It is a crucial moment for our collective survival. In this blog, first published in the March – April edition of Town & Country Planning journal, Hugh Ellis asks why the government has chosen to reinforce a failed economic model
It should be self-evident that the scale of the climate crisis requires new ways thinking and new economic approaches. And yet, after eight months of power, the government has yet to demonstrate the kind of transformational thinking vital to secure our future. The overall policy on climate change remains deeply conflicted.
After eight months of power, the government has yet to demonstrate the kind of transformational thinking vital to
secure our future.
On the one hand, government has repeated its commitment to our carbon reduction budgets, determined by the 2008 Climate Act. It is also committed to an ambitious policy of renewable energy deployment.
But on the other hand, there have been a series of announcements which make our carbon targets harder to secure, and leave us critically unprepared for those impacts already locked into the climate system. The scale of this challenge is illustrated by estimates that, at current rates, some 100,000 new homes will have been constructed in Category 3 flood plains in the next five years. None of these homes will qualify for the Flood Re re-insurance scheme, and residents will either have to pay exceptionally high market rates for flood insurance or risk being uninsurable, with a home which is effectively worthless.
At current rates, some 100,000 new homes will have been constructed in Category 3 flood plains in the next five years. None of these will qualify for the Flood Re re-insurance scheme.
At the time of writing, the government has yet to make a decision on consenting major new oil and gas extraction licences, such as for Rosebank. It has committed to support a third runway at Heathrow, and has ambitions for 1.5 million new homes built by 2029. It is also committed to approving other energy-intensive infrastructure, such as data centres.
In each case, the government has tried to claim that such schemes are both vital to our GDP growth and can be delivered inside the current carbon reduction budget. In each case, this assertion depends on some fairly dubious assumptions about the ability to deploy a large number of small-scale nuclear power stations, or that poor standards of energy efficiency at the heart of the Future Homes Standard can be compensated for by a decarbonised national grid.
Whether it is lobbying from housebuilders, the aviation sector or global tech bosses, the result is development which is likely to be consented without any credible sense of whether it can operate within our carbon budgets. Crucially, where there is a conflict between net zero and GDP growth, the Chancellor has made it clear that GDP growth is the priority.
Where there is a conflict between net zero and GDP growth, the Chancellor has made it clear that GDP growth is the priority.
The precise origin of this conflicted policy position rests on an economic paradox at the heart of government thinking. On the one hand, the government is committed, through the work of John Van Reenen, to a classical liberal economic thinking in which our future depends on reliance on private capital flows being bent towards a range of public goods.
The practical effect has been to try to create a regulatory framework that is friendly to investors. In doing so, government assumes first that such capital flows will deliver important public goods, and second that they will use tax revenues to support progressive outcomes. The problem is that this model of wealth creation is based upon the ability to extract value and ignore the externalities which that extraction inevitably creates. Where this results in damage to nature or human wellbeing, it is assumed that these impacts can be offset or mediated through regulation.
The paradox is that when such regulation provides effective social and environmental safeguards, extractive profits are reduced and investors seek either to remove that regulation or invest elsewhere.
The paradox is that when such regulation provides effective social and environmental safeguards, extractive profits are reduced and investors seek either to remove that regulation or invest elsewhere. While there is no evidence that this amounts to a conscious collective effort by capital investors, it does manifest itself as concerted anti-regulatory lobbying and financial support for those think tanks and lobby organisations committed to classical liberal economic theory. So far, private sector lobbying has proved extremely successful in negotiating away safeguards, and as a result we now face, for example, an unprecedented period of global species extinction.
This was the primary reason why the concept of environmental limits as a foundation of sustainable development was seen as a central and new form of an evolved wealth creation model. The proposition was simple. Human activity must work within planetary boundaries to ensure their resilience so that they can provide for both our survival now and offer a pathway for future generations.
Human activity must work within planetary boundaries to ensure their resilience so that they can provide for both our survival now and offer a pathway for future generations.
But while understanding environmental limits was supported by extensive data on a range of factors, it proved to be incompatible with an orthodox economic model which is dependent on damaging extractive practices. It is significant that even those strands of economic theory that sought to monetise ecosystem services as a means to internalise the cost of exploiting the natural environment have now been side-lined by government.
Sustainable development in general, and environmental limits in particular, have been effectively marginalised, and we are now being asked to endorse a free-market approach to solving the social and environmental problems caused by a decades-long application of that very same free-market approach. It is interesting to observe how squaring the circle of environmental limits and a 19th-century approach to extractive capitalism leads to some obvious political contortions.
We are being asked to endorse a free-market approach to solving the social and environmental problems caused by a decades-long application of that very same approach.
For example, implicit in the divisive rhetoric of senior ministers about ‘blockers’, nimbyism and eco-extremism is an assumption that environmental limits are an ideological, and not a scientific, construct. This demonstrates the inability of
HM Treasury’s economic advisors to face the reality of the climate crisis, which is by far the greatest risk to our national economic resilience.
The climate crisis is by far the greatest risk to our national economic resilience.
Carbon reduction targets expressed in law through international agreements provide a perfect example of this reality. The targets embedded in the 2016 Paris Agreement result from a process of data modelling by the IPCC7 to establish
a relationship between future increased carbon emissions and global heating. It runs alongside our best scientific analysis of the maximum global temperature increase that might provide a sustainable future for our economy and society. Currently that target is two degrees above pre-industrial global temperatures.
The carbon-reduction pathway to achieve two degrees is now tenuous but still considered achievable, assuming we make radical and immediate cuts in emissions in line with, in the case of the UK, the seventh carbon budget. We already know that temperature increases below two degrees have resulted in severe economic impacts. A world past two degrees will result in the economic collapse of many vulnerable nations. This is not an ideological construction, it is evidentially a choice between survival and non-survival.
Government, civil society and business are all capable of making this choice, but it is significant that notions of a Green New Deal are no longer front and centre of the current UK government’s economic approach. It is also deeply depressing and revealing that global capital is, on the whole, showing no thought leadership in achieving the climate stability upon which their own future depends. That raises a fundamental question about whether neoliberal economics can ever be compatible with our collective survival.
The Garden City model offered hope of an evolution of market economics to secure social value in a thriving natural world.
The Garden City model, along with many other subsequent alternative economic approaches, offered hope of an evolution of market economics to secure social value in a thriving natural world. They will be central to our economic future in a new era, where GDP growth is replaced by a focus on securing our basic survival.
Dr Hugh Ellis is Director of Policy at the TCPA.
