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Economic stimulus programs should think green (Canberra Times)

Don Henry & Sharan Burrow

As the Government prepares to spend up big to stimulate the economy out of the looming recession, what lessons from the current economic crisis should inform our response?

Two points are increasingly obvious. First, apparent economic growth can mask deep instability if an economy rests on a dubious foundation of debt-driven consumption, the run down of environmental capital and erosion of social resilience. As Thomas Friedman put it recently, if you jump off an 80-storey building, you can convince yourself you are flying for 79 storeys, but it won't soften your landing at all.

Second, the credit crisis has led to a rapid reappraisal of government's role in leading the economy.

Intelligent government policy must deliberately foster private-sector activities that provide multiple long-term benefits and discourage those that are excessively risky or destabilising. It follows from these insights, of which we have been so painfully reminded recently, that we must embed environmental and social integrity at the very heart of our economic policy, including our response to the economic downturn.

We can emerge from this period as a stronger and more resilient economy ready for the challenges that the future may present. Economists say further government spending is needed to keep the economy moving.

Prime Minister Kevin Rudd has already committed $10billion. This stimulus package can either exacerbate the climate crisis or help us to solve it. It depends how it is spent. Directed wisely, this stimulus could be the basis for a “green new deal” for Australia, leading to long- term prosperity while protecting our environment.

We can take our cue from governments around the world that are carefully fostering green industries and sound infrastructure investments, not simply stimulating undirected consumer expenditure.

US President-elect Barack Obama has identified green-collar jobs as a priority, aiming for five million new jobs in clean energy industries alone. He has committed to retrofit one million homes annually to make them highly energy efficient.

This is smart environmental and economic policy: green industries are witnessing strong growth, despite the troubled world economy. Global carbon markets are up 81 per cent to $US87 billion ($A134 billion) in the first nine months of this year, while other markets have plummeted.

The United Nations projects a doubling in green industries to $4.2 trillion annually by 2020.

British climate economist Lord Stern recently identified the opportunity in this economic downturn to promote investment in efficiency and clean energy to boost Britain’s economy. And China is doing much more than talking about green jobs. Its recently announced $870billion stimulus package is carefully targeted towards projects that enhance the environment and society, including renewable energy, rail transport and rebuilding areas affected by the Sichuan earthquake.

In light of the multiple long-term benefits China can expect from its stimulus package, Australia’s initial response will do little to advance our long-term environmental and social goals.

Cash in consumers’ hands can be spent on imports or other activities that provide little in the way of sustainable advantages. Germany created 25,000 jobs and sustained 116,000 existing jobs by retrofitting some 200,000 apartments from 2002 to 2004.

Australia could do the same for our own buildings’ trades by focusing economic stimulus on energy-efficient renovations rather than the poorly- targeted First Home Owners’ Grant scheme, which may only exacerbate housing affordability issues.

A joint ACF-ACTU report launched recently, Green Gold Rush, made a first attempt at quantifying the green jobs opportunities for Australia. It identifies six key green industries renewable energy, energy efficiency, sustainable water industries, biomaterials, green buildings and waste recycling that with appropriate industry policies and private investment could grow an additional 500,000 green jobs by 2030 and take on a significant proportion of global market share.

Australia has a lot to gain, but can also very quickly miss the boat. In recent years, we have lost jobs and promising businesses overseas: fuel cells to Germany, solar power to China, solar thermal to the US, wind turbines to the European Union and waste industries to Britain. Australian super funds are increasingly investing Australian savings into overseas clean-energy investments.

A new green deal would help us through the current downturn while building a strong, low-carbon future.

It should: Immediately invest in a major nationwide program to retrofit houses and buildings to make them more energy efficient. Invest in infrastructure that reduces our carbon footprint including public transport and rail for freight. Create green jobs as a centrepiece of economic policy, with coordinated plans to grow key green industries and supportive policies to meet skills and training needs and commercialisation of new technologies. Start the Carbon Pollution Reduction Scheme in 2010 with a strong 2020 target to cut greenhouse emissions. Restructure tax subsidies so that they encourage environmental efficiency, not the other way around.

Better regulate the corporate sector to ensure executive remuneration and other aspects of corporate governance are aligned with real long-term performance rather than illusory and unsustainable profits. Such a stimulus program would go a long way towards building a more robust and resilient economy for Australia, while positioning for leadership in the green industries and jobs of the future.

Don Henry is executive director of the Australian Conservation Foundation. Sharan Burrow is president of the Australian Council of Trade Unions.