Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Toward A Green New Deal

Mariana Mazzucato 15th December 2015

Mariana Mazzucato

Mariana Mazzucato

The global agreement reached in Paris last week is actually the third climate agreement reached in the past month. The first happened at the end of November, when a group of billionaires led by Bill Gates, Mark Zuckerberg, and Jeff Bezos announced the creation of a $20 billion fund to back clean-energy research. On the same day, a group of 20 countries, including the United States, the United Kingdom, Germany, India, China, and Brazil, agreed to double their investment in green energy, to a total of $20 billion a year.

Of the two pre-Paris announcements, it was that of the Breakthrough Energy Coalition (BEC) – Gates and his fellow entrepreneurs – that grabbed most of the headlines. This is not surprising, given the strong association in the popular imagination between innovation and the private sector. If a technological breakthrough is needed in the fight against climate change, whom should we expect to provide it, if not the wizards of Silicon Valley and other hubs of free-market innovation?

Gates himself is the first to acknowledge that the public perception is far from accurate. “The private sector knows how to build companies, evaluate the potential for success, and take the risks that lead to taking innovative ideas and bringing them to the world,” reads his coalition’s manifesto. “But in the current business environment, the risk-reward balance for early-stage investing in potentially transformative energy systems is unlikely to meet the market tests of traditional angel or VC investors.”

On its own, the free market will not develop new sources of energy fast enough. The payoff is still too uncertain. Just as in previous technological revolutions, rapid advances in clean energy will require the intervention of a courageous, entrepreneurial state, providing patient, long-term finance that shifts the private sector’s incentives. Governments must make bold policy choices that not only level the playing field, but also tilt it toward environmental sustainability. Then – and only then – will private financing follow. So far, however, austerity has prevented sufficient public financing. One hopes that the Paris agreement changes that.

As with the information technology revolution, advances in clean energy will require the involvement of both the public and the private sector. Because we do not yet know which innovations will be the most important in decarbonizing the economy, investment must be allocated to a wide array of choices. Long-term, patient finance must also be available to help companies minimize uncertainty and bridge the so-called “Valley of Death” between basic research and commercialization.

The BEC’s argument – that the “new model will be a public-private partnership between governments, research institutions, and investors” – shines a welcome spotlight on the relationship. Unfortunately, however, aside from Gates and his colleagues, there are few signs that the private sector can be counted on to lead the way.

The energy sector has become over-financialized; it is spending more on share buybacks than on research and development in low-carbon innovation. The energy giants ExxonMobil and General Electric are the first and tenth largest corporate buyers of their own shares. Meanwhile, according to the International Energy Agency, just 16% of investment in the US energy sector was spent on renewable or nuclear energy. Left to their own devices, oil companies seem to prefer extracting hydrocarbons from the deepest confines of the earth to channeling their profits into clean-energy alternatives.

Meanwhile, government R&D budgets have been declining in recent years – a trend driven partly by under-appreciation of the state’s role in fostering innovation and growth, and more recently by austerity in the wake of the 2008 financial crisis. Tight budgets are straining the agencies that could be driving path-breaking innovation. The US Defense Advanced Research Projects Agency (DARPA) was a catalyst for the IT revolution. By contrast, the Advanced Research Projects Agency-Energy (ARPA-E) has a 2015 budget of $280 million – barely a tenth of DARPA’s. In 1981, energy accounted for 11% of the total US public R&D budget. Today, it accounts for just 4%. Meanwhile, problematic demand-side policies are also in crisis, impeding the deployment of existing renewable-energy technologies.

The main public-sector bodies playing a leading role in promoting the diffusion of green-energy technologies are state development banks. Indeed, Germany’s KfW, the China Development Bank, the European Investment Bank, and Brazil’s BNDES are four of the top ten investors in renewable energy, amounting to 15% of total asset finance.

The public sector can – and should – do much more. For example, subsidies received by energy corporations could be made conditional on a greater percentage of profits being invested in low-carbon innovations. After all, it was this kind of condition – imposed on the US telephone company AT&T in the early twentieth century, in exchange for being allowed to retain its monopoly – that led to the creation of Bell Labs, a crucial incubator of innovation.

Similarly, while charitable donations by billionaires certainly should be welcomed, companies should also be made to pay a reasonable amount of taxes. After all, as the BEC’s manifesto points out, “current governmental funding levels for clean energy are simply insufficient to meet the challenges before us.” And yet, in the UK, for example, Facebook paid just £4,327 in tax in 2014, far less than many individual taxpayers.

The willingness of Gates and other business leaders to commit themselves and their money to the promotion of clean energy is admirable. The Paris deal is also good news. But they are not enough. If the low-carbon revolution is to be achieved, we will need both the public and private sectors to commit more fully to green innovation, from both the supply and demand sides.

© Project Syndicate

climate transition,green transition
Mariana Mazzucato

Mariana Mazzucato, professor in the economics of innovation and public value at University College London, is founding director of the UCL Institute for Innovation and Public Purpose. She is the author of The Value of Everything: Making and Taking in the Global Economy andMission Economy: A Moonshot Guide to Changing Capitalism.

Home ・ Politics ・ Toward A Green New Deal

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

Gazprom,Putin,Nordstream,Putin,Schröder How the public loses out when politicians cash inKatharina Pistor
defence,europe,spending Ukraine and Europe’s defence spendingValerio Alfonso Bruno and Adriano Cozzolino
North Atlantic Treaty Organization,NATO,Ukraine The Ukraine war and NATO’s renewed credibilityPaul Rogers
transnational list,European constituency,European elections,European public sphere A European constituency for a European public sphereDomènec Ruiz Devesa
hydrogen,gas,LNG,REPowerEU EU hydrogen targets—a neo-colonial resource grabPascoe Sabido and Chloé Mikolajczak

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube