First, how to build a clean energy economy, creating millions of good jobs in the process; and second, how to create a financial system focused on channeling money toward productive investment as opposed to destabilizing speculation. In fact, the link between these matters becomes clear once we pose the simple question: how can we pay for the transition to a clean energy economy? Realistically, there is no way to construct a clean energy economy — driven by solar, wind, and geothermal power and biomass fuels, and operating at dramatically higher levels of energy efficiency — unless trillions of dollars are channeled into this project over the next 20 years. Considered on an annual basis, it is reasonable to assume that a green investment program should be in the range of $150 billion per year.
This contribution by Robert Pollin can be seen as an update to our previous reference to the essay by Thornthon Parker, who distinguised parasitic investements, leading to contraction cycles, to productive investments, leading to growth cycles.
Robert Pollin examines this issue in detail:
1) he asks (for the U.S.): how much money do we need to make renewable energies a competitive and realistic alternative ($150 billion)
2) how can this money be generated, and the answer is: only by a combination of public and private funds
Go to the orginal article for the full details, but here are significant excerpts explaining the problem that needs to be solved, and what the broad direction of the policy solutions are.
“How can we pay for the transition to a clean energy economy? Realistically, there is no way to construct a clean energy economy — driven by solar, wind, and geothermal power and biomass fuels, and operating at dramatically higher levels of energy efficiency — unless trillions of dollars are channeled into this project over the next 20 years.
Considered on an annual basis, it is reasonable to assume that a green investment program should be in the range of $150 billion per year. This is roughly equal to 1 percent of the United States gross domestic product (GDP) or equal to the current level of our spending on the Iraq war. A green investment program of this size would create about 2.5 million new jobs within the U.S. economy. But as long as Wall Street continues to squander trillions chasing speculative profits and generating financial bubbles — i.e. variations on the housing market, stock market, and emerging economy bubbles that we experienced just over the past decade alone — there will not be enough money available to adequately finance a clean energy transformation.
There are only two possible ways to finance a clean energy transition — public funding, with money coming from either the U.S. or individual states’ treasuries; or private funding, with money coming from private businesses and households. We often think about large-scale economic policy initiatives as necessarily being funded by the federal government. In fact, both public and private sources of funds will be needed to build a clean energy economy. But the key will be to ensure that private funds are channeled into green investments and away from fossil fuels.”
Robert Pollin’s conclusion: How it Hangs Together
“Overall, we can roughly envision the financial requirements for the epoch-making project before us, of building a clean energy economy, and generating millions of good jobs in the process. Thinking of this as an annual investment project of about $150 billion, a feasible financing breakdown would be about $50 billion coming out of public funds, and the other $100 billion coming from private investments. The $100 billion in heavily regulated and subsidized private lending would also represent one important step toward transforming our financial system — to raise the level of support for productive investment in the U.S., and to move Wall Street away from the casino logic that has been dominant for a generation. By itself, a subsidized and regulated private green investment segment of the U.S. financial market, operating at a level of about $100 billion per year, will represent only a modest step toward stabilizing the overall $2 trillion U.S. credit market, to say nothing of the additional sectors of the financial markets engaged in trading stocks, bonds, and derivative instruments.
Nevertheless, establishing a well-functioning green investment sector can serve as both a reminder and an example: it will remind us of the positive investment opportunities being lost by allowing financial markets to operate without significant regulations; and as an example of the broader approach needed to restore the principle that the capital development of the U.S. economy can no longer be guided by the logic of the casino.”