addressed without a transformative reconstruction of the law.

Ewan McGaughey
16 July 2020, 1.26pm
Jürgen, CC BY-NC 2.0

We’re about to spend billions of pounds on restoring our economy out of the Covid-19 pandemic, and if we do it right, we can solve the climate crisis and live in a golden future. Imagine a world where the roar of traffic is replaced by the song of birds, where flower petals not plastic bags float in the wind, where people in cities can breathe, and the countryside comes to life once more. Our problem is simple: we still use coal, oil and gas, and it must stop. All of it. Since I began teaching enterprise law, and the finance and governance of regulated industries, I’ve learned how hard and complex the details of decarbonisation can be. But the principle is easy. Stopping climate damage is a moral imperative. We owe it to ourselves and each other to build back better, and create a golden future for our children.

With the think tank Common Wealth we’ve written a complete Green Recovery Act that gets us to zero carbon as fast as technologically possible, not to wait till 2050 or 2030. Its price tag is zero, but the whole machinery of government and all businesses will have new duties to replace vehicles, energy sources, and investments that use coal, oil and gas. The Bank of England will have a new monetary policy based on clean investment. The UK Treasury will replace “Gross Domestic Product” with an objective indicator of economic success, that doesn’t go up when companies profit from pollution or privatise health care. The Act empowers our local authorities to be the new laboratories of environmental innovation, and it requires our Foreign Minister to negotiate for the same principles abroad as at home in all international agreements. The Act will put fossil fuel companies into a swift and orderly liquidation procedure, and it will guarantee full employment, incomes and training for everyone.

This lays the foundation for a Green New Deal, but it goes far further than the plans we’ve seen from the EU, or even from the declaration of US Congressional Democrats. We do need money, but the key element that’s been missing is we need to change what got us here in the first place. In law and economics we often talk about ‘market failures’, like pollution as an ‘externality’ (when companies unjustly pass the costs of production onto others) or the status quo bias (we stick with what we know, even if it’s harming us). But these phenomena only matter because our social institutions – above all our laws – are failing.

Why do companies still buy polluting vehicles, even when the total cost of electric vehicle ownership is lower? Why do we still have coal and gas power stations, when wind or solar are so much cheaper – even without taking into account the cost of climate damage? Why haven’t we stopped all fossil fuel vehicles being manufactured, when we know air pollution kills 40,000 people, costs the NHS £6 billion, and the whole economy £20 billion every single year? Of course, one set of answers can be that company directors or ministers don’t bear the costs of their action or inaction, that like all of us they stick to the status quo, or think more about the short term. We could see the problem as ‘market failure’.

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This is all true in part, but the deeper, less familiar answers are that the Capital Allowances Act 2001 section 104AA(4) still gives tax deductions for petrol and diesel vehicles that cost more than electric over their life. It’s that the Companies Act 2006 section 174 contains a duty of care, skill and diligence on directors, but it doesn’t yet make it explicit that this duty includes ending fossil fuel use when that will actually save money. It’s that the Railways Act 1993 section 25 and the Bus Services Act 2017 section 22 mean the only governments in the world that can’t own and expand public transport are ours. It’s that in a case called Commission v Germany in 2007 the Court of Justice of the EU ruled that golden shares for the state government in Volkswagen were unlawful, and the next thing you know (without public oversight) VW executives were installing ‘cheat devices’ that led to the dieselgate scandal. It’s that the Petroleum Act 1998 section 9A demands ‘maximising the economic recovery of UK petroleum’, like two fingers up to every child in the world.

There’s no such thing as ‘the market’. There are only laws and the society that upholds them. This is because there are infinite varieties of market constitution, all dependent on law. How we code our laws can determine almost any economic and environmental outcome, not unlike an algorithm in a computer. When we talk about ‘market failure’ what we should really say is legal failure – and as an educator in law, I feel I bear a special responsibility – to understand and change our laws for a living planet.

The Green Recovery Act is all about striking the root causes of the climate emergency – the emergency that Parliament and hundreds of councils have recognised. We’re not powerless till 2030 or 2050, and we can change everything now. When the US entered World War Two, the government went to the auto-makers and said they needed to retool to make planes and fight fascism. The companies said it was impossible, and only 10-15% could be retooled a year. The government said it must happen, and it did, at tremendous pace. We can do the same: it’s purely a matter of law and will. Climate damage is political, but it’s also transcendent, and the need to stop it is too great to be stalled by politics.

The Green Recovery Act doesn’t cost a single penny to the taxpayer, and because fossil fuels cost more, it will make businesses, pensioners, and the Exchequer wealthier. The Act does set up a Green Recovery Commission – an idea building on the Decarbonisation Bill introduced by Caroline Lucas and Clive Lewis – to recommend how future investments are best raised and spent. This is the legislative basis for a Green New Deal, but the costs are lower than many believe. We just need to change what we build and buy. Together with the recoding of our laws – for clean energy, transport, farming, buildings, and finance – we can create a paradise on Earth. Let’s get that cross-party consensus and pass the Green Recovery Act.

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