Tonight Channel 4 will host the first ever televised election debate on climate. It comes after a year in which climate change has become increasingly prominent in UK politics, from Extinction Rebellion to the devastating floods in Yorkshire in recent weeks. Just a few days ago, the Oxford Dictionary declared ‘climate emergency’ word of the year – and it looks as though the climate crisis could become a decisive issue in this election.
In Labour’s manifesto, they announced that they would invest around £25 billion every year between now and 2030, in order to drastically cut the UK’s carbon emissions. The Conservatives, Liberal Democrats, SNP, Greens and Plaid Cymru have also announced climate spending plans in their manifestos.
It’s great that we can finally have a discussion about the role of the state in climate action. And it’s no secret that the transition to net zero emissions is going to mean spending big. Commentators like the IFS have been quick to pour cold water on Labour’s spending plans – and more criticism of the cost of fighting climate chaos is sure to follow.
The private sector will play a big role in funding the transition to a zero carbon economy, but private finance cannot do it alone. Markets by themselves aren’t equipped to address social injustice and have little incentive to support the workers, communities and places whose livelihoods would be most directly affected by a poorly managed transition.
There is also greater risk that the costs of the transition will fall on the less well-off in society and increase inequality – for example through higher everyday energy bills. Finally, a big question is whether the private sector should be allowed to skim off the top and profit from important public goods like green infrastructure projects.
So government has to have a role. Not everyone is calling it the same thing but putting government at the heart of the crisis response is the essence of a Green New Deal, which the New Economics Foundation (NEF) and others first called for over a decade ago.
A Green New Deal would be a state-led investment programme aimed at tackling environmental breakdown head on – with a particular focus on rebalancing the economy and targeting the people and places that most need a socially just green transition. It places the state firmly at the heart of the climate response, in a way we have almost forgotten how to do after decades of neoliberal economic policy.
So, how do we fund it? Let’s be clear up front that it’s hard to think of many better candidates for public spending than building a thriving, productive economy that helps deal with the increasingly ruinous climate crisis. A liveable planet is obviously ‘priceless,’ but in any case many of the investments that come with a Green New Deal are likely to more than pay for themselves.
At NEF we’ve found that there are at least five ways the next government could fund a Green New Deal.
Borrowing gets a bad rap but it has never been cheaper for the UK government to borrow than it is today. The world is awash with trillions of pounds of savings – there is what economists call a savings glut. Financial markets are looking for safe places to store their money and want to lend to governments. Leading economists have explained that a one off increase in debt will also not require higher taxes in the future.
Tax is a vital tool for making sure the right people are paying for climate action, that pollution is discouraged, and that clean economic activity is given the leg up that it needs. In the UK, we tax wealth much less than we tax income. So we’ve got significant scope to raise taxes on the wealthiest, create more equality and create room for government to invest in a Green New Deal.
According to the European Commission the UK has the biggest fossil fuel subsidies in Europe. Many of them could be scrapped and redirected towards decarbonising the economy.
And the government should make more use of the Bank of England. The Bank can lend to the government at cheap rates and help lower its long-term borrowing cost, while also encouraging private lenders to move their money away from environmentally damaging activities and towards sustainable ones.
When governments invest this can help to create and shape new markets which will lead to new jobs, more innovation, and higher standards of living. This can lead to yet more investment and jobs, helping spark a virtuous cycle (what economists refer to as ‘multipliers’).
All important government programmes cost money, from educating our children to funding the NHS. Responding rapidly to climate breakdown in a socially just way is as important as they come. The costs of inaction in climate terms alone will be staggering.
The Green New Deal will end up paying for itself, create millions of new jobs, raise living standards, and tackle climate change. When wars need to be fought, taxes cut, or banks bailed out governments can somehow find the money. Whether we can build a Green New Deal is a question of political choice, not whether there is enough funding available. So the question of feasibility is no longer about if; but about how far, how fast and when.