The world is adversely affected by severe financial crunch which has been of unprecedented nature for the post-War generation and there seems no immediate solution to tide over this crisis. Many governments in the developed and developing countries are adhering to bail-out measures for the industrial and banking sectors along with other affected sectors of the economy to extricate them out of the crisis. Many economic pundits agree that it could prove a short-sighted move and not a permanent solution.
In the thick of this crisis, former American Vice President Al Gore has suggested that current financial crisis can be a gateway to tomorrow’s environmentally responsible economy.
In his opinion, “We need to stop bailing on the financial crisis and bail in green energy. Green revolution is the solution to the financial crisis.” Asserting that as the solution is worthy of greater attention from political leaders, Gore suggests that the planet’s environment crisis is akin to the current financial one, but with proper investment could lead to a vast, growing and sustainable new economy.
The green revolution is the solution to the financial crisis and there exists a close interconnectedness between the national security crisis, the debt crisis and the climate crisis.
The time has come to think differently about the future, in particular with an understanding that consumerism and growth had taken its toll. Viewed in a broad perspective, everything has a limit – be it human body or earth’s resources. We have to understand the limits that define our reality. We are exceeding those limits.
Ban Ki-moon, UN Secretary General opines that it not time to ask as to we can afford to tackle climate change amid the pressures of the global financial crisis, but the better question is as to how we can afford not to. While suggesting to put aside the familiar arguments — that the science is clear, that climate change represents an indisputable existential threat to the planet, and that every day we do not act the problem grows worse, he instead calls for making the case purely on bread-and-butter economics.
At this critical juncture when the global economy is sputtering, there is dire need to maintain dynamics of growth. At a time when unemployment in many nations is rising, there is a need to generate new jobs. At a time when poverty threatens to overtake hundreds of millions of people, especially in the least developed parts of the world, there is urgent need for ushering in promise of prosperity.
Economists at the United Nations have called for a Green New Deal — a deliberate echo of the energizing vision of United States’ President Franklin Roosevelt during the Great Depression of the 1930s.
It is noteworthy that the UN Environment Program has recently launched a plan for reviving the global economy while dealing simultaneously with the defining challenge of climate change.
The plan calls upon world business and political leaders, including the new US president, to help redirect resources away from the speculative financial engineering at the root of today’s market crisis and into more productive, growth-generating, and job-creating investments for the future.
This new “Green Economy Initiative”, backed by Germany, Norway, and the European Commission, arises from the insight that the most pressing problems we face are interrelated. Rising energy and commodity prices helped create the global food crisis, which fed the financial crisis. This, in turn, reflects global economic and population growth, with resulting shortages of critical resources — fuel, food, and clean air and water.
The commingled problems of climate change, economic growth, and the environment suggest their own solution. Only sustainable development — a global embrace of green growth — offers the world, rich countries as well as poor, an enduring prospect of long-term social well-being and prosperity.
It is a happy augury that people throughout the globe are gradually awakening to the new ground realities. There is no denying the fact that people have experienced great economic transformations throughout history: the industrial revolution, the technology revolution, and the era of globalization. The world is probably on the cusp of another revolution — the age of green economics.
Past couple of years has seen growing investment in green projects. In 2007, investment had been pouring into new renewable-energy and fuel-efficiency technologies in ‘Silicon Valley’ in California. The venture capital firm that underwrote Google and Amazon, among other archetypal entrepreneurial successes, directed more than US$100 million ($152 million) into new alternative energy companies in 2006 alone.
It is noteworthy that China has emerged a world leader within a short span in wind and solar power, employing more than a million people. Green capital investment in China was expected to grow from US$170 million in 2005 to more than US$720 million in 2008. At the global level, the UNEP estimates that investment in low-greenhouse-gas energy will reach US$1.9 trillion by 2020. The ongoing financial crisis may slow this trend; nevertheless capital is likely to continue to flow into green ventures.
Undoubtedly investment in green projects is seed money for a wholesale reconfiguration of global industry and its practical expression is becoming discernible. More than two million people in the advanced industrial nations are currently engaged in renewable energy. Brazil’s bio-fuels sector has been creating nearly a million jobs a year. Economists estimate that India, Nigeria, and Venezuela, among many others, could go the same way.
In the coming years, environmental technology is expected to quadruple in Germany, reaching 16 per cent of manufacturing output by 2030 and employing more people than the auto industry. Mexico already employs 1.5 million people to plant and manage the country’s forests. According to UN Secretary General, Governments have a huge role to play. With the right policies and a global framework, countries can generate economic growth and steer it in a low-carbon direction. Handled properly, our efforts to cope with the financial crisis can reinforce our efforts to combat climate change. In today’s crisis lies tomorrow’s opportunity — economic opportunity, measured in jobs and growth.
It is noteworthy that business community in many parts of the world has started demanding clear and consistent environmental policies. It is also the reason that global companies like General Electric and Siemens are betting their future on green. However, it is important that the global public recognize this fact, perhaps nowhere more so than in the US.
With a sense of urgency bordering on desperation, the International Energy Agency has been calling for radical changes in the way the world drives its cars, its factories and, indeed, the global economy.
But the financial crisis plunging the world into recession right now has caused a wave of doubts, second-guessing and backsliding among many political and business leaders. Italy and several Eastern European states have threatened to sink previously agreed upon European Union initiatives. With bank collapses, home foreclosures and unemployment on the rise, and the public coffers drained by bailout packages, even America’s vaunted venture capitalists are getting cautious. A few months ago, many were ready to invest in huge green-technology projects. Now they say they’re scaling back if, indeed, they can get the money together at all. China’s leaders, after what seemed a crisis of environmental conscience during the Beijing Olympics, may be inclined to dispense with their qualms as they see their economic growth drop from double digits to single ones.
But there are also powerful voices being raised amid the din of despair, saying that now is precisely the time to seize the initiative and launch that “global revolution” the IEA is calling for. And not just because it will stave off disasters two or three decades away, but because it can provide the impetus to pull the global economy out of the slump it’s in now and put it on a more solid foundation than it’s had in at least a generation. British Prime Minister Gordon Brown, French President Sarkozy and American President Barack Obama have taken up the cause of what United Nations Secretary General Ban Ki-moon called a “green New Deal” that would rebuild and reshape the economy of planet Earth in ways reminiscent of the programs that President Franklin Roosevelt used to revitalize the economy of the United States during the Great Depression.
It took a great war, and all the military industries that fed the carnage, to bring America out of the Depression. But to a surprising degree, the world economy has been riding the strength of its hottest sectors ever since. By the 1990s, it was the rise of the Internet and the network economy, which collapsed in the dotcom bubble and gave way to housing and the financing that paid for it. In each of these recent cases it was the market that discovered and promoted a new engine for growth—creating millions of jobs and trillions in profits worldwide. Between 1996 and 2000, the tech sector created 1.6 million new jobs, according to Moody’s Economy.com—roughly 14 percent of new U.S. job growth. In this decade, the financial sector accounted for a lion’s share of U.S. corporate profit, while housing accounted for a staggering 40 percent of new U.S. job growth. Now, those two stalled drivers are leading producers of unemployment: Goldman Sachs, the royal house of finance, announced a 10 percent staff cut last week.
The world, simply put, needs a new economic driver, a new hot growth industry. And with financial markets down one-third or more for the year, even once stalwart capitalists are now willing to entertain the idea that perhaps the government must play a greater role in sparking growth and job creation. Proponents of the 21st century’s New Deal argue that massive public investments and fiscal incentives can lay the groundwork for the private sector to develop whole new industries and create millions of jobs in the near term, and, oh, by the way, save the planet in the medium term. “You are not just putting money into hot paper or into a financial-services sector that destroys itself,” says Oliver Schäfer, policy director of the European Renewable Energy Council. “You are investing in clean technology, which is real business.”
Indeed, in 2008 the promise of jobs was a stronger incentive to go green than the threat of ice caps melting and coastal cities drowning in 2018 or 2048. In the euro zone, for instance, unemployment is expected to rise from 11.3 million to 14.5 million by the end of 2009 year, pushing the rate up from 7.5 to 9 percent. In the U.S. the rate is 6.1 percent, but is expected to push toward 8 percent by the end of 2009, the highest in 25 years. Bill Gates, a man who knows a thing or two about job creation, predicts unemployment could reach as high as 9 percent. Already in the first nine months of 2008 some 760,000 people lost their jobs, and the total ranks of the unemployed had swollen from 7.3 million to 9.5 million.
Such are the hopes for green industries that Japanese Prime Minister Taro Aso talks of “a great opportunity for new growth” and vows that “we will achieve the low-carbon society that is compatible with growth ahead of the rest of the world.” Tokyo’s ministry for trade, economy and industry says it wants to build a new industrial infrastructure by banking on more efficient use of energy and innovative technologies.
The U.S. Congress endorsed a green response to the global crisis when it demanded provisions for developing renewable energy supplies as a condition for approving the massive financial rescue package in October. And the political platforms of both the major presidential candidates note the promise of green initiatives. Republican John McCain may have made a stump-speech mantra of the phrase “drill, baby, drill” [for oil], but his official position is that “the U.S. must become a leader in a new international green economy.” Can the rest of the world be persuaded to take even more dramatic steps? What of countries like Poland, which produces 94 percent of its electricity from coal, or China, which pumps more carbon dioxide into the air in eight months than the European Union is likely to save in the next 12 years with all its programs to reduce emissions 20 percent by 2020? Complicated schemes to price carbon emissions and trade carbon credits, some of which are in place, may provide a useful mechanism. So might the costly and almost entirely untested schemes to capture and store the carbon dioxide produced by power plants and factories.
The governments and international business community is so engrossed in devising measures to wriggle out of the financial quagmire that they do not appear serious about the dire predictions of the world’s scientists and the doomsday scenarios on computer models that it will allocate trillions of dollars just to meet those postulated challenges. What governments might do, and some certainly will do, however, is spend huge sums soon to kick-start their economies and create millions of jobs. “The nation is asking for action, and action now,” said Franklin Roosevelt when he took office in 1933 and launched the New Deal. Today the global economy—the planet itself—is asking for the same thing with slight modification based on green solution.
By Dr. Arvind Kumar, Article Published in SAR Economist March 2009 Issue
