Green Economy

I can’t help but notice the deep discrepancy in the manner with which President Obama is handling two headline issues: Afghanistan and climate stability. In one case, the President has made deliberate use of executive power and perquisite. In the other, he has struck a strangely passive stance. It is a disparity reinforced by the relative budgetary priorities accorded to these two issues.

On climate, the Obama administration has effectively handed the initiative to a gridlocked Congress whose deliberations are marred by the corrupting influence of money. We know how that’s playing out. Corporate lobbyists succeeded in emasculating the House bill to the point where projected cuts in U.S. greenhouse gas emissions by 2020, relative to the internationally recognized base year of 1990, amount to a measly 4 percent. The Senate version looks to be equally uninspiring.

In the process, the administration has allowed its Copenhagen strategy to be shackled by an unenthusiastic Congress. Instead of climate leadership, the dominant spectacle is one of downplaying expectations, as serious action is delayed until some time next year (the approaching U.S. mid-term elections then may force yet another postponement of critical decisions).

Next up: A prime-time speech on urgent climate action?

Now contrast that with the President’s approach to Afghanistan. During the election campaign, Obama made it clear that he intended to pour substantial additional resources into the war. Even before his decision to dispatch 30,000 more soldiers, the number of U.S. troops in Afghanistan had already been increased from about 30,000 at the beginning of the year to 68,000 now.

(There are reasons to believe that military escalation is the wrong policy, and that investments in education, jobs, and sustainable agriculture would be more likely to help stabilize Afghanistan than more soldiers and guns are. But the main point here is not to debate the merits of Obama’s choice, but the striking difference in assertion of leadership between these policy areas.)

You notice that Obama didn’t allow himself to become hostage to Congressional deliberations before making further troop commitments. Unlike on climate, he used a prime-time speech to put down the goalposts in the expectation that Congress will follow suit and provide the necessary additional funds.

This is all reflective of the conventional assumption that matters of war and peace are Presidential perquisite, but that climate policy is not—even though the latter represents arguably a far greater threat to global stability, and thus to U.S. security. It is high time, however, to use the Presidential bully pulpit—the authority and stature that comes with the office—to set the agenda and to marshal public opinion around decisive climate action.

Neither the administration nor Congress seems overly troubled about run-away military spending, but are in comparatively penny-pinching mode when it comes to climate-related budgets.

Imagine, however, if the rapidly rising sums spent on the Afghan war had been allocated to get a green transition of the U.S. economy under way. Even before the West Point speech, the Administration’s fiscal year 2010 request included $73 billion for war in Afghanistan, up from $43 billion in FY2008. A September Congressional Research Service report notes that from fiscal years 2001 through 2010, a total of $300 billion will have been spent on Afghanistan operations.

This is part of a skyrocketing war bill in Afghanistan and Iraq, amounting to a cumulative $1 trillion since 2001. Had even a decent portion of that amount been made available for green purposes, the United States could now rightfully claim global leadership in the struggle against climate change and other environmental ills, instead of busily telling the world what it can’t do.

In late August, my colleague Tom Prugh blogged about a non-capitalist, worker-owned corporation—the Mondragón Corporación Cooperativa (MCC) in Spain’s Basque region. For Americans who are skeptical about European ideas of how to run the economy in a more socially-conscious manner, it may be all too easy to dismiss MCC as yet another crazy idea that will never take root in American soil.

But on October 27, the United Steelworkers (USW)—North America’s largest industrial union—and Mondragón Internacional, S.A. signed an agreement to collaborate in establishing Mondragón-style manufacturing cooperatives in the United States and Canada. These cooperatives are to be governed by MCC’s model of “one worker, one vote.”

MCC has its own—highly regarded—university. Photo credit: Mahaiburuak http://www.flickr.com/photos/30633476@N04/3946745983

MCC is a federation of democratically-run enterprises that produce and sell a range of goods and services (including appliances and machinery needed to produce solar panels). Set up in 1956 in the Basque town of Mondragón, it relies on democratic methods in its organizational structure and is concerned with generating assets for the benefit of its members and their communities, rather than for shareholders. Today, MCC is the seventh largest company in Spain. It has about 100,000 cooperative members in about 250 cooperative enterprises that operate in more than forty countries. (It should be noted that MCC has acquired some companies that are run in conventional capitalist style, although the idea is to convert them to cooperatives in due time. An MCC enterprise in Poland, Fagor Mastercook, has been embroiled in controversy over low wages and anti-union tactics.)

The loss of nearly 6 million U.S. manufacturing jobs over the past decade and the stagnation of real wages across the economy during the last three decades are throwing more and more families and communities into a tailspin. Signing the agreement, USW President Leo Gerard commented: “Too often we have seen Wall Street hollow out companies by draining their cash and assets and hollowing out communities by shedding jobs and shuttering plants. We need a new business model that invests in workers and invests in communities.”

It remains to be seen how well the USW-MCC agreement can be translated into a new U.S. economic model. Even before this agreement was struck, some promising new worker co-op initiatives motivated by the Mondragón experience were started, including the Evergreen Cooperative Laundry and a solar installation service and an industrial-size hydroponics greenhouse, all located in Cleveland, Ohio. If the USW-MCC connection takes off, such initiatives may well multiply—not just in the service sector, but also in manufacturing.

Among the cacophony of voices in the debate over how to avoid full-fledged climate change and green the world economy, two mainstream protagonists are prominent: Stern and Stern. No, they are not partners in a law firm. They are Nicholas Stern—principal author of the widely discussed Stern Review of the Economics of Climate Change, released by the British government in 2006, and Todd Stern—Special Envoy for Climate Change in the Obama administration.

But the two namesakes seem to be headed in opposite directions. Having put the world on notice about the immense economic costs of climate inaction, Lord Stern acknowledged last year that his 2006 report was, if anything, too cautious. Now chairing the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, he continues to warn governments that delaying far-reaching action to reduce greenhouse gas emissions is not an option. And in an April 2009 report published jointly with the Potsdam Institute for Climate Impact Research, he laid out a strategy for greening the economy at a time of deep financial and economic crisis.

Todd Stern has impressive climate-related credentials. He served as Bill Clinton’s senior White House negotiator at the Kyoto Protocol negotiations, advised Hillary Clinton on environment and climate during her presidential campaign, and continued to work on these issues at the Center for American Progress prior to his current post.

But as the administration’s climate front man, Stern has repeatedly downplayed expectations. On climate, “yes we can” seems to have morphed into “no we can’t.” Earlier this year, he rejected calls for industrialized countries to cut their emissions by 40 percent below 1990 levels by 2020. Todd Stern not only opposed such cuts as “not feasible” for the United States, but strikingly called them “unnecessary.”

Todd Stern’s statements reflect the Obama administration’s decision to let Congress be the de facto driver of climate policy. Predictably, that has led to stalemate and back-pedaling as special-interest dynamics and the influence of money in politics take precedence over the demands of climate science. But if the United States comes to Copenhagen in December empty-handed, deadlock and mutual recriminations may result.

To be fair, similar pressures are on display in other countries. Europe has long claimed the mantle of climate leadership, but has grown reticent when it comes to committing resources for adaptation in the developing world. Following the September German federal elections, the incoming governing coalition is considering pruning the country’s generous subsidies for solar energy development, in effect slowing the transition to a low-carbon economy. India—belatedly recognizing that pointing to Western countries’ historic guilt in pushing the world to the edge of the climate abyss will not save it from the repercussions of climate chaos—is attempting to set its Copenhagen compass even as an intense internal debate unfolds among climate “stonewallers,” “progressive realists,” and “progressive internationalists.”

The “Tale of Two Sterns” plays out worldwide. But there is only one planet, and it will have the last word. Will Planet Earth be stern with us?

When people think about the emerging green economy, the vision is typically one of leaving behind the old dirty industries in favor of new landscapes dotted with gleaming “clean” factories. Sometimes, however, there is really no leaving behind old sites, but rather a redevelopment and conversion of them.

Suitable locations for wind farms, solar factories, and other facilities are hard to find. First, after two centuries of industrialization, the built environment leaves few untouched places. Second, conservationists worry that a new wave of factories will encroach on remaining scraps of wildlife habitat. Finally, NIMBY sentiments can stymie even the greenest of investments—witness the opposition to offshore wind turbines at Cape Cod.

It is not surprising, then, that there is increasing interest in locating wind farms and solar plants at so-called “brownfields”—abandoned and often contaminated industrial sites, landfills, and mines. Clean-up and redevelopment efforts will take considerable time and investment. But the advantage of many brownfields is that they are typically already connected to infrastructure such as roads or the power grid, and thus tied into the local, regional, and national economy.

For example, in 2006, wind turbines started operating at a former Bethlehem Steel mill at Lackawanna near Buffalo, New York. The wind farm, Steel Winds, currently generates enough electricity to power 9,000 homes, with an expansion planned.

In Newton, Iowa [PDF], the site of a former Maytag washer and dryer factory was redeveloped into a wind energy manufacturing hub. TPI Composites, a wind turbine blade manufacturer, now makes fiberglass blades there. And Trinity Structural Towers opened a plant in February 2009 to produce steel and concrete wind turbine towers.

In a twist, renewable energy projects can also provide the power needed to carry out clean-up of contaminated sites, to render them safe for alternative use. This is happening at several sites in Arizona, California, and Colorado.

This “brownfields to greensites” transformation holds major potential. Teaming up, the Environmental Protection Agency and the National Renewable Energy Laboratory have mapped close to 4,100 contaminated sites in the United States—stretching over 5.5 million acres or about 0.2 percent of the country’s total territory—that could be utilized for wind, solar, or biomass development. Fully developed, they could eventually produce as much as 950,000 megawatts, or more than the country’s total electricity consumption. Additional such sites are being identified with geothermal potential.

For communities that fell victim to deindustrialization when steel mills and other manufacturing plants shut down, the redevelopment of brownfield sites also offers some badly needed new employment. Still, it will take time before a significant portion of the lost jobs is replaced. The Lackawanna steel mill once employed thousands. The Steel Winds site currently offers 35 jobs in construction, operations, and maintenance. (The jobs building the wind turbines and components are elsewhere.) Similarly, the old Maytag factory offered incomes to some 1,800 people. TPI Composites and Trinity Structural Towers have to date created 470 jobs.

As the renewable energy sector expands, job numbers will climb. Another concern is that the new jobs aren’t necessarily always well-paying jobs. High Road or Low Road? Job Quality in the New Green Economy [PDF], a February 2009 report by Good Jobs First, points out that TPI Composites—despite generous state subsidies—pays its workers in Newton, Iowa, only an average of $13.47 per hour, far below the $19 that Maytag used to pay.  (Trinity, by contrast, is paying an average of $18 per hour.)

This does not mean that renewable job development isn’t worth pursuing. Many renewables companies offer well-paying jobs. But it does mean that local, state, and federal governments need to pair business incentives with a requirement for decent wages and overall strong labor standards. Marrying environmental and social needs can be a win-win strategy.

In the discussion on how best to address climate change, carbon pricing is regarded as a principal tool to “internalize” the full costs associated with fossil fuel use. Higher prices will lead individuals to rethink their purchasing decisions. Thus, they may choose a more fuel-efficient car, drive less, mind their thermostat settings in winter and think whether and when to switch on the air conditioning in the summer. And so on.

To the extent that this helps to make consumers more discriminating and smart about their choices, it is all for the better. But a strategy that is driven solely or primarily by market signals can quickly translate into hardship, as skyrocketing home heating bills in the United States in 2008 demonstrated. In the United States, and maybe elsewhere as well, full-cost pricing and current socio-economic trends seem to be on a collision course.

Over the past quarter century or so, the gap between rich and poor has widened dramatically. More than a quarter of all U.S. workers earned poverty level [Excel] hourly wages in 2007. Inflation-adjusted average hourly earnings [Excel] were slightly above $17 in 1978, a level not seen again until 2002. From a perspective of simple economic justice, wages should be on a par with productivity gains—something that has not been the case [Excel] in the United States for at least 20 years now.

Some will say that higher disposable incomes associated with rising wages will only further drive consumption. While that may be true, stagnating wages as such certainly did not lead to wiser consumption decisions. Many families balanced their books by taking on growing debt—in part to support questionable purchasing decisions. (One can debate whether these are the consequence of innate foibles or insistent advertising that insinuates that happiness is a function of possessing the latest gadgets).

At a time of both tremendous global economic tumult and gathering climate catastrophe, will people be forced into false tradeoffs—choosing economy over ecology, or vice versa? Will sustainability happen at the cost of growing disparities and hardship?

Market signals can and should play a role in the move toward a sustainable economy. But environmental sustainability requires social sustainability. People who don’t have to constantly worry about making ends meet will be more likely to accept that prices should tell the ecological truth.

Environmentalists need to be as aware of the social dimensions of sustainability—well-versed in issues like living wages or occupational health and safety—as labor representatives are mindful of the environmental dimensions. Luckily, there are indications of growing recognition of mutual concerns, as well as cooperative efforts, from the Apollo Alliance and the Blue-Green Alliance to the very well-attended “Good Jobs Green Jobs” conferences in Pittsburgh (2008) and Washington, DC (2009).

The U.S. “cash-for-clunkers” program—formally known as the Car Allowance Rebate System (CARS) Program—has apparently been successful far beyond what Washington policy-makers expected.  The $1 billion set aside for the program ran out in a matter of days, leading Congress to vote an additional $2 billion for it. Government data indicate that the average rating for the new car purchases that were stimulated by the program was 25.4 miles per gallon, compared with an average of just 15.8 mpg for the surrendered clunkers.

For a nation that for many years defiantly purchased clunkers … err, SUVs, in the face of worrisome resource and environmental trends, that’s not a mean feat to accomplish.  Still, the 7 million tons of carbon emissions avoided over the next decade by trading in a quarter million gas guzzlers are equal to just 0.04 percent of total U.S. emissions of 16 billion tons from gasoline-powered vehicles over the same period of time.

False God? Image courtesy of billaday

The United States will have to keep working hard to reduce the environmental footprint of its transportation system, catching up to Europe, Japan, and even China in fuel economy.

France, which already has far more efficient vehicles than the United States, in December 2007 adopted an “ecological bonus-malus” program [PDF; in French] for new car purchases to further reduce the carbon footprint of cars. The program offers a bonus of €200–1,000 ($275–1,380) for vehicles emitting a maximum of 130 grams of carbon dioxide (CO₂) per kilometer, and €5,000 for those emitting no more than 60 grams. (More efficient cars emit less CO₂).

But the program also brings in revenue, and provides an incentive not to purchase less efficient cars. Vehicles emitting more than 160 grams of CO₂ are subject to a charge of €200–2,600 ($275–3,580). As a result, the share of newly registered vehicles that emit less than 130 grams per kilometer rose from 31 percent to 44 percent in a single year.

The French experience offers some good lessons for the United States.  Automobile manufacturers would have far greater incentive to meet and surpass corporate average fuel economy (CAFE) standards if car buyers could be persuaded to consistently seek out the most efficient models.  As under the French approach, buying a gas guzzler would attract a hefty fee, while purchasing a top-performing vehicle would be supported either with cash incentives or tax benefits.

Further, instead of only imposing average fuel economy requirements, the government should consider outlawing sales of any vehicle that does not meet a minimal mileage requirement. This floor could then be raised with each passing year.

There is no shortage of effective measures to reduce the climate footprint of vehicles.  Ultimately, however, it’s even more important to work on reducing the heavy reliance on cars and to promote public transit, rail, and walkable communities.

We recently posted a guest opinion piece in our Eye on Earth series, “U.S. Climate Funds Increase, Future Levels Remain in Doubt.” The author, Miriam Pemberton of the Institute for Policy Studies, observed that in fiscal year 2008, the U.S. federal government had spent $88 on the military for every dollar spent on averting full-fledged climate change.  Because climate disruptions may well translate into fresh or aggravated conflicts down the road, investing in climate stabilization is also smart security policy.

Under the Obama administration’s FY 2010 budget request, this spending ratio improved to 65 : 1.  And because the economic stimulus bill passed in February contains a raft of green programs, the gap was further reduced to 9 : 1.  (The problem, however, is that the American Recovery and Reinvestment Act is a one-time measure. The next budget cycle will most likely return us to greater budget disparities.)

Make Levees Not War

The United States accounts for more than 40 percent of the $1,464 billion the world spent on arms and soldiers in 2008, and so, in principle, has the most ample room for shifting resources to support a vigorous climate policy.  But how are other nations faring?

Like climate policy itself, information about available programs and budgets is still highly fragmented, often divided among different government ministries with different, perhaps even contradictory, missions.

India is busy formulating its National Action Plan, but funding for key aspects like the government’s solar investment plan remain uncertain.  Meanwhile, the government upped its military spending by 34 percent over last year.

Germany’s FY 2008 climate budget ran to €3.3 billion ($4.7 billion), almost double the €1.5 billion in 2005. But compared with the €29.5 billion ($42 billion) allocated to the Ministry of Defense, that’s still a ratio of 9 : 1.

The situation in Japan is similar.  In FY 2009, ¥432 billion ($4.6 billion) in climate-related programs are still dwarfed, about 11 : 1, by ¥4,774 billion ($50 billion) for the military budget.

It is becoming ever clearer that success at the Copenhagen climate conference in December will significantly ride on making sufficient funding for climate mitigation and adaptation available.  Rich nations, historically responsible for the bulk of greenhouse gas emissions, have been tight-fisted.  By reassessing their budget priorities, and reducing the astronomical sums devoted to armaments, they can facilitate a Copenhagen deal.