Quantitative easing to fund climate change programmes?

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Colin Hines, co-founder of Localise West Midlands and Richard Murphy, Professor of Practice in International Political Economy, City University, London, warn that the Paris Climate talks are facing an enormous funding problem to which there is only one viable solution.

In a new report published by Finance for the Future, entitled ‘Climate QE For Paree’, they suggest that the measures to be put on the table in Paris will not go far enough to halt a disastrous global temperature rises of more than 2 degrees because no one has suggested how the enormous cost of tackling this issue is to be addressed, particularly at a time of global economic slowdown.

The paper offers a solution to this problem, using a variation on the idea of People’s Quantitative Easing that has received much attention during 2015:

The world has or is intending to print €7 trillion of quantitative easing to keep the financial system afloat​. In that case, why not use this mechanism in the form of Climate QE to save the planet?

The European Central Bank is already e-printing €60 billion a month under its QE [programme and is committed to doing so till September 2016.

If it allocated say €10 billion a month either from this QE programme, or from an additional QE commitment, it could use it to buy climate change bonds from the European Investment Bank. The EIB could then direct these funds to climate change programmes in both Europe and developing countries.

This could have a galvanising effect on other rich countries, putting pressure on them to introduce their own Climate QE initiatives and thus further bolster global funds towards the many hundreds of billions eventually needed to keep temperature rises at 2oC.

Importantly, since Climate QE involves one arm of the EU, the ECB, creating e-money and using it to buy assets from another arm of EU, the European Investment Bank (EIB), this will not increase Europe’s repayable debt levels. This would also hold true for countries like the United States and the UK, something that is crucial to making involvement in ‘Climate QE’ post Paris politically acceptable to all rich countries.

How the European Investment Bank Could Spend Climate QE

The EIB already invests around 10% of its funds in developing countries and prioritises climate change mitigation and adaptation (e.g. renewable energy, energy efficiency, urban transport and other projects that reduce CO2 emissions).

To achieve the goals likely to be set in Paris, Climate QE funding should be used by developing countries to fund low carbon emitting industrial and agricultural infrastructure and energy efficient buildings in cities. Such projects face difficulty attracting private finance, since the returns are harder to identify and the process of capturing and sharing them are more complex than normal investment programmes.

Rich Countries would benefit too

Colin Hines said:

‘Climate QE is not just for poorer countries. The economic and employment advantages of investing in energy efficiency and renewables is not only a way to generate economic activity in every city, town, canton and hamlet across Europe, but will also ensure our continent’s significant contribution to helping solve the biggest threat facing humanity, which is climate change.’

For further details contact:

Richard Murphy, Director of Finance for the Future LLP and Professor of Practice in International Political Economy, City University, London

Tel +44 (0) 1366 383500

Mobile +44 (0) 7775 521 797

And

Colin Hines, Convenor Green New Deal Group

Tel +44 (0) 20 8892 5051

Mobile +44 (0) 7738 164 304

Should QE now be used for the common good – extending and adapting the work of Birmingham Energy Savers?

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Quantitative Easing currently benefits the non-bank financial sector, commercial banks and the Treasury

HansardUnder QE, Hansard evidence informs us, the Bank of England’s Asset Purchase Facility purchase of just under £375bn of government bonds from the non-bank financial sector has led to a lowering of long term interest rates. The non-bank financial sector and commercial banks now hold more liquid assets in the form of interest-bearing reserves.

The consequent reduction of borrowing costs for the government means that debt issued or re-financed since 2009 has been substantially cheaper, saving some £50bn in immediate funding costs.

But QE could be used directly for the common good: MP Caroline Lucas:

Caroline Lucas 3“There is huge, and as yet untapped, potential in renewable energy, energy and resource-use efficiency and the transformation of our transport system that would create high-quality jobs across the country and reduce the UK’s overall ecological impact.

“If we are serious about staying below 2C warming, as we have legal obligations to do, then to invest in a destructive Dash for Gas when there is a Green New Deal on the table borders on criminal negligence by my parliamentary colleagues.”

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GND logo

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This is the National Plan advocated by the Green New Deal Group: Larry Elliott of the Guardian, Tony Juniper, formerly FOE’s director, Jeremy Leggett of Solarcentury, Richard Murphy Tax Justice Network, Ann Pettifor of NEF and Debtonation, Charles Secrett, currently working with ELF, Triodos Bank and London’s Development Agency and Wildlife Trust, MP Caroline Lucas, Andrew Simms director of NEF, and the convenor Colin Hines, LWM co-founder and Co-Director of Finance for the Future.

Birmingham Energy Savers

birmingham energy saversEarly beneficiaries of Birmingham Energy Savers’ (BES) activities gave testimony of the positive impact the innovative scheme is having on their lives at its official launch event at The Council House in February.

It was attended by local people helped out of long-term unemployment, residents that are now enjoying warmer homes plus lower energy bills joined representatives of Birmingham City Council, who originated the scheme, and its delivery partner Carillion Services.

If such schemes could be more widely implemented and adapted for use all over the country, welcome social, economic and environmental benefits would be offered to most people – but minimal ‘rich pickings’ for the few.


STOP PRESS

In similar vein, Fran, Ben, Andrew, Mira and rest of the team at Positive Money urge:

“Get the Bank of England to create new money instead. This new money would be granted to the government, who would spend it into the real economy where it can create jobs and support businesses”.

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Green New Deal, piloted in Birmingham, now advocated Europe-wide

The Green New Deal Group inspired Jon Morris of Localise West Midlands, a thinktank promoting local supply chains for sustainability, and Matthew Rhodes [far right] of low-carbon solutions engineering firm Encraft to present the award-winning business plan, developed and championed by Keith Budden [left] of the Birmingham Environment Partnership. This was the foundation for the City Council’s Birmingham Energy Savers scheme.

As EU leaders gather around the German Chancellor’s dinner table to discuss austerity versus growth, Colin Hines, LWM’s co-founder and convenor of the Green New Deal Group, sent a press release about a discussion paper Help Save Europe With A Green New Deal makes the case for crucial new topics and solutions to be put at the top of their menu.

Read more on http://ourbirmingham.org/?p=1679