ENDS Report 432, p. 51, January 2011.
The growth and green agendas are at last converging. How smooth their meeting will be depends on the government’s ability to pursue multiple policies that work with, not against, each other.
A hard lesson from nearly 40 years of environmentalism is that there is no satisfaction in saying “I told you so”. This reflection was prompted by reading the 2011 edition of the World Economic Forum’s Global Risks report. The language is different, but its message would have sat comfortably in any of the seminal books written in the 1970s about the emerging environmental crisis.
The report speaks of the “disastrous impacts” that might result from the “contagion” of risks through “increasingly connected systems”. Long before current technology made everyone familiar with ‘connectivity’, environmentalists were pointing out that ecosystems connect us all. They have been warning the world for 40 years of what bankers have now taught us to call systemic risks.
It goes on to emphasise that “improved global governance is essential” to manage the onrushing avalanche of risks to the global economy. I first recall this point being made in the Blueprint for Survival published in 1972. It was repeated in the Global 2000 report published in 1980. This concluded that: “While limited resources may be a contributing factor [to a world ‘…more vulnerable to disruption…’] in some instances, the primary problem is lack of coordination.”
The WEF report goes on to highlight three “important clusters of risk” to which world leaders need to pay urgent attention. The third, after “macroeconomic imbalances” and the growth of the “illegal economy” is the “water-food-energy nexus”. Bjorn Lomborg, where are you now?
It would have been more accurate to have called it a “water-food-energy-climate” nexus. Climate change is a stress multiplier. If you tackle it effectively the costs of meeting your energy, food and water security needs go up. If you do not, they go up anyway. The only difference is whether they go up today or tomorrow.
It is not hard to imagine the choice that most governments will make. Food security has already been a crucial factor in regime change in Tunisia and Madagascar. As the WEF report points out, dealing with this nexus means that “pursuing multiple goals will become a necessity”.
Governments everywhere have little experience with this. Indeed, one of the more important governments, the US, is constitutionally incapable of it, something which is not only a problem for Americans. As WEF points out, “effective global governance is held back by ineffective decision-making structures at national level”.
What the WEF report amounts to is a plea for an end to policy cannibalism in which policy gains in one area simply annihilate those in another. Increasing the use of carbon-intensive chemicals to counteract losses of agricultural productivity resulting from climate change is one example. Using coal-based electricity to pump water thousands of kilometres to cope with water shortages caused by falling precipitation is another. But there are many more.
Policy cannibalism leaves everyone confused. Consumers are left wondering whether it really is worthwhile altering their behaviour. Businesses, especially those making the long-life, high-capital investments central to untangling this nexus of problems, cannot plan with confidence.
Britain is, by common consent, one of the world’s better-governed nations. But we are far from immune to this disorder. For 20 years successive governments have tried to drive the price of energy down, to deal with competitiveness or fuel poverty concerns, and tackle climate change by driving the price of carbon up. Not surprisingly, they have mostly failed to accomplish any of these goals.
We now have a government committed to being the “greenest government ever”. So, that’s alright then. I do not doubt the prime minister is serious about this goal. It is less clear that his officials have either the knowledge or the will to help him get there.
The government’s top priority is to restore economic growth while retaining the bond market’s confidence. This is clearly essential if we are to avoid regime change in Britain. But it has to do this in the face of exactly those resource constraints set out in the WEF report. Any growth strategy that fails to take account of these pressures will lack conviction and will ultimately fail.
To fulfil the prime minister’s pledge, the growth agenda and the green agenda must be strongly aligned. It is clear that this is possible. The investment needed to drive the transition to a low-carbon economy, for example, will help to insulate Britain from global commodity price shocks and drive technology innovation.
It will also create jobs. It will particularly create jobs and cut business input costs if this investment has a strong initial focus on improving energy efficiency. What is more, those jobs will be well distributed throughout the country and use available skills.
The government’s Green Deal has recognised this potential. But its delivery is bogged down in an arcane dispute over whether or not the proposed Green Investment Bank should be allowed to help finance energy efficiency measures. Much of this opposition seems to stem from the Treasury’s belief that if there were real energy efficiency gains to be had, the market would have discovered them.
Public expenditure constraints mean there will be little money for new roads. But restoring economic growth will increase congestion and thus business costs and that will slow growth. This puts a premium on using the planning system to manage traffic generating development carefully. This will not fit comfortably with the government’s apparent determination to give up on planning anything.
The message from the WEF report is that the growth agenda and the green agenda are at last converging. What it leaves open, and what is not at all obvious in Britain, is whether this convergence will result in a marriage or a crash.