The Green New Deal: Easier said than done?

Michael Jacobs - Professorial Fellow and Head of Engagement and Impact, SPERI

The first is political. In the US, where climate politics has become almost entirely partisan, the GND is an explicitly left-of-centre programme being prepared for a post-2020 Democrat President. But in the UK a much broader appeal will be needed. Unless Brexit intervenes, there will still be a Conservative government over the next year when the net zero target and COP26 (whether held in the UK or not) will require a new policy package. With its call for a ‘green industrial revolution’ to create 400,000 new jobs the Labour Party is already well on the way to adopting a GND. But can this also become something the Tories can be persuaded to support? It will need a clever coalition of civil society forces – and possibly some judicious re-labeling – to allow the GND to have both ‘radical’ and ‘moderate’ forms.

The second challenge is institutional. Even if a GND were adopted by government, would it have the capacity to implement it? Much of the discussion about this so far has centred on how a GND would be paid for. While most of the required investment in decarbonisation and wider environmental technologies will come from the private sector, largely mandated by regulatory policy, much will also have to come from public spending. Can this be afforded? There’s been a bit of a distraction here, with proponents of ‘modern monetary theory’ arguing that in times of low inflation there are no effective limits to public spending. In practice, with the budget deficit back to pre-crisis levels and long-term interest rates still at record lows, even mainstream economists acknowledge that there is significant scope for an increase in government borrowing.

The bigger question, in reality, is whether the current institutions of government are up to the job of a GND-style transformation programme. With the Treasury having already let it be known that it opposed the net zero target, and Theresa May’s embryonic industrial strategy uncertain under a new Prime Minister, it is not at all obvious that the British state has the capacity to deliver the scale of investment required. Any GND programme will therefore need to focus as much on institutional as policy reform.

The third challenge is distributional. A cornerstone of the Green New Deal is that it should benefit disadvantaged communities. Some kinds of GND policies have clear potential to do this: a major programme of home insulation, for example, would create jobs right across the country, and could be targeted at under-employed groups. But other policies may be more problematic. As the UK energy system is decarbonised – particularly as fossil fuels used in heating and transport are replaced by renewably-generated electricity – there is a clear risk that energy and transport bills will rise, which unless explicitly prevented will inevitably hit the poorest hardest. As the gilets jaunes protests in France (which were sparked by an increase in fuel tax) have demonstrated, rising costs for households could easily trigger a political backlash, risking the whole initiative being thrown into reverse.

Fourth is the even deeper industrial challenge. Many GND policies, such as investment in renewable energy, will create new ‘green jobs’. But rapid decarbonisation also means the loss and transformation of others. Achieving net zero greenhouse gas emissions will require the near-complete dismantling of the UK’s still sizeable oil and gas industry, with carbon capture and storage its last remaining activity. Our major remaining industrial sectors, including chemicals and motor manufacturing, will need to be transformed. Central to the GND is the idea of a ‘just transition’, in which the workers of such sectors (and the local communities in which they are located) will be protected through a gradual and planned transfer of investment into new sectors and jobs. But there are few precedents for such a transformation occurring in a managed and politically-acceptable way. It will require a depth of industrial intervention, regional policy and political leadership we have not yet imagined.

The final challenge is what might be called the problem of capitalist growth. Most environmentalists support the Green New Deal, but some have warned that ultimately green Keynesianism will not save the planet. If the new jobs and incomes which the GND creates feed back into growth in the regular economy, they will simply cause higher emissions and other forms of environmental damage elsewhere. This is particularly true if GND strategies rest on the same exploitative resource extraction and trading patterns that have fuelled environmental degradation in the global South. While these critiques are unlikely to undermine the immediate political attractions of the GND, they provide a continuing reminder that it cannot magic away the longstanding tension between sustainability and growth in a capitalist system.

There is little doubt that the Green New Deal is an attractive idea. It brings the need for decarbonisation and environmental restoration together with the demand for decent jobs and a just distribution of economic rewards. It defines a key role for the state and a mission for industrial strategy. It offers at once the promise of a new economic paradigm, and an implementable programme to bring to the next UN climate conference. But as these challenges show, there is one thing it definitely shouldn’t be seen as, and that is a panacea.

Read part 1 of Michael’s blog on the Green New Deal here