This was published in Chartist magazine
There is much to admire about the roadmap and key policies that make up the European Green Deal. It has opened up political space across the continent, and across a range of countries, for debates on how economies can adapt to, and prepare for climate breakdown and the loss of biodiversity. Debate in Anglo-American economies on the Green New Deal has largely petered out – buried by the pandemic, the politics of identity, nationalism and protectionism.
Second, the EU Green Deal has set (and the EU is considering raising) binding targets for 40% GHG reduction from 1990 levels by 2030; for an increase in the share of renewable energy to 32% and indicative targets for energy efficiency. Subject to further debate and engagement with member states these targets will be enshrined in law and will apply to the twenty seven countries of the Union. Even while there are fierce debates and differences, with Poland and Hungary as outliers, nevertheless, nowhere else in the world is there a similar level of inter-governmental coordination and cooperation at regional level, with the aim of tackling climate breakdown and biodiversity collapse.
Third, the priority accorded to the climate crisis provides the Union with off-the-shelf policies and targets that could aid job creation and economic recovery from the coronavirus crisis. Meanwhile the increasingly uneconomic extraction of coal will likely mute Polish and Czech political resistance to the Green Deal.
While these are encouraging developments, The Green Deal suffers from three weaknesses.
The first is the failure to set specific carbon-reduction, energy efficiency and renewable energy targets for each country of the Union. The second more serious weakness is the pitifully small sums of money allocated for the immense programme of work required for the radical and urgent transformation of Europe’s energy, transport and land-use systems. The third weakness of the Green Deal is also structural, and can be located in the growing, and increasingly divisive economic divergences between member states. That structural weakness must be addressed for the Green New Deal to be meaningful.
Perhaps the greatest weakness of Mrs von der Leyen’s Green Deal is the dearth of finance it is proposed would be mobilised for this transformational programme. The meagre sums proposed can be explained by the inability of the EU Commission to draw on the power and resources of a central bank to generate the liquidity needed to finance public investment in economic transformation. Instead the Commission is forced to draw on Europe’s existing and limited public and private savings. These include a percentage of the paltry EU budget (barely 1% of the EU’s gross national income) plus savings mobilised by the InvestEU Fund and the EU Investment Bank. The EU Green Investment Plan aims to raise EUR one trillion over ten years. The EIB Group will aim to support €1 trillion of investments in climate action and environmental sustainability “in the critical decade from 2021 to 2030”. These negligible sums to be expended over long time periods are entirely inadequate for the scale of transformation needed if Europe is to achieve Green Deal ambitions.
Contrast these sums to the speed and scale of finance committed by the ECB and European governments in March, 2020 and designed to keep Europe’s private and globalised capital markets liquid. The ECB’s emergency purchase programme (PEPP) committed €1,350 billion to bail out the finance sector and did so almost instantaneously. The interest rate on its main refinancing operations, the marginal lending facility and the deposit facility were quickly lowered to an extraordinary 0.00%, 0.25% and -0.50% respectively. This largesse was supplemented by tax breaks and fiscal spending by member states that drew on present and future contributions (savings) of Europe’s taxpayers. The unprecedented ECB interventions were intended to maintain life support for a European finance sector that was in a comatose state after the Great Financial Crisis of 2007-9. Its lending to these institutions will add to unsustainably high levels of debts owed by financial and non-financial corporations, and has undoubtedly be gambled away on stock markets, on stock buybacks and on other forms of speculation. Green Deal investments by contrast, could expand both private and public sector activity, create jobs Europe-wide. Job creation will both revive the private sector, but also generate the tax revenues needed for repayment of public debt, while at the same time the investment would tackle the climate crisis.
We can afford what we can do, John Maynard Keynes once argued. Today we should add that we can afford what we can do within the ecosystem’s limits. To finance a transformatioin of the European economy away from its addiction to fossil fuels, Europe has public institutions; and strong European economies backed by loyal taxpayers, whose regular tax payments provide the ballast (or collateral) that ensures a strong currency. Given these strengths there is no need for Europe to turn to Wall St. or Frankfurt for financing the Green Deal. Instead finance capital should be subordinated to the interests of the people of Europe, and to the future of civilisation. Once the political will to challenge finance capital is mobilised, Europe will be able to afford what it can do within the limits of the ecosystem.