Avoiding a “Cheap and Dirty” Fix for the Economy


As the global financial crisis deepens, one question being debated is how the world will deal with urgent environmental issues.

On the one hand, we can seek a “green transformation” through public investment:

In the face of economic catastrophe, yesterday’s controversial assertion has become today’s conventional economic wisdom. That lack of regulation is one root of the current depression is not only the view of liberals and moderates, but also of sensible conservatives. And the need for public investment to fight the depression is no longer in doubt either. There are really only two tools in the conventional economic toolbox to fight a depression: lower interest rates, and public investment. Given that real interest rates are close to zero, that doesn’t leave a whole lot of alternatives. …

The bottom line is that we have about $275 billion a year we could productively invest in a green transformation, rising over the course of 20 years to $475 billion, and then dropping down to $265 billion for a decade after the transformation was complete, to pay off the last of the “green debt.” Those subsidies would make up for any difference in cost between green energy and dirty energy.

On the other hand, governments can resort to short-term economic fixes over long-term environmental solutions:

The world must avoid a “cheap and dirty” fix for the economy that could undermine the fight against global warming, the U.N.’s top climate official said on Sunday.

Yvo de Boer said the world risked a second financial crisis if governments reacted to economic slowdown by building cheap, high-polluting coal-fired power plants that might then have to be scrapped as climate impacts hit.

“What concerns me most is that the financial crisis will lead to a second set of bad investment decisions,” he told a news conference before Dec. 1-12 talks involving 186 nations working on a new climate treaty.

“I hope that the second financial crisis is not going to have its origins in bad energy loans,” he said.

Let’s hope we have the foresight to heed De Boer’s warning.