New rules, new tools, new deals: Why we should proceed from ins- trument debate to society reform...

New rules, new tools, new deals: Why we should proceed from ins-trument debate to society reform

Towards a greener and fairer capitalism

11th GCET Bangkok, November 2010

Dr. Anselm Görres, President GBE

Towards a greener and fairer capitalism – Exhibit 3

IST DIE UMWELT ÜBER-HAUPT EIN PROBLEM –WENN JA, WIE GROSS?

ENVIRONMENT AS A PROBLEM – AND TO WHAT

EXTENT?


Bangkok is an excellent location for talks about the true scope of our challenges

« A risk-analysis firm published an index that identifies South Asia as the region most vulnerable to the effect of climate change. Of the 16 countries listed as being at extreme risk over the next 30 years, five are South Asian. A heavy dependence on agriculture and weak public insti-tutions make the region especially vulnerable. »

The Economist, October 23rd 2010


CO2/CLIMATE

Climate priority is undisputed – but it understates the true scope of the problem

RESOURCEDEPLETION

BIO-DIVERSITY

POISON

SOIL

ERO

SION

WASTE

WATER

DESERTS

CO2/CLIMATE


Even while we are convening, they are drilling and spilling all over the place...

DRILL BABY DRILL!


Both for energy as for resources, emerging countries dominate demand

ChinaEmerging economiesOECD


Our kids may long back to when there was just the „simple“ climate problem ...

CLIMATE ALL OTHER RESOURCES

Main substances

Basically only coal, oil, and gas

Multitude of metals, sands, and other substances

Main instruments

Eco-taxes, e-trading, subsidy reform, efficiency

Multitude of national regulation systems

Main agents for solutions

Limited number of large emitter countries

Multitude of developing countries

Chances for coordination

Worldwide with Kyoto, strong role of EU

A lot more difficult – up to now almost no rules

Progress Since 1980! Almost at zero!

Carbon vs. rest at this conference: Probably >85% to 15%!


WARUM WIR DENNOCH OPTIMISCH SEIN KÖNNEN

(UND MÜSSEN)

WHY WE CAN AND MUST STILL BE OPTIMISTIC


« With your constant optimism, you are wrecking our nice gloomy spirit »


All EU countries have some green taxes

Examples from EEA 2005

1. Witness of EU-Creativity!2. Many roads to Rome!3. Autonomy from neighbours!4. Similar situation in new MS


Europe is a worldwide fore-runner and successful exporter of eco-instruments

• Regulation: First positive experiences in the 1970ies, for instance against „Waldsterben“ (dying forest syndrome)

• EU today belongs to the fore-riders, e.g. with „Eco-design“• Eco-taxes: All EU-countries have several variants of it, some

also performed macroeconomic green fiscal reforms.• Emission trading: On 1.1.2005, Europe starts roll-out of an

American invention• Green Subsidies: Overvalued, but very popular nevertheless...• Slashing perverse subsidies: New sex appeal through debt

crisis• Feed-in tariffs: Hidden eco-tax (because non-budgetary), copied

by over 30 countries worldwide• Toll systems: Another important eco-fiscal instrument, whether

on country or city level (London, Stockholm)


Many “synergies” will help us to protect the climate AND conserve resources

• In both cases, we need to decouple output from input – i.e. learn to do more with less

• Most material-intensive goods and services are also energy-intensive – and vice versa

• So reducing material and energy intensity goes hand in hand

• Each time, the benefit is to avoid price peaks after passing the production peak

• And in both cases, we reduce the vulnerability of our economies


Being more general: We only must deve-lop our solutions faster than our problems

• «Men created the problem, so men can solve it»*• Or perhaps God sent us these problems to make us all

better world citizens? • But we don’t need to all become altruists.

Enlightened self-interest will do the job just fine!• Is it so difficult to understand that you cannot solve a big

problem with a small tool?!?• If we need more supranational cooperation, then let’s

have the cooperation.• If we need more government, then let’s have more

government. Nature does not care about ideology.This very conference bears witness about

the multitude of ideas and solutions!*Lady Joan Branson


NOCH GIBT ES CHANCEN FÜR DEN GRÜNEN KEYNES

THERE ARE STILL CHANCES FOR A

GREENER KEYNES!


In 2008/ 2009, most governments found themselves with very limited options


South Korea and China had the highest green share in their stimulus packages

Country Stimulus Package Volume US bn $

Green Share (%)

South Korea Green New Deal 38 69%

China NDRC 581 34%

EU Recovery Plan 253 14%

Germany Stimulus Plan 130 13% USA Emergency Economic

Stabilization Act 700 2%

Japan Stimulus Package 476 2%

Italy Emergency Package 101 1%

Sources: HSBC; for Germany GBG-Analysis

We missed most of the chances on the spending side. Now let’s

try and maximize the opportunities from refinancing the debt!


Consolidation pressure from high debts and/or deficits is mounting

1. Most states had high debts/ deficits even before crisis2. Crisis leads to heavy revenue losses ...3. ... plus huge expenses for saving banks ...4. plus financing Keynesian impulses

(worldwide 3-4 trillion US dollars)5. Additional pressure from Greek and Euro Crisis...6. ... plus hidden risks from parafiscal shadow budgets

(bad balance sheets in truth always even worse) 7. New money for new tasks, like climate,

demography ... STATES VERY CREATIVE IN SEARCH OF NEW REVENUES!


In Germany, a lib-con government sur-prisingly embraced eco-fiscal elements

WITHIN THEIR NEW SAVINGS PACKAGE THEY PROPOSED

• Cancelling eco-tax-exemptions

• Introduction of a new air traffic charge

• Eco-tax on nuclear elements

• Extending truck toll to 4-lane-highways below autobahn

• ... and promised: a Tobin tax on financial transactions.

SOME OF THIS UNDER THE EXPLICIT HEADLINE:

„ECOLOGISATION OF THE SOCIAL MARKET ECONOMY“

“GREEN CONSOLIDATION” is used by many other EU countries: (e.g. Estonia, Greece, Hungary, Ireland, Iceland)


Environmentally harmful subsidies always pose a double, if not triple waste

Usually, the lead to a combination of:

1. environmental damage, with the government paying for it

2. economic inefficiency, because whatever is subsidized will be used wastefully

3. and a huge fiscal burden, bringing some states to the edge of insolvency.


Typical areas for perverse subsidies (just look for the biggest lobbies...)

DRILL BABY DRILL!


ZEIT FÜR EINE NEUE UTOPIE!

IT IS TIME FOR A NEW VISION!


US real estate crisis – 2nd world crisis – social crisis – sustainability crisis – elite crisis

Weltfinanz-, Wirtschafts- + Sozialkrise

Globale Nach-haltigkeitskrise

Krise der Elite

• Every half year a new name!• Fast career : From US-sub prime-

crisis – international financial crisis etc. – to second world economic crisis

• Worldwide social crisis with poverty, unemployment and starving

• Climate and sustainability crisis• ... and at its base: elite crisis

In 2010, it also became a fiscal and currency crisis

HOUSING CRISIS


Financial/economic and environmen-tal crisis have very similar roots

SIMILAR ORIGINS/ PROBLEMS

Fin. Crisis

Envir.Crisis

COMMENTS

Many forms of market failure and perverse incentives

Not only external effects…

Government failure

Weak regulation, partly due to laissez-faire ideology

Violation of simplest rules, even rules for kids

All I needed to know I learnt at kindergarten (clean up your dirt...)

Explosion of state debts

Greek case shows dangers

Business as usual no longer an option

Outdated growth model and wealth concept

Overall: Unsustainable behaviour of consumers, firms, governments ... and you know what: We all

know it’s not sustainable!


„Gan-dhism“?

Abolish capitalism – worldwide idealism and selflessness – or improve capitalism?

Abolish capitalism?

Improve capitalism?

Worldwide economic and environmental crisis from uncontrolled capitalism


How about a price system that will finally tell the truth in all three dimensions?

.... the economic truth: fair competition and efficiency

.... the social truth: fair wages and social security

.... and the ecological truth: Internalisation of external effects

Wrong prices lead markets in wrong directions!


The new vision: A greener capitalism, with more equity and decency

DEC

ENC

Y/EF

FIC

IEN

CY

SOC

IAL

EQU

ITY

AN

D S

ECU

RIT

Y

ECO

LOG

ICA

LSU

STA

INA

BIL

ITY

ECO-SOCIALMARKET SYSTEM

DEMOCRACY/HUMAN RIGHTS

SOCIAL EQUITYAND SECURITY

• Mill, Marx, Bismarck, Beveridge...• Social security, 8h-day, unions..• Prices tell social truth

ECOLOGICALSUSTAINABILITY

• Pigou, Kapp, Meadows, Weizsäcker...• Eco-regulation, green budgets• Prices tell ecological truth

DECENCY/EFFICIENCY

• Adam Smith...• Decent markets, efficiency,

fair competition• Prices tell economic truth


In Asia, there seems to be openness for a progressive evolution of capitalism

Source: Singapore Times, November 2008


NEUE STEUERN + PREI-SE, NEUE HÄUSER +

AUTOS, NEUES DENKEN

NEW TAXES + PRICES, NEW CARS + BUILDINGS,

EVEN NEW THINKING!


Acceptanceof need for

action

Actual imp-lementation

95%

Public, Media

Politics, Business,

elites

The biggest impediments to action are not the deficits of our knowledge!

Knowledgeof climate problems

Knowledge of climate solutions

80%

95%

30%

Degree of nee-ded knowledge

reached

Failure of media, politics, and above all,

elites!

Main focus of researchers

Main topics of Green Budget Europe/ Germany

Natural Scientist

Economists, managers,engineers


The are more kinds of double dividend than just the classic relief for labour

Ecological Tax Reform (ETR – 70ies to 90ies)

Green Fiscal Reform (GFR – early 2000s)

Green Keynesianism Green Consolidation

╬ More green taxes


╬ More green pro-jects


GREENER SPEN-DING!

▬ Less bad subsidies

╬ New reve-nues (ETS)

▬ Less bad subsidies

▬ Less la-bour tax

NO NET EFFECT ON EXPENDI-TURES!

▬ Less la-bour tax

= SLIGHT SUR-PLUS!

╬ Other green revenues

= BIGGER SUR-PLUS!

Budget neutrality

Budget neutrality or slight surplus to pay for

green projects

Budget surplus used for green consolidation


Austerity is not enough: We need a new growth model and new values

Simple austerity programs will not solve the crisis but enforce it.

There is no return to the august times of pre-Lehmann.

We need a new, smarter growth model than in the past to build a better future, including

• New houses and buildings• New traffic systems, cars, trains, ships, airplanes• New agriculture, new foodstuffs, new bio products• New technologies and new factories• New products in all areas, with less waste and packaging • And a new life style

This will create many new jobs. But it will not be possible without new values and visions


We need both – small scale technologies, but also some of the real big things

» I‘d put my money on the sun and solar energy. What a source of power! I hope we don‘t have to wait till oil and coal run out before we tackle that. « (Thomas Alva Edison, 1931)


We can see important parts of this vision in the EUROPE 2020 strategy

DECENCY/EFFICIENY

SOCIAL EQUITYAND SECURITY

ECOLOGIALSUSTAINABITY

SMART GROWTH

Innovation – Education – Digital SocietySUSTAINABLE GROWTH

Climate, Energy, MobilityCompetitiveness

INCLUSIVE GROWTH

Employment and SkillsFighting Poverty


Crises and problems create opportunities for intellectual progress

FOR GOVERN-MENTS OF ANY COLOR

Green revenues are not from the devil, but a god-sent giftto combine environmental and fiscal sustainability

FOR TRADITIONAL KEYNESIANS

After 30 years of supply-side melodies, the crisis gave you a splendid comeback – but this time, please don’t forget to repay the debts

FOR ECO-TAX ADVOCATES

Even the definition of our beloved Double Dividend may evolve over time, for instance from a budget-neutral tax shift from labour to nature to more deficit consolidation

FOR THE LEFT

Don’t believe for one second you can advance social progress by fighting environmental progress!

FOR THE RIGHT

Please forget everything you used to think about a conflict between Green and Growth!


Personally, I sold the big station wagon use the new company car most of the time

With 112 gram C02/kg most eco-efficient German car (2008)

242 gram C02/kg


IF YOU LIKED THIS PAPER AND OUR IDEAS:

• Don‘t be surprised if perverse incentives produce perverse results

• Please support Green Budget Germany or GB Europe

• Please help us organize future conferences in your city/ country/ organisation

• Please help us to create a fairer and greener Capitalism; in the EU and elsewhere!


Some nice quotes from Budapest (1)

Prof. Dr. Zoltán Cséfalvay, State Secretary of the Ministry for National Economy:

This is the time to think the unthinkable. For too long, we have not dared to think the green ideas. This crisis is the day.

Janez Potočnik: European Commissioner for the Environment:

We don't need subsidies which pretend to help by supporting old industries and locking people into the jobs of the past.

Árpád Kovács, President, Hungarian Economic Association:

We’ve seen far too many red budgets, not in the sense of party but of deficit. We need black/green budgets, again not party colors, but positive fiscally and ecologically!

Helen Mountford, Senior Counsellor, OECD:

We’ve studied perverse subsidies throughout the world, also attempts to get rid of them. We know it’s difficult but it’s doable. We offer country-tailored advice to help.

Jos Dings. Director, European Federation for Transport and Environment (T&E):

It’ not true that the Chicago Convention bars air fuel taxes and it’s a job if the ETS raises the price by only 0,01 Cent.

Arno Schroten, Senior Researcher/Consultant, CE Delft, The Netherlands:

Any economic or ecological costs not contained in the market price can be seen as an external effect or as a subsidy.

Katri Kosonen, Principal Administrator and Economist in the DG Taxation and Customs, EU:

The subsidy for company cars in the EU amounts to 5,4 bn Euro and 0.5 percent of GDP, in Germany even to 0.9%.

Dr. Benedek Jávor: Chairman, Parliamentary Committee for Sustainable Development, Hungary:

We should start to shift the burden in our tax system from labour and other productive forces to energy and resources.

John Hontelez, Secretary General, European Environment Bureau (EEB):

Europe2020, with its advise to use environmental fiscal reform as part of national government budget consolidation measures as “growth friendly” is an opportunity for us. But in order to have an impact, the National Reform Programme process that is triggered by Europe2020 should involve national parliaments and civil societies, so it is necessary that the deadline of October 2010 for delivery of such plans is postponed till next Spring.



Kerryn Lang, Research Officer, Global Subsidies Initiative GSIWe know enough about the benefits of subsidy reform to start the process today. We need more political leadership and public awareness. And we need NGOs like GSI.Bathó Ferenc, State Secretary for the Public Budget:You are speaking from my heart. Nothing here will remain unchanged from the past. This revision of our tasks will be influenced by your conference. The next budget will be a greener budget. I can promise you we will phase out some harmful subsidies. We need to convince investors and stakeholders that in the long run, they have more to gain from new subsidies for new energies and technologies than from the old, harmful subsidies.Mikael Skou Andersen, European Environment Agency:We must acknowledge that the rise in the oil price also helped triggering the 2008 crisis. At the same time, countries with higher energy prices are less exposed to further price hikes and show less inflation effects. Perhaps we need to define a concept of core inflation that does not include the inevitable and even desirable increases in energy prices and taxes.Walter Deffaa, Director General, European Commission. Directorate:

By splitting energy taxes into an energy and an CO2-part, we can expand the CO2-level outside the emission trading sector, reduce the subsidy for diesel vs. petrol, and achieve a comparable level for all heating fuels. With such mobile factors like energy, transport, we need more harmonization of indirect taxes to overcome prisoner’s dilemma and unfair competition.Cees van Beers, Delft Technical University:Let us not forget the hidden subsidies outside the budgets, e.g. through minimum prices in agriculture or maximum prices for some energies. We may be successful in curbing visible perverse subsidies only to see them return as invisible ones!Jean Chateau, Administrator, Environment Directorate, OECD:We estimate that eliminating perverse subsidies would reduce greenhouse gases blamed for global warming by 10 percent by 2050. However, the cost would be unevenly distributed, with the highest burden on OPEC-countries, Russia and China.Erwin Mayer, Consultant for Climate and Energy Policies, Denkstatt:If we want to beat the perverse lobbies, we must understand their strategies. Perhaps we need more plebiscites!



“We don't need subsidies which pretend to help by supporting old industries and locking

people into the jobs of the past.

Instead we have to let go and invest in the jobs of the future. It is not about jobs OR

environment, it is about WHAT KIND of jobs AND the environment.”

(Janez Potočnik: European Commissioner for the Environment)

New rules, new tools, new deals: Why we should proceed from ins- trument debate to society reform...

Documents

Transcript of New rules, new tools, new deals: Why we should proceed from ins- trument debate to society reform...