Edward B. Barbier

 

On his book A Global Green New Deal: Rethinking the Economic Recovery

Cover Interview of September 06, 2010

A close-up

Many observers of economic policy enacted during the 2008-9 recession will have noted that some governments included many investments in energy efficiency, clean energy, waste management and other environmental improvements as part of their fiscal stimulus efforts.  Some people would argue that such measures, popularly referred to as “green stimulus,” were an important step in initiating a global green recovery.

Unfortunately, such a perception is misleading—the book’s Chapter 1 explains.

It is true that a unique feature of the global policy response to the 2008-9 recession is that, as part of their efforts to boost aggregate demand and growth, some governments adopted expansionary policies that also incorporated a sizable “green fiscal” component.  South Korea and China devoted large chunks of their financial stimuli to green projects.  The US included a sizable green fiscal component as well.  By July 2009, over $460 billion had been spent globally by governments on green measures, and currently, the total is over $520 billion.

Although the total amount spent on green stimulus seems impressive, and is a promising start towards a GGND, it is not sufficient to launch a global green recovery.

First, only a handful of economies—almost exclusively members of the G20—devoted a significant chunk of their total fiscal spending to green stimulus; most were cautious about making low-carbon and other environmental investments during a recession, and some did not implement any green stimulus measures at all.

Second, fossil fuel subsidies and other market distortions, as well as the lack of effective environmental pricing policies and regulations, will diminish the impacts of G20 green stimulus investments on long-term investment and job creation in green sectors.  Without correcting existing market and policy distortions that under-price the use of natural resources, contribute to environmental degradation, and worsen carbon dependency, public investments to stimulate clean energy and other green sectors in the economy will be short lived.  The failure to implement and coordinate green stimulus measures across all G20 economies also limits their effectiveness in “greening” the global economy.

Finally, the G20 has devoted less effort to assisting developing economies that have faced worsening poverty and environmental degradation as a result of the global recession.  Nor has the G20 taken a leadership role in facilitating negotiations towards a new global climate change agreement to replace the Kyoto Treaty that will expire in 2012.

As argued in Chapter 11, by failing to adopt a comprehensive GGND strategy the G20 and the world economy is also missing the opportunity to address global structural imbalances and chronic debt.  A global green recovery strategy of reducing carbon dependency and improving energy security may help to control both the large current account deficits incurred by major oil-importing economies, such as the United States, and to reduce the trade surpluses of fossil fuel exporting economies.  Increased clean energy investments from domestic and overseas sources of financing would also reduce the “savings glut” of Asian and other emerging market economies, and help them shift from labor-intensive export goods to skill, capital and technology-intensive production.