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A New "New Deal" Approach to the Challenge of Climate Crisis
Sean Sweeney, Ph.D., Director, Cornell Global Labor Institute
School of Industrial & Labor Relations
Keynote address to the New York State Summit of the Apollo Alliance
May 24, 2007, Latham, New York

I would like to begin by thanking the New York State chapter of Apollo Alliance for giving me the opportunity to make this keynote address at its first ever state summit. 

I am director of the Cornell Global Labor Institute, a program of the Cornell School of Industrial and Labor Relations. As some of you know, Global Labor Institute recently organized a North American Labor Assembly on Climate Crisis which brought together trade unionists from 20 different countries, as well as environmentalists and energy policy people from the U.S. The discussions at the conference left me with confidence that unions and their allies around the world are rising to the challenge of global warming and are ready to grasp the opportunities that exist. Opportunities for jobs and union growth—yes, that’s important—but also opportunities to carve out a better, more sustainable, future for ourselves and for the planet, and to reinvent trade unionism.

The subject of my talk today is the climate crisis and the need for bold government-led measures to reduce greenhouse gas emissions, basically a New Deal approach. It will take me about 30 minutes to get through this, so I’m appealing to your patience as well as your attention. The initiatives being taken in New York City and New York State are, in my view, harbingers of a much larger national and global transformation.

Fittingly, this state was the intellectual and political home of the New Deal. New Deal policies were proposed and developed here by Governor Al Smith several years before FDR was elected in 1932. Robert Wagner, a New York senator, crafted the labor legislation that established the NLRB and helped build the labor movement. Huge and essential New Deal projects built up our infrastructure and provided real jobs for the unemployed. The 15 by 15 plan, and Mayor Bloomberg’s proposals, may reflect a similar kind of leadership—only time will tell. 

In many respects, too, the Apollo Alliance embodies the values and optimism of New Deal thinking, combining the need for the creation of good jobs, social equity, and environmental protection.

I would like at this time to draw your attention to a major new study commissioned by the European Trade Union Confederation, the findings of which was presented at a 2-day conference in Brussels called Jobs in a Low Carbon Europe. Just released, this study concludes that a low-carbon future means more jobs, not less. It means higher quality work. And it means a better quality of life for all. This merely underscores the findings of research commissioned by Apollo, but the study’s findings are particularly important because climate change is, or is fast becoming, a core trade union issue in the European Union. 

At the Cornell conference, we heard how Spanish unions are working with their government on a national action plan to reduce emissions sector by sector; the British unions are developing sustainability bargaining; the South African and Brazilian unions are fighting for sustainable agriculture and reforestation. Unions all over the world are making themselves part of the solution to the climate crisis. Here in New York too, at both the city and state level.

What We Know: The Climate Challenge 
But let’s be clear about the challenge we face. Science tells we need to reduce global greenhouse gas emissions by 80 percent before 2050 if we are to have any hope of avoiding catastrophic ecological damage and massive economic and social disruption. That’s it in a nutshell. This means that the Apollo agenda takes on a whole new level of importance, but it also means we must fight harder to get it enacted.

Let’s quickly review what we know:

We know that the skills and technology to limit CO2 and other greenhouse gases already exist that can take us a long way towards reaching these reductions.

We know that public awareness of the climate crisis has been raised to a whole new level during the past your or so, and there is broad public support for action, particularly so amongst young people.

We know that we have a window of about ten years to put a program in place to reverse emissions at the global level. Not a lot of time, but it is what it is.

We also know that renewable energy can eventually provide much of our energy needs and create more jobs per unit of useable energy than fossil fuels.

So that’s the good news. The bad news is that despite all of the speeches and declarations emissions will continue to go dramatically upward both here and globally.

We therefore have to guard against is the idea that all of the talk about climate change is leading to the kind of action we need, because that’s nowhere near true. 

So what is true? The International Energy Agency projects a global rise in CO2 by 60 percent by 2030 and a doubling of energy demand by 2050. (In fact, just 2 days ago the International Energy Outlook for 2007 was released. World carbon dioxide emissions will continue to increase steadily from 26.9 billion metric tons in 2004 to 42.9 billion metric tons in 2030.) China, India and other so-called developing economies will increase their emissions, but so will the US and other rich countries. Our emissions grew a staggering 18% between 1990 and 2004 and remain the highest in the world in per capita terms. So if the reality of global warming is indeed an inconvenient truth, the fact that emissions are going dramatically upwards when they need to be going sharply downwards is a really inconvenient truth.

What, then, needs to be done? 
The climate challenge requires what I call “An Emergency Transition” from fossil fuels to a clean and energy efficient economy. This Emergency Transition will only happen if there is government leadership and intervention. What kind of intervention? The standard options – incentives, grants, taxes, and regulations—all have an important role to play, especially if they are part of a coordinated transition plan that combines energy, industrial and social policy. But I think we need to be prepared to go further, to fight for the kind of direct interventions that took place during New Deal when, under conditions of economic depression and social disenchantment, the government took decisive action around a whole range of problems. We need that kind of approach today to meet the climate challenge and to build a sustainable future. Let’s not be comforted by steps in the right direction—there are many of those—we need to also concern ourselves by the pace of change and how it’s implemented. 

So we may need to take measures that may appear radical in the context of our political culture but for which, as Margaret Thatcher might put it, “There Is No Alternative.” 

Market solutions?
Now, a New Deal approach is generally out of step with existing policy approaches whereby, to paraphrase Paul Krugman, everything private enterprise does is good and everything government does is bad. Consistent with this, policymakers and business leaders here and abroad propose market-based solutions to global warming—even though the problem of emissions has itself been described as the greatest ever market failure. Can this failure be corrected? Let’s examine this first, because maybe we don’t need a New Deal after all…the market has got us covered.

The market approach sees carbon and other GHGs as “externalities” that need to be priced, and one way to do this is to create a global carbon market. Thus trading carbon emissions is today the market mechanism of choice here and around the world. Observing the growth of the carbon market and other corporate initiatives, Jeffrey Sachs from Columbia’s Earth Institute gets positively euphoric when describing how business and markets are far ahead of governments when it comes to taking action on global warming. 

But on closer inspection it appears that market solutions are based on some amount of hope and partly on large amounts of government support—which makes one wonder just how much market there is in the market solutions being offered. I’ll return to this point a little later. 

Meanwhile, unions and their allies in the EU note that the experience of the European carbon market, the most advanced in the world by far, has not led to reductions in CO2—but it has led to big profits for corporations and higher consumer prices. Unions acknowledge that carbon trading might make a contribution to controlling emissions, but they are also calling for governments to invest in public transportation, energy efficiency, and more control over the energy sector. 

Market failure or systemic failure?
The problems of the European Trading System have been dismissed as teething troubles. Far too many permits were given away, and this will be corrected in future. But why, exactly, were too many permits given away? Because industry lobbyists pressured governments to issue these permits, and the reason they did that is because they do not want to make the kind of cuts in emissions that are needed because these cuts eat into profit margins and hurt company competitiveness. Stricter caps on emissions, auctioning of permits, etc., can make carbon trading more effective, but we simply do not have the luxury of being able to spend years getting this system right and perhaps more years making it truly global. 

I mention the European emissions trading experience because it speaks to a much bigger problem: while some businesses may look for opportunities through greening their operations, companies are generally programmed to resist change that costs them money and hurts their competitiveness. This is not then a market failure; it’s a systemic failure. It’s not necessarily the fault of companies or their CEOs. The laws of competition and accumulation, and with it the growth imperative that drives shareholder capitalism, are on a collision course with the environment, indeed they have collided already. Governments can and must intercept these laws if we are to have any chance of rescuing ourselves and our planet. 

Big Oil and Big Coal invest in a fossil future.
If that all sounds a bit abstract, then lets look at the behavior of many oil and coal corporations. First they deny global warming exists. Then they say it does exist but it has nothing to do with them. But it goes even further. The Union of Concerned Scientists reports that Exxon Mobil gave $16 million to different groups to discredit the science behind global warming. Moreover, oil companies continue to invest relatively little in renewables while putting billions into further exploration in order to get more carbon out of the ground knowing that it will be released it into the atmosphere and stay there for centuries. They do this for profit—all the time fully aware of the ecological and health consequences. The tar sands extraction in Alberta is an example of this eco-destruction. Led by Royal Dutch Shell, $24 billion was invested between 1996 and 2002, and a further $70 billion will be invested between now and 2020. And the purpose of this huge investment is to unlock the 1.6 trillion barrels of oil that’s captured in the shale. A million barrels a year are already being produced, consuming huge amounts of natural gas and fresh water in the process. In Bush’s Energy Act of 2005, companies received government incentives to go after the oil shale and tar sands in Utah, Wyoming and Colorado where up to two trillion barrels are apparently just waiting to be stripped-mined into existence. Shell Oil is again at the front of the line. According to Senator Hatch’s office, “Between the U.S. and Canada, we truly are the energy future of the world." 

Given what we know about the health and climate affects of fossil fuel use, this is not just antisocial corporate behavior, it’s potentially genocidal.

The actions of Big Coal are frequently no different. Existing coal-fired plants are a major source of man-made CO2—40% of all CO2 emitted in the US. Emissions from the electric power sector have risen 28 percent between 1990 and 2004. Yet plans exist for 150 new coal-fired power plants. As Jeff Gooden has noted, if only a few of these power plants come on line, then the battle to reduce emissions may well be lost. But as emissions go up, so do profits. TXU's coal plants helped net $1billion the third quarter of 2006 – almost as much as Google and Apple combined.

Of course, coal need not be as lethal to the climate or as destructive to the health of humans. Steps can be taken to improve efficiency of coal-fired power generation, through the deployment of new technologies such as IGCC (integrated gasification combined cycle). More long term, carbon capture and storage (CCS) could be very important. But here’s the rub: an IGCC plant costs 10-20% more than a conventional coal plant—which might explain why only a few of the 150 or so proposed new plants will be built with IGCC technology.

Renewable energy is growing – but much too slowly
Another serious problem is that renewable energy is growing far too slowly. This statement may sound a little strange given that, since 2000, global wind energy generation has more than tripled; solar cell production has risen six-fold; production of fuel ethanol from crops have more than doubled; and so on. Annual global investment in renewable energy has risen almost six-fold in 12 years, to $180 billion cumulative. Costs of renewable energy technologies are also declining rapidly. But as renewables grow, so too does the demand for energy, and all the projections show that renewable energy as a proportion of the whole is likely to increase only very incrementally in the years ahead. It’s already been 16 years since the Department of Energy issued a study that said there is enough wind energy in three states—North Dakota, Kansas and Texas—to supply the energy needs of the whole country. But in 2007, despite record growth, less than 1% of the nation’s energy is supplied by wind power.

Renewables in the U.S. face a number of obstacles, such lack of manufacturing capacity and skills, and—perhaps most important of all—the lack of a government-led strategy or coordinated energy policy that’s committed to clean energy. The Wind Energy Association said recently, “Only a small portion of the country’s vast wind potential will likely be tapped in the near term unless there is a shift in our energy policy priorities towards long term support for renewable energy development.” (http://www.awea.org/pubs/factsheets/EconomicsOfWind-Feb2005.pdf) 

A core problem is that the fate of renewables appears tied to their capacity to compete with (generally cheaper) coal, oil and gas, even though these fuels are known to be leading us the environmental catastrophe. There is something quite perverse about this market logic, and one wonders why it’s not challenged more aggressively. Paul Epstein, from Harvard’s Center for Health and the Global Environment, maintains that renewables are 20 years away from becoming competitive with fossil-generated energy—that’s 20 years too long. And if shale oil comes on line in U.S.—and we’re subsidizing that too—and coal use continues its spectacular growth, then the price of fossil fuels could actually fall and large investors may turn their backs on renewable energy. We may “break our addiction to foreign oil” but we’ll have a bigger addiction to domestic oil and coal—clear cases of out of the frying pan into the fire. Many disagree with this assessment, and argue that renewables are on course for a great future. This may be true, but will this future arrive fast enough?

In the US, about 6% of energy comes renewable sources, mostly hydro, which is not enough. But as long as the likes of Shell, Exxon and TXU can make enormous profits from fossil fuels and invest accordingly, then surely the social and environmental need for mass-use renewable energy will not be met and climate catastrophe becomes more and more likely. 

Lack of investment in clean energy technology
Now to the issue of technology. Recently Sir Nicholas Stern produced a major review called the Economics of Climate Change. The Stern Review says that effective action on the scale required to tackle climate change depends on new technology being deployed in power generation, transportation, and energy use. Investment in research, development and demonstration (RDD) of clean energy technologies must be dramatically increased. Present levels of investment – roughly $34 billion annually – needs to be scaled up by up to five times, or around $170 billion. But global trends in private sector RDD in energy are going in the opposite direction, and public RDD is also falling. Some companies like General Electric are investing in energy efficient products, but globally RDD budgets are down 50% since the early 1970s. In the US power sector, RDD as a share of total turnover is just 0.5%, compared to 8% in the electronics industry and 15% in pharmaceutical sector. It’s also worth noting that what RDD investment does occur, both in the US and internationally, over 60% of it comes from government sources. 

Stern therefore sees carbon trading as only part of the solution, a point echoed by Ashok Gupta this morning. Technology is key. But private companies, he says, can not be expected to introduce the technology themselves, and governments need to drive the process of innovation, commercialization, and diffusion because, and I quote, “private firms focus on private costs to satisfy their shareholders. But this can lead to a greater emphasis on short-term profit and reduce the emphasis on innovations and other low-carbon investments that would lead to long-term environmental improvements.” It seems, therefore, that market solutions require a lot of taxpayers’ money and government intervention if they are to succeed! (Incidentally, Stern’s conclusion on this point echoes that of the U.S. Department of Energy in its Scenarios for a Clean Energy Future published seven years ago.) http://www.ornl.gov/sci/eere/cef/CEFES.pdf

Markets have also failed to develop the kind of radical changes to transportation technologies such as plug in hybrids and other electrical vehicles. These technologies could ensure that, within a generation, the gasoline-fueled vehicles could be consigned to the museum. In the U.S. alone cars and light trucks are responsible for a large part of the increase in CO2 and already account for 25% of our emissions. Globally the problem is huge. Automakers are unfazed by the fact that two million new cars per year are being sold in India, and in China a staggering 6.4 million new vehicles hit the road in 2006. In fact, this makes the automakers very happy indeed. Incremental improvements in fuel efficiency are not enough, especially when so many new vehicles being produced and sold.

There is much debate about how the car of the future might be powered. Hydrogen buses are already on the road in small numbers in the EU, China and Iceland. But the investment is simply not there, because the returns are too far off to capture the interest of investors. Industry analysts say that hybrid vehicles will capture no more than 3% of auto sales in the U.S. by 2010.

Many other points could be made that converge on the same conclusion: whether it be in the failure to reduce emissions, invest in clean technology, or qualitatively grow renewable energy, “the market” is failing to respond to the challenge of climate change—failing big time. And thus we need to face this reality, and develop alternatives.

A New Deal approach: What might a New Deal approach look like?
The New Deal successfully weaved together the demand for jobs, the desire for social justice, and the need to develop the nation’s infrastructure—needs that were not being met by the private market. When we apply New Deal thinking to the need to transform the energy base of our economy, it’s possible to imagine a number of critical government interventions that go beyond the usual package of subsidies and incentives. Such interventions can be grounded in a commitment to develop well-paid and stable jobs in a low-carbon economy.

I suggest that an “Emergency Transition” may require a new federal agency that can drive this process forward according to strict deadlines. After 9/11, we got the Department of Homeland Security, with an annual cost of $54.3 billion (FY 2005). Surely the climate challenge requires a response that’s similarly well resourced? George Sterzinger has called for a Clean Energy Authority, which makes a lot of sense, inspired by the TVA of the 1930s. But the agency I imagine will oversee the complex coordination between the scientific, the social and the economic dimensions of the transition.

The first step might be to convene a “climate crisis commission” to quickly put together the broad outlines of the transition. The commission would include scientists not on the payroll of large companies, and should include public officials and representatives from green energy, trade unions, environmental and environmental justice organizations who share the view that decisive government-led action is necessary. We don’t have to look back 70 years to the New Deal to see how this might work. In Germany, the parliament formed an Enquete Commission in 2000 to furnish scientific evidence to be used as a basis for its future energy policy. Its 2002 report concluded, "It is possible to cover the total energy demand [for Germany] by means of solar/ renewable sources." Subsequent German policy is governed by this premise, and Germany has already developed wind energy that’s today 20% larger than the US to serve a population that’s two-thirds smaller. By 2010, wind will provide over 100,000 Germans with steady employment. A similar approach in Denmark has seen wind energy reach a 20% market share. And unions are partners in the implementation of these policies.

The commission would then advise the new agency. As for the priorities for the new agency, I suggest 7 main areas of action:

Area 1: Cleaner Electrical Power. 
Quick and decisive action to control emissions coal fired plants must happen immediately. Because renewable energy is not yet ready to displace fossil fuels, state of the art IGCC technology must be installed as soon as is technically possible. Companies have failed to do this, and a federal conversion program is essential. There should be severe fines for noncompliance or obstructive practices. Coal company profits should be taxed heavily and indefinitely in order to pay for the installations. Any financial shortfall should convert to a public stake in companies themselves. Oh, and let’s support Al Gore’s suggestion for a moratorium on construction of new coal-fired power plants that are not compatible with carbon capture and sequestration.

Area 2: Revenues for Renewables, Infrastructure, Mass Transit and “Smart Growth.” 
Last year Exxon Mobil posted the largest annual profit by a U.S. company—$39.5 billion. In 2005 it made $36.13 billion. Senator Clinton has already said that she wants a windfall tax on these profits and “put them into a strategic energy fund that will begin to fund alternative, smart energy alternatives and technologies.” A good move, but why stop there? Even more decisive federal intervention should be considered. Oil companies typically reap a return on capital of 46 percent for upstream drilling and production operations, plus a 32 percent for refining and marketing. The new federal agency might want to take charge of the operations of the oil companies, investigate their pricing methods, and over the longer term plan to bring some democratic control over this cartel. This may seem politically unrealistic today, but exerting control over the oil sector will guarantee a huge source of revenue. Along with the profits, the billions of investments destined to extract more fossil fuels can be redirected to pay for large capital-intensive projects that could bring clean renewable energy on line, such as large wind farms and tidal power schemes that cost a lot of money to put in place but can result in very cheap and clean energy in the years ahead. 

Area 3: Rapid Development of Renewables. 
Armed with sufficient funds, the new agency will also oversee, support and coordinate the rapid development of renewable energy like wind, solar and geothermal. Here the initial emphasis will be on the development of manufacturing capacity here in the U.S. and include publicly owned state or federal projects to manufacture wind turbines, energy efficient light bulbs and other products critical to the emergency transition. The state of Pennsylvania’s Energy Independence Fund and its Office of Energy Technology and Deployment shows how state administrations can drive this process, engage clean energy companies in public-private partnerships that create employment. 

Area 4: Accelerate Research, Development, Deployment and Diffusion of Green Technology.
Scientific and technological knowledge is a public good, and governments already fund most research and development in clean and renewable energy technologies. It’s time to develop a coordinated plan to replace the presently ad hoc and ineffective panoply of subsidies and incentives with a program of public investment aimed at rapid development and deployment of these technologies, based on cooperative models of RDD. This will help small companies. According to the Economic Policy Institute, “If the government bears a greater amount of responsibility for investing in research and disseminating technical information, firms and households will be able to make better investments and acquire new technologies at lower cost, thereby increasing their productivity.” Profitable opportunities for private investment can become available as a result of extensive public investment in research and development—as shown in the case of the Internet and semi-conductors. http://www.epi.org/content.cfm/studies_cleanenergyandjobs

But if taxpayers are going to fund the RDD, then that should bring with it appropriate levels of public control and oversight. 

Area 5: Workforce and Skills Development. 
A new agency might replicate features of the New Deal’s Works Progress Administration, taking charge of training workers and developing with unions and businesses the kind of apprenticeship programs that can begin to address the existing skills gap in green manufacturing and energy conservation. Susan Helper’s research into the auto sector reveals, the skilled workers needed to develop fuel efficient, hydrogen and electrical vehicles have been cast aside by the off shoring and restructuring of the industry, and the National Association of Manufacturers have long maintained that too few American workers have the skills needed in modern industry. A training program could draw on the skills and experience of older workers, allowing that critically important human capital to be passed on to a younger generation. The agency will also ensure that a “just transition” policy is fairly administered and that workers and communities normally dependent on the old energy base benefit from investments and employment generation around clean and renewable energy.

Area 6: State and National Programs for Energy Efficient Buildings. 
The agency would engage companies and citizens in a national and/or state level program aimed at making buildings energy efficient. Here the union-driven German example of the Alliance for Work and the Environment is particularly informative, with its annual goal of retrofitting 300,000 apartments and creating 200,000 new jobs. Direct government funding for this project stands at a little under $2 billion combined with a package of home-owner and landlord incentives worth about $12 billion. 

Area 7: Engage the Public in Environmental Stewardship. 
Lifestyle changes will still be important to maintain an energy efficient and low carbon society, and citizen vigilance will be essential. This is an important area that needs more attention and resources. 

We can debate the details of what a new agency might do, or even if a new agency is actually necessary. 

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I have not said much about the role of the states in building a new New Deal, but at this conference I’ve got a better sense of the encouraging things that are happening at the state and city levels. The initiatives taken in recent years suggest that a big policy shift is coming, as seen with the Renewable Portfolio Standards being adopted in, I think, 22 states. The Regional Greenhouse Gas Initiative also seems very promising, as are the plans of the mayor and the governor here in New York. But the primary purpose of my talk today is to urge us not to put too much faith in market solutions as defined by Jeffrey Sachs and his ilk. Markets, social markets based on responsible business practices, are important. But democratic, transparent, and union and community-driven solutions backed by a comprehensive and well-resourced government program for transition will be critical to our success.

The global significance of these actions would be immense. The negotiations for a new global treaty to succeed Kyoto are just beginning. If the US leads with an Emergency Transition, then the world will take notice and the progress towards climate stabilization will take a great leap forward. 

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