One of the less expected consequences of Boris Johnson’s firing of Dominic Cummings is that the British prime minister now sees fit to submit op-ed articles to the Financial Times. I’m not complaining; the text is a must-read as it sets out Johnson’s “10-point plan” for a “green industrial revolution”, with which Britain catches up with American “green new deal” and continental “European green deal” ambitions — rhetorically, at least.
How good is it? To start, we should be clear that it is a political aspiration, not a detailed policy proposal — a vision, not a plan. But vision is welcome and necessary: decarbonising the economy is a multigenerational project that can only succeed with a sense of collective direction. For once, Johnson’s unique talent of conjuring alternative realities has a constructive use.
Many of the particular elements of the vision also make a lot of sense. Promoting hydrogen as a zero carbon energy source suits an economy where both extraction and consumption of natural gas play an important role. Carbon capture and storage is a worthwhile future to pursue for the North Sea oil and gas industry.
(We should add that a bet on hydrogen would be much more effectively pursued if the UK was still a member of the EU and could influence continent-wide policy — a point that also holds for Norway which has a similar interest in hydrogen. And there are many other ways Brexit makes a UK green industrial revolution harder, such as disrupting the auto manufacturing supply chains or the link with the EU’s carbon emissions trading system.)
The one hard, significant policy commitment in Johnson’s announcement — to ban sales of solely diesel and petrol-powered vehicles from 2030 — is meaningful. It both vaults the UK to the international forefront on this particular dimension of decarbonisation and is likely to take a big bite out of emissions.
Beyond that, however, a vision without a plan will achieve little. And the promises and commitments made by Johnson, even if they are fulfilled, only contribute part of what is needed to achieve decarbonisation. A good yardstick by which to measure the UK’s — or any government’s — climate policy programme is the IMF’s ambitious advice from last month’s World Economic Outlook.
In my new interview with Gita Gopinath, the IMF’s chief economist, she explains a three-pronged approach is necessary: ambitious public investment to draw in private investment; a significant and predictable rise in carbon prices; and a redistributive mechanism to ensure that the carbon transition is just and does not hurt those who are already worst off. That points in the direction of the “carbon fee and dividend” proposal endorsed by senior US Republicans and German and French government economic advisory bodies.
Johnson’s outline essentially focuses on only the first pillar: investments in new, green and innovative jobs and industries. That is politically understandable: the second and third pillars — carbon taxation and redistribution — highlight that there are costs and losers from decarbonisation, at least in the absence of smart policy. (As Gopinath and the IMF show, with the right three-pronged combination, the carbon transition can actually make the economy bigger than otherwise, so it should be possible to make everyone better off.)
But without squarely confronting these potential downsides, it is less likely that the government will take the measures needed to prevent them. We should remain sceptical, therefore, about Johnson’s “plan” until we see a detailed commitment to a rising path of carbon taxes and an acknowledgment and solution to any regressive distributive effects.
Even the first pillar — public investment — leaves much to be desired. The actual amounts put on the table are smaller than the announced headline figures and are nowhere near what is needed. Worse still are the signs that the UK government is unwilling to commit today to spending plans stretching into the future. Just weeks ago, the Treasury decided against a multiyear spending review because of the uncertainties caused by the pandemic. As I argued then, that was precisely the wrong approach: longer-term planning is a way to reduce uncertainty. That goes for climate change policy too. The more short-termist the government acts behind the rhetoric, the more sluggish and costly the carbon transition will be.
So that’s a score of one-half out of three points. The verdict can only be: right direction, must do better.
Other readables
The FT’s report on the plight of young people in the pandemic lockdowns is another must-read. “Generation Covid” is also a path-breaking project that collects the voices of many of our young FT readers from around the world.
Don’t let the stand-off over the EU’s rule-of-law conditions on common spending overshadow the huge advances made in European budget policy this year.
On both sides of the Atlantic, the push for higher wage floors is gaining support at the highest echelons of policy-making. That is good news.
Numbers news
As I wrote last week, the realistic scale of president-elect Joe Biden’s policy ambitions depends on the outcome of Georgia’s two run-off races for the Senate, which will determine the balance of power in the US Congress’s upper chamber. It would be a steep climb for the Democrats to take both — but in a state where more people voted for Biden than for President Donald Trump, it should not be impossible. The registration and turnout drives of black and other minority voters by Stacey Abrams, a former candidate for governor, and others are part of the reason Georgia turned blue in the presidential vote. But a New York Times Upshot study of precinct-level voting results shows that in the places with the largest shares of black and Hispanic voters, Biden did not make much headway — his margin may even have slipped — compared with Hillary Clinton four years ago. It turns out that voting drives notwithstanding, black voters’ share of all registered voters has only remained constant, and their share of votes cast has fallen since 2012. If that can be reversed in the Senate run-offs, the Democrats stand a good chance.
Source: Economy - ft.com
