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Green Recovery/Green New DealHow These Proposals Would be Funded and Their Relationship with Climate Justice

Jusen Asuka, Professor, Center for Northeast Asian Studies / Environmental Sciences and Policies, Graduate School of Environmental Studies, Tohoku University

21 August 2020

in Japanese

1. Introduction

The term Green Recovery (hereafter “GR”) has begun to have seen some use in Japan as well. In many cases, this term is used to refer to “pursuing a recovery from the economic stagnation caused by the spread of COVID-19, together with climate change countermeasures.” In slightly more detailed cases, it is used to mean “generating employment and achieving economic growth while preventing a rebound in greenhouse gases emissions such as CO2 to build a society resilient against climate change, pandemics, and other crises.”

However, most discussion in Japan ends here. There is no specific debate over where investments should be made, how much should be invested, how these investments will be funded, and the associated policy measures required. In its current state, the term risks ending its life as little more than a call for “more climate change measures!”, with minimal impact on the policy formulation process (in fact, GR did not even elicit a mention during discussion of the recent supplementary budget by members of the Cabinet Office, Ministry of Economy, Trade and Industry, Ministry of Finance, and other related parties). 

To further discussion of GR in Japan, this article aims to introduce the Green New Deal (hereafter “GND”) proposed by US Senator Bernie Sanders to illustrate the (1) historical background, (2) problem of funding, and (3) relationship with inequality, poverty, race, and gender—topics that have thus far been little-discussed in Japan.

2. GR Overlaps with GND

The specific objectives of GR overlap with those of GND, whose fundamental aims include expanding employment and achieving economic growth through renewable energy and energy efficiency initiatives, and also share similarities with the “Green Growth” policies advocated slightly earlier. The term GR was also used among certain circles of researchers during the 2009 Global Financial Crisis. Looking back further in history, it is also linked to the “environmental modernization” discussion that began in the 1980s.

In February 2019 in the U.S., a group including Alexandria Ocasio-Cortez, the youngest representative in the country, actually submitted a Green New Deal resolution to the House of Representatives. This resolution called for a major expansion of investment in renewable energy-related infrastructure and aimed to transform the country’s economic and social system into one not reliant on fossil fuels. The proposal was also linked to the resolution of societal problems such as inequality and poverty. As described below, Senator Sanders, who contested the Democratic presidential nomination to the final stage, has also released his own detailed GND proposal.

Ocasio-Cortez is known as a follower of modern monetary theory (MMT), a branch of neo-Keynesian economics which proposes that there is no major problem with monetarily sovereign governments holding debt as long as hyperinflation is avoided. In addition, Stephanie Kelton, a professor at New York State University and a proponent of modern monetary theory, serves as economic advisor to Senator Sanders.

In countries across the world—not only the U.S.—there is currently a structural conflict between proponents of a neo-Keynesian economic approach and those favoring neo-classical/neo-liberal economic policy. Although this article will not delve deeply into this discussion, the proposed GND is coupled with neo-Keynesian economics, and due to the recent COVID-19 crisis, it is no exaggeration to say that the actual fiscal and monetary policies adopted by many countries around the world are slanting toward a neo-Keynesian model.

3. How Sanders’ Proposed GND Would be Funded

However, in actual fact Sanders himself has consistently adopted a cautious approach to increasing government debt. Indeed, the total 16.3 trillion-dollar (approximately 1,600 trillion yen!) investment that his GND proposal outlines is to be fiscally balanced over a 15-year period. The main sources of funding for this expenditure and their monetary values include: 1) abolition of subsidies for fossil fuels, taxation of fossil fuel producers, fining and litigating against polluters (3.86   trillion dollars), 2) reducing military spending used to protect oil transportation routes (1.22 trillion dollars  ), 3) sale of electricity (6.4 trillion dollars), 4) income tax generated from new employment of 20 million workers (2.3 trillion dollars), 5) savings in current unemployment support programs as a result of new employment of 20 million workers (1.31 trillion dollars), and 6) additional taxation of wealthy individuals and large corporations (2 trillion dollars).

Will large-scale fiscal expenditure such as the 16.3 trillion dollars proposed in Sanders’ plan trigger problems such as hyperinflation? Is large-scale taxation required to prevent this? These are the key points of focus in the U.S. during discussion of a GND, and a range of opinions have been put forth and debated. For example, Galvin and Healy (2020), argue that 1) the fiscal expenditure proposed in Sanders’ GND is unlikely to generate hyperinflation considering taxation and the scale of government bonds issued during WW2 time, and 2) although the greatest resistance to Sanders’ proposed GND is related to its taxation of the wealthy, the level of taxation proposed is equivalent to that paid by the wealthy in the U.S. during the 1960s and 1970s.

4. Relationship with Climate Justice

GNDs, particularly GNDs in the U.S., incorporate in their climate change countermeasures significant components related to elements of “climate justice,” such as issues related to inequality, poverty, race, and gender. Indeed, Sanders’ GND proposal includes 1) creation of 20 million full-time jobs (five-year wage guarantee), 2) construction of 7.4 million low-cost, low-carbon houses, 3) improvement in the energy efficiency of 1.2 million houses, including federal housing, 4) improvement in the resilience of isolated and indigenous communities against climate change, 5) funding for left-behind rural communities, and 6) provision of school lunches. 

In Japan, many people may find it unnatural to package inequality, poverty, race, and gender-related issues together with climate change countermeasures. This point has also met criticism in the U.S. However, the aforementioned Galvin and Healy (2020) state for the following reasons issues such as inequality are either linked to or have synergy with climate change countermeasures: 1) the higher wealth inequality, the greater the CO2 output (research findings show that countries with higher Gini coefficients have higher per-person CO2 emissions and that increasing taxes on the wealthy and redistributing takings to those in poverty serves to reduce the country’s total CO2 emissions), 2) large corporations, particularly those that consume significant amounts of energy, have large CO2 outputs, and due to the rights and interests involved hold significant political influence, 3) many climate change countermeasures will benefit low income earners, 4) as carbon pricing (for example, carbon taxes), one climate change countermeasure, has a disproportionately negative impact on low income earners, there is a risk that this measure will be met by opposition from low-income earners, and 5) unemployment problems are more serious among female and non-white demographics and a GND would contribute toward the resolution of this issue. In other words, reducing elements such as inequality and rule by large corporations would have the effect of reducing CO2 emissions. Conversely, climate change countermeasures will fail if the issue of inequality is ignored.

5. Toward the Future

The members of the research group I am involved with recently released “Zero Nuke, Energy Transition Strategy” (ETFFJP  , 2020). In addition to representing a Japanese Green New Deal, it is also an alternative proposal to the current Basic Energy Plan formulated by the Japanese government and also serves as a Green Recovery plan for a post-COVID-19 world. It outlines, to a certain level of clarity, specific policies, investment targets, investment amounts, funding sources, jobs created, impact on electricity prices, reduction in CO2 emission volumes, and other figures.

It does not, however, contain the level of detail outlined in Sanders’ GND proposal and lacks a sufficient climate justice perspective. Meanwhile, Joe Biden, the former U.S. vice-president and current Democratic presidential candidate recently announced a GND proposal which seeks to invest two trillion dollars over four years, while a Canadian industrial group proposed an extremely specific GR proposal to the Canada’s Minister of Finance (Torrie et al. 2020). In the case of the latter, the Minister of Finance, Bill Morneau actually participated in the drafting of the GR proposal himself and has spoken of the importance of post-COVID-19 climate change countermeasures on numerous occasions.

Without being discouraged by the gulf in the level of initiatives of such overseas counterparts, going forward I hope to further improve our “Zero Nuke, Energy Transition Strategy” and make it more persuasive in consideration of the specific circumstances unique to Japan. I hope this proposal can serve as a reference material for as many people as possible to discuss a GR in Japan as well as reform of the country’s Basic Energy Plan.

<References>
・Energy Transition for Future Japan   (2020) “Zero Nuke, Energy Transition Strategy”
・Galvin Ray and Healy Noel(2020)“The Green New Deal in the United States: What it is and how to pay for it”, Energy Research and Social Science, 67, 101529.
・Torrie Ralph, Céline Bak Toby Heaps(2020)“BUILDING BACK BETTER WITH A BOLD GREEN RECOVERY” Synthesis Report, June 2020.
・Author's article in Asahi Shimbun’s RONZA publication (July 16, 2020) “Who is getting in the way of a Green Recovery?: The only way to achieve a green recovery from the COVID-19 crisis is to change Japan’s Basic Energy Plan”

 

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