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The Green economy can be stimulated through targeted quantitative easing: report from Anglia Ruskin University
James Phillips (Business Green) reviews a major new report from Anglia Ruskin University commissioned by Molly Scott Cato MEP [below] and published by the Greens/EFA group in the European Parliament.
It was written by Victor Anderson, Visiting Professor at the Global Sustainability Institute, Anglia Ruskin University*, Cambridge.
Full report: Green Money: Reclaiming Quantitative Easing – Money Creation for the Common Good.
At the launch, Molly Scott Cato said: “Quantitative easing to date has simply further benefited wealthy elites. But QE is just a technique to create money and we need to reclaim it for the common good. We need the money we create to be invested in energy from safe, clean renewable sources and provide safe clean homes for all the citizens of our continent. This public investment will create jobs for the thousands of unemployed across our continent while simultaneously building up our green infrastructure . . . It is time for us to liberate the power of money and make QE our own. In producing this report, we have benefitted greatly from comments by Andrew Waldie, Fran Boait, Colin Hines, Richard Murphy, Francisco Padilla Olivares and Grace Murray.
James Phillips writes: “European governments should adopt a policy of ‘Green Quantitative Easing’ (GQE), The report, which was commissioned by Green Party MEP for the south west of England, Molly Scott Cato, offers a detailed assessment of the Party’s previously stated plans for a round of targetted QE that would see central banks directly inject capital into low carbon infrastructure projects.
“Report author Professor Victor Anderson highlighted so-called ‘carbon bubble’ risks: “As well as damaging the environment, fossil fuel companies have also become a risk to financial stability. As action to combat climate change spreads, the value of fossil fuel investments will fall. This is a threat not only to those companies but also to the pension funds, insurance companies and other organisations which have shares in them. The Bank of England has a duty to play its part in helping the shift towards a greener economy no longer dependent on dirty sources of energy.”
The report, which follows last week’s G7 agreement to move away from fossil fuels and deliver full decarbonisation of the global economy this century, suggests that the European Investment Bank should also pioneer GQE policies across Europe.
Scott Cato said GQE would allow money to be reclaimed “for the common good” through direct investment in the green economy.
“Quantitative Easing to date has simply further benefited wealthy elites,” she said. “But QE is just a technique to create money and we need to reclaim it for the common good. We need the money we create to be invested in a future we want to see. So, for example, we need to invest in energy from safe, clean renewable sources and provide safe clean homes for all the citizens of our continent (and) . . . create jobs for the thousands of unemployed across our continent while simultaneously building up our green infrastructure”.
“Quantitative easing (QE) is a mechanism for putting new money into the economy. Central banks create money which they then use to buy bonds from investors such as banks or pension funds. This increased amount of cash in the financial system, aims to stimulate the economy by encouraging banks to make more loans and in turn increase investment.
“The European Central Bank (ECB) recently agreed a new round of QE in an attempt to tackle stagnation and deflation in the Eurozone. This report argues that evidence of conventional QE in the UK has shown it to fail in its objectives and that it has simply benefited wealthy elites. It calls instead for a mechanism of Green QE and identifies how this could be implemented.
“Green QE works in a similar way (but) the difference is that the money created in Green QE is used specifically to boost the green sectors of the economy with the aim of helping Europe transition to a sustainable economy”.
James Phillips ends: “We need urgently to respond to two crises: the crisis of climate destabilisation, and the after-effects of the 2008 financial crisis. Green QE is a practical plan to tackle both finance and the global environment together. This report clearly demonstrates that implementing such a plan would help create a more stable, secure and prosperous Europe”.
From the report:
Areas assisting the transition to a greener economy and society include:
- Insulation and ecological design and construction of buildings
- Public transport, walking & cycling schemes
- Arrangements for the collection, recycling and/or re-use of materials, and for waste minimisation
- Renewable energy projects
- Energy, water, metals and other resource efficiency promotion & implementation
- Nature conservation schemes
- Research, development, and application of environmental technologies for monitoring and measurement, e.g. for pollution control
- Environmental and sustainability education and awareness raising
- Ecologically sound agriculture and food production
- Noise reduction barriers and technologies
- Land and soil decontamination
Building political support to make the idea a reality.
“Given the European Commission’s emphasis on the importance of investment via the Juncker Plan, it is of concern that at present there is a very limited amount of new money to fund the plan. We would strongly recommend that they consider the route of new money creation rather than the highly leveraged system which might introduce its own instability and would also influence the sorts of projects that would be funded. The long-term nature of investment for the green transition requires patient capital of the sort that Green QE could provide.
“What is needed above all is a determination to take some political control over the finance system. There is absolutely no need to accept that banking and the creation of money are matters which have to be left to the private sector, when they are so crucial to the functioning of the whole economy, and when they have recently gone so badly wrong.
“This lesson was learned by policy makers who introduced conventional QE but they have not used that power strategically and, as argued earlier, the money they have created has not provided useful investment and has increased inequality.
“We need to respond to both crises: the crisis of climate destabilisation, and the after-effects of the 2008 financial crisis. Green QE is a practical plan to tackle both finance and the global environment together. Doing so would create a more stable, secure and prosperous Europe.”
*Victor Anderson is a Visiting Professor at Anglia Ruskin University. He worked as an economist for the Sustainable Development Commission, a government advisory body, where he contributed to the “Prosperity without Growth?” report. in 1858, when the art critic, patron and philanthropist John Ruskin opened Cambridge School of Art. The art school grew to become Anglia Ruskin University, and is still at the heart of its modern-day campus in Cambridge. Over the years, a number of colleges and institutes have become part of Anglia Ruskin. They include the Cambridgeshire College of Arts and Technology (CCAT) and the Essex Institute of Higher Education (formerly the Chelmer Institute – itself formed from the Mid-Essex Technical College and the Brentwood College of Education).