Can economic rescue plans also save planet?

Campaigners hope huge spending packages aimed at easing the slump will spell the first serious attempt to tackle climate change. But are they as green as billed?
Suzanne Goldenberg, The Guardian 24 Feb 09;

With governments around the world continuing to pump colossal sums of money into their plunging economies, a grand global experiment is under way: can the unprecedented spending provide not only a quick fix for the economic catastrophe but also the measures vital for dealing with global warming?

Many hope so, and Barack Obama is foremost among them. He sees his presidency as a rare moment in history when crisis can be converted into opportunity, and his $787bn economic recovery plan is putting that theory to the ultimate test. His goal is to seize the opportunity to put in place the architecture of a low-carbon and sustainable economy.

Calls for "green new deals" are coming from every part of the world and the US plan presents a case study on an epic scale, one that is being carefully monitored by other governments. Environment ministers at a United Nations meeting in Nairobi last week saw the US plan as a powerful signal to other governments to raise the green quotient in the next round of recovery plans. The G20 leading industrialised states will be grappling with those choices when it meets in London in April.

"It is very clear that a lot of countries are watching the green component of the Obama plan because they are very interested in quick wins," said Ed Barbier, a University of Wyoming economist and author of a United Nations Environment Programme report on a green recovery.

So how does the US plan stack up? American environmentalists are delighted. "We would never have been able to imagine legislation funding developments on this carte blanche scale," said Kert Davies, research director of Greenpeace. "However, now you have an opportunity within this crisis, so let the experiment begin."

Elsewhere, the verdict is mixed. The $100bn (£68bn) in green measures represents just under 13% of the total package, falling short of the benchmark set in a recent report led by economist Nick Stern, that green measures should account for 20% of global economic recovery plans. It also fails to meet the UN target of 1% of GDP. South Korea devoted two-thirds of its $36bn recovery package, or about 3% of its GDP, to green investment. China allocated about a third of its $580bn recovery plan to green measures, concentrating on energy efficiency.

That is much higher than most European countries. The green portion of the EU recovery plan comes in a notch higher than the US plan at 14%. Germany's green investments account for 19% of its plan, but France is spending just 8%. There is no green component whatsoever to Poland's recovery plan, and Italy's efforts, in its $101bn package, are also negligible, according to a study by the climate change centre for excellence at HSBC. "I suspect that one reason some governments, including European ones, are reluctant to adopt green stimulus initiatives is they are still stuck in the 'old school' thinking that we have to revive the economy first before thinking about long-term low-carbon strategies," said Barbier.

However, Stern's colleague Dimitri Zenghelis, at the Grantham Institute, London, said that it was too early to draw up a definitive green ranking: "We have yet to see the full amounts governments are going to spend to stimulate the economy." Seen in that context, the American plan comes off well, especially considering the political battle that was waged as the plan moved through Congress.

The green recovery plan was incubated at a liberal thinktank, the Centre for American Progress. Its founder, John Podesta, was a former White House chief of staff for Bill Clinton and led Obama's transition team. The thinktank produced a plan late last year for a green new deal and many of those ideas survived in the 1,100-page package passed by Congress. The green elements include:

• funding to insulate domestic and public buildings;

• tax breaks and loans for solar and wind power firms;

• investment in a new electric grid;

• expansion of subways and inter-city trains.

American environmentalists say it is not worth quibbling about a few percentage points, given the huge sweep of the package and its swift passage. "The US a year ago was still in denial on issues of energy conservation," said Earl Blumenauer, a Congressman from Oregon and a champion of the environment.

Nick Robins, who heads the climate change centre at HSBC, argues the plan more than makes up in breadth what it lacks in total spending levels: "It gives a very, very comprehensive stimulus to the green economy across the key pillars: renewables, building efficiency, auto vehicle efficiency, mass transit and water."

The American plan also meets Stern's other prescriptions for an effective green stimulus - a concentration on building efficiency and renewable energy. Efficiency measures, such as insulation, sealing, and double glazing, account for the largest share of the $100bn. It is also thought to score well on its most basic purpose: rapid job creation. It is projected to create 2m jobs over the next two years, half of the 4m total envisaged by the package.

Congress, in giving shape to Obama's proposals, was adamant that programmes should be ready to go within the two-year deadline. But that meant that some of the most transformative measures - modernising the electrical grid and developing electric cars - were scaled back because the institutions involved could not handle such vast sums of money in a short timeframe. There are other gaps. Davies would have liked to have seen estimates of the emissions reductions promised by each measure in the package.

In Washington, the plan is often described as a down payment on the new green economy. Ultimate success will depend on whether Congress manages to push through legislation expected this year in three areas: expanding public transport, developing wind and solar energy and moving to cap carbon dioxide emissions.

"You can't just flip a switch on the green economy," said David Foster, director of the Blue-Green Alliance, which combines trade unions and environmental groups.

"But if we do all three, in addition to the down payment, we will be well down the road to getting the green economy really roaring."

As vast sums of money begin to flow into the US economy, and other governments prepare to commit even more, observers around the world will be watching closely to see whether saving the economy can, in fact, also save the planet.