March 16, 2009 2:00 am
Around the world, a massive injection of cash is being prepared by governments desperately trying to resolve the financial crisis and prevent the recession turning into something worse.
The economic stimulus, amounting to more than $2,800bn, is being compared with the "New Deal" programme of spending on national infrastructure initiated by Franklin D Roosevelt in the 1930s, in his attempt to pull the US out of Depression.
But this time, many of the governments involved are looking to focus large slices of their funds on projects that will help change the footing of the world economy, away from its high consumption of fossil fuels to a low-carbon basis.
Politicians and businesspeople have begun to refer to this spending as a "green new deal". Hundreds of billions of the public spending dollars are expected to be devoted to green projects, and governments hope that this will stimulate private sector spending too.
Achim Steiner, executive director of the United Nations Environment Programme, says this is a vital opportunity: "The flip side [of the financial crisis] is the enormous economic, social and environmental benefits likely to arise from combating climate change and re-investing in natural infrastructure - benefits ranging from new green jobs in clean tech and clean energy businesses up to ones in sustainable agriculture and conservation-based enterprises."
The phrase "green new deal" means different things in different countries, but broadly it refers to the argument that if we direct the stimulus spending into building more of the same kind of infrastructure that we already have, such as coal-fired power plants and petrol-guzzling vehicles, it will result in ever-increasing greenhouse gas emissions, provoking a global warming crisis. But if the money is used instead to spur the building of "green" technology such as renewable energy and public transport, this will create jobs and infrastructure of the kind needed to set the world on the path of low-carbon economic growth needed.
For several months, the UN has been working furiously to finalise its proposal for "a global green new deal", to be presented at the meeting of the G20 countries in London early next month.
Pavan Sukhdev, a senior banker from Deutsche Bank who has worked on the green new deal with UNEP, explains the urgency of the issue: "Investments will soon be pouring back into the global economy - the question is whether they go into the old, extractive, short-term economy of yesterday or a new green economy that will deal with multiple challenges [such as climate change, water scarcity, pollution and the need to feed a growing population] while generating multiple economic opportunities for the poor and the well-off alike."
What will a green new deal look like? Energy efficiency is a quick win for any such project as it requires large numbers of people from the construction industry - hard hit by the recession - to refurbish buildings.
Another prime sector for investment would be carbon capture and storage (CCS) technology, which has been much discussed as a way of allowing countries to continue to burn coal without harming the climate.
But at present there are no full-scale operational coal-fired power plants in the world incorporating CCS. The costs are high - about £1bn per power station - and government help has been slow in coming. The prize, for the company and country that mastered the technology, would be huge, as the technology could be replicated in hundreds of locations.
The idea of building a "smart grid" for electricity has also been raised in the US and the UK as a way of improving the efficiency of power generation. Smart grids are more efficient as they make it possible to balance the supply of electricity with demand very quickly so that it is no longer necessary to keep large numbers of fossil fuel plants on standby, generating excess emissions. They also make it easier for small suppliers of electricity, such as householders or small renewable energy installations, to sell back to the grid the power they have generated.
A revival of nuclear electricity may also result from a green new deal, if governments devote resources to subsidising new plants, training employees or guaranteeing to clean up the resulting nuclear waste.
At present, according to an analysis by HSBC, the world stands to devote $430bn, or about 15 per cent of the $2,800bn stimulus, to green measures. However, this disguises wide variations - China is devoting more than a third of its stimulus to green measures, if the rail investments are included, according to Nick Robins of HSBC. But Japan is channelling only 2.6 per cent of its stimulus to green projects, and the UK only about 7 per cent. In the US, the figure is 10 to 12 per cent.
Lord Stern of Brentford, author of the landmark Stern review of climate change, has estimated that countries should be spending about 20 per cent of their stimulus on green measures, in order to stave off the worst effects of climate change and lay the foundations for green growth.
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