Economist Étienne Espagne believes that a climate alliance between Europe and China must act as a driving force for the rest of the world in 2020 and could be the first step towards a global Green New Deal.
2020 began with a series of extreme events that make it hard to deny any links with ongoing climate change. The terrifying fires in Australia and floods in Madagascar (with significantly less media coverage) bear witness to social and ecological destruction of unprecedented magnitude. These events allow us to see the culmination of internal contradictions within this new geological epoch referred to as the Capitalocene.
At the same time, this period offers unprecedented prospects for action after two years of declining political commitment to ambitious climate policies. More importantly, these new prospects define the terms of climate commitment in the context of the Green New Deal, an increasingly common focus of political statements in both Europe and the United States. In other words, there can be no ecological transition without reforming the social contract to reduce inequalities and establish a new definition of progress.
From the European Green Deal to the American Green New Deal
Talk about a Green New Deal addresses this fundamental need for a major public initiative that will guide and boost (potentially private) economic activity and social behavior in keeping with a path outlined by, among others, the Paris Agreement. However, despite this common premise, significant differences exist.
The European Commission recently revealed the details of a Green Deal that would increase investments to €1,000 billion over a ten-year period to achieve carbon neutrality by 2040. Incidentally, it is worth noting the omission of the word “new”, which marks a symbolic distance from the spirit of Roosevelt and Keynes. Although €100 billion (an amount that Poland has already deemed insufficient) is to be devoted to territories that are hardest hit by the transition to a low-carbon society, it by no means proposes a reform of the European financial framework. This framework maintains strong pressure on European fiscal resources and those of the Member States.
In the United States, the majority of Democratic candidates are discussing a variety of options in favor of a Green New Deal that would transform their economy to varying degrees in order to address climate change challenges, while including a wide range of social reforms that differ in magnitude depending on the candidate. For presidential candidate Bernie Sanders and Alexandria Ocasio-Cortez, the representative endorsing him, the Green New Deal even extends to implementing an entirely public social security system. However, these campaign promises should not overshadow the existing duopoly of combined and competing interests, sometimes called “Chinamerica”, that currently dictates the main dynamics of global emissions.
Fostering new dynamics among new centers of emissions
European and American powers combined currently represent “only” 25% of global greenhouse gas emissions. The “Chinamerican” duopoly, on the other hand, is responsible for more than half of global emissions. If all of Asia is added to this group, this percentage reaches nearly three-quarters of emissions.
China has announced its commitment to building an “ecological civilization”, a very unique form of the Green New Deal combining considerable investments in renewable energies, transport and smart cities and social control expanded to include environmentally responsible behavior. However, tensions with the United States over the past two years have renewed China’s focus on coal, which ensures greater energy independence than renewable energies, which depend on access to new silk road resources.
In any case, there can be no true Green New Deal unless it is global. This raises the question of possible driving forces (and cultural adaptation by geographical area of the concept of Green New Deal for developing and emerging countries) and the financial, social and political barriers to implementing these types of programs without improved international coordination.
A key financial component: activating and transforming development banks and central banks
This year, developing countries, like all signatory countries of the Paris Agreement, must make national contributions to the UNFCCC that are more ambitious than those proposed at the time of the Paris Agreement in 2015. The contributions are based on the 2030 deadline, but signatory countries are also encouraged to demonstrate long-term ambitions by establishing plans for 2050. However, it is clear that few plans are currently being developed, while national contributions will likely not be enough to meet the challenges. This lack of ambition can no doubt be explained, at least in part, by financial reasons.
The tragedy of the horizon that the financial system is currently facing calls for a profound change in funding structures, especially in developing countries. New stakeholders (national or regional development banks, strategic sovereign funds) could help to resolve this issue in part by offering terms of funding for development projects that incorporate the social value of their environmental impacts and are no longer subject to short-term profitability criteria alone. Central banks in developing countries often have mandates that are less focused on the strict supervision of inflation or financial stability. They therefore have more room than developed countries to directly support the economy or offer directed credit programs.
Purely endogenous Green New Deals are theoretically already achievable for certain emerging countries, especially the largest ones (China, India and Brazil). Aligning financial flows with the objectives of the Paris Agreement would require these existing institutions to be strengthened and, at the same time, the creation of new expertise that could evolve over time on the climate co-benefit of the projects to be financed. However, for many emerging countries, the prospects for transition to low carbon societies by 2050 are far from being a political priority.
A key legal component: redefining relationships between developed and developing countries by rewarding emission reductions
In many respects, it is crucial for there to be a coordination with the Green New Deals being created in developing countries. First of all, developing and emerging countries are sometimes faced with greater vulnerabilities. They often have a high level of financial openness, which means all sustainable transition strategies are vulnerable to exchange rate instability. The properties of the various exchange rate regimes must therefore be assessed in light of the necessary transition to low carbon society.
Next, based on the principle of “common but differentiated responsibilities”, it is entirely possible for public financial institutions in developed countries to significantly increase their guarantees and loans to developing and emerging countries to assist and stabilize local Green New Deal strategies. This would require an agreement on the emissions reductions these local plans must achieve, and the value assigned by the international community. Even more than a carbon price or a global market for the right to emit, this value has the power to become a linchpin for a truly global Green New Deal.
This would maintain the principle of subsidiarity that governed the dynamics of national contributions for the Paris Agreement and would give form to the common desire to avoid the worst-case climate scenario through a common value for the entire international community. Furthermore, this value could eventually justify the allocation of special drawing rights from the IMF in proportion to the effective implementation of emission reductions in the countries’ development strategies.
A key social component: defining the conditions for ecological social security
However, an additional point for consideration remains, pertaining to all the scenarios for the global transition to low-carbon societies. A number of studies emphasize the extreme pressure on several mineral resources and mining activities in general that could result from a Green New Deal that is globalized, or simply focused on the world’s industrial centers. If these effects are poorly anticipated, they could lead to a long line of adverse consequences, especially for developing countries, which are often mining countries: corruption, environmental destruction, social and even military conflict.
Even a global Green New Deal cannot eliminate the issue of low-carbon development paths in terms of demand and therefore the social inclusiveness of these paths. A sufficient national tax area must therefore be recreated and enable the pursuit of social policies capable of tempering (if not reversing) social upheaval caused by climate change and by more local environmental pollution. This kind of Green New Deal invites us to engage in new reflection on the concept of progress that takes into account all biological planetary boundaries.
Alongside the Bretton Woods financial institutions and development banks, the International Labour Office (ILO) can establish social sustainability conditions for a global Green New Deal by defining international standards for labor law and redefining labor for a sustainable world.
In 2020, the Paris Agreement must be saved by a Europe-China alliance and a global Green New Deal
Finally, this global shift requires us to break free from the geopolitical patterns of a post-war world. As stated by Adam Tooze, China must be an immediate and natural partner of a global Green New Deal in order to restore respect for the Paris Agreement.
Given the (hopefully temporary) absence of an American partner, it is above all up to Europe and China–with two completely different social and economic models–to form this new narrative in 2020. Only then can we allow ourselves to hope that these driving forces will make the Green New Deal a new paradigm for international development and coordination. The Europe-China summit that Angela Merkel proposed be held during the second half of 2020 should help establish this new context.
The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.