We are on the brink of a revolution: the demise of the fossil-fuel economy. A new deal must jolt us out of orthodox thinking
Every crisis, Sigmund Freud said, is potentially a stimulus to the positive side of the personality and an opportunity to start afresh. Today we are facing two global crises in tandem – the economic recession and climate change. Both are deeply worrying, but what is their relationship likely to be?
Freud’s point has not gone unnoticed by the scientists gathering in Copenhagen this week, nor by political leaders. Following the example of Barack Obama, many have signed up to the idea of a climate change new deal. Investment in low-carbon technologies, the insulation of buildings and public transport, it is reasoned, can also make a key contribution to getting the economy moving again.
Nick Stern, in his celebrated review on the economics of climate change, argues that such measures should make up at least 20% of the funding provided for recovery plans. Obama’s proposals fall some way short of that. But other countries are allocating much more. South Korea, for instance, is devoting two-thirds of its recovery package to such ends.
I support the idea of a new deal and hope it produces the desired double benefit – and if countries manage to reduce their dependence upon imported oil, it would be a triple benefit. Yet the effect that Freud spoke of should galvanise us to thought and action of a much wider scope.
We are on the brink of a major revolution – the demise of the fossil-fuel economy. Now is the time to think through the implications. On the nitty-gritty side, one major concern has to be jobs. A climate change new deal will create new jobs, its proponents argue. I’m not so sure, if by this they mean net jobs – that is to say, larger numbers than existed before. As more energy is produced from low-carbon sources, and energy efficiency increases, some workers in the fossil fuel industries, like coal mining, will be put out of work. Most forms of technological innovation reduce the need for labour power.
Jobs will be created not so much through renewable technologies themselves, but through the lifestyle changes that coping with climate change and energy security will bring about. The emerging economy will be even more radically post-industrial than the one we have now. And it will be up to entrepreneurs to spot the economic opportunities that will come about as it expands – much in the same way as ways were found to revitalise dockland areas when the shipping industry evaporated.
Pondering what form recovery from recession should take must cause us to think seriously about the nature of economic growth itself, at least in the rich countries. It has been known for a long while that, above a certain level of prosperity, growth does not necessarily lead to greater personal and social welfare. Now is the time to introduce more rounded measures of welfare alongside GDP and give them real political resonance. Now is the time for a sustained and positive critique of consumerism which can be made to count politically. Now is the time to work out how to ensure that recovery does not mean a reversion to the loads-of-money society.
The period of Thatcherite deregulation is over. The state is back. Both economic institutions and climate change and energy policy will need active planning, though the mistakes made by previous generations of planners have to be avoided. Take renewables. Technological breakthroughs are required if fossil fuels are to become history, yet how should governments decide which ones to back? How can they cope with the fact that the most radical technological innovations – such as the internet – are often not foreseen by anybody?
We have to find a new role for market-based mechanisms as well. Complex financial instruments are out of fashion, blamed for the economic collapse. Yet we will have need of them again because, properly regulated, they are often the key to long-term investment, rather than a force against it.
Consider the issue of insurance against extreme weather events, such as hurricanes in the Caribbean. Such episodes will become more frequent and intense as climate change progresses. Providing insurance against damage incurred will be a key way of adapting to them – especially for poorer people. The private insurance industry will have to supply most of the capital, since given its many other obligations the state can be only the insurer of last resort.
And then, there’s the granddaddy of the whole thing, globalisation, which has proceeded apace without adequate international controls. Effective regulation of world financial markets is essential for the future. Perhaps it could help pave the way for the collaboration essential to coping with climate change.
A vast amount of re-assessment is necessary before political leaders make their way to the Danish capital in December to agree a treaty to replace the Kyoto protocol. The financial crisis and its aftermath have given a jolt to established ways of thinking that could and should prove massively important. We’re at the end of the end of history.