Our transition to the low carbon economy in the next decade will require cooperation of government and private sectors and a re-definition of the role of traditional "supply and demand" economics to include the needs of the population and the sustainable use of resources.
Stephen Cohen, an author at State of the Planet at Columbia University, makes the argument that a renewable resource-based economy requires public-private partnership.
Roles in SocietyBut the private sector can’t do this on its own.
Some of the change we need requires new technology and only government can provide the scale of long-term funding needed for the basic scientific and engineering research needed to develop that technology. We also need to use the tax code to drive investment toward businesses built on renewable resources. We should provide tax credits and deductions to encourage investments in renewable resources. One of the greatest challenges will be to finance the modernization of the electric grid and the decarbonization of power generation. Some of the energy technology under development will enable homeowners to disconnect from the grid. State governments regulate electric utilities and they will need to structure and possibly subsidize electric rates to ensure that power companies remain financially viable during this transition. But in protecting utility capacity, they must not deploy their regulatory power or the clout of their energy utilities to prevent decentralization of energy generation. Additionally, government needs to retain the critical sustainability rules of the road represented by environmental law and regulation. While very few people running a business want to pollute the environment, there are always unscrupulous people who are willing to dump toxins into the river to make a quick buck. Those people and their companies need to be punished and that means we need to retain and improve the rigor of environmental standards. Only government can play the role of an environmental police force. When there is certainty in standards, inspection and enforcement, you can count on the private sector to find new and innovative ways of complying with rules. This is why our economy has grown while America’s air and water improved dramatically over the past half-century. Regulation has not stimulated paralysis, but technological innovation. Cars meet mileage standards, but also provide innovative communications, safety and propulsion features as the engineers hired to meet regulatory standards find ways to improve the overall product.1
James B. Quilligan, a political economist and the Managing Director of Economic Democracy Advocates, is a member of Systems Change Alliance’s advisory board and has been an economic advisor to countless heads of state, including Chancellor of Germany, Willy Brandt, and Swedish Prime Minister, Olof Palme. Quilligan asks why is supply and demand, which is widely celebrated as a natural principle of economic balance, unable to manage the thresholds of resources which an environment can sustain?
The threshold of available resources and the allocations of those resources to meet the needs of a population are actually opposing forces which continuously counteract one another. This same dynamic principle exists between every species and its environment: natural organisms react to changes in their ecosystem and make adjustments to survive. Instead of supply creating its own demand, or demand being dependent on a personal income, the demonstration of need creates its own supply and is automatically met. This is how it works in nature and in the biology of the human body; this is also how it must work in human society. The needs of a population for its resource support systems must be given a new empirical basis in policy. This begins with a little reorientation. What is presently on the supply-side as the extraction and production of resources is redefined as the self-organization of resources within the limits of the planet to sustainably regenerate those resources. And what is now on the demand side as a measure of income or purchasing capacity is redefined as the self-sufficiency of people in meeting their needs through their use of these resources.2
Seth Klein, in his book, A Good War, recommends that we embrace economic planning and create the economic institutions needed to get the job done.
During the Second World War, starting from a base of virtually nothing, the Canadian economy and its labour force pumped out planes, military vehicles, ships and armaments at a speed and scale that is simply mind-blowing. Remarkably, the Canadian government (under the leadership of C.D. Howe) established 28 crown corporations to meet the supply and munitions requirements of the war effort.
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That is just one example of what the government was prepared to do to transform the Canadian economy to meet wartime production needs. The private sector had a key role to play in that economic transition, but vitally, it was not allowed to determine the allocation of scarce resources.
In a time of emergency, we don’t leave such decisions to the market. Throughout most of the war years, the production and sale of the private automobile, in both Canada and the U.S., was effectively banned; instead those auto factories were operating full tilt to churn out wartime vehicles. Howe’s department undertook detailed economic planning to ensure wartime production was prioritized, conducting a national inventory of wartime supply needs and production capacity and coordinating the supply chains of all core war production inputs (machine tools, rubber, metals, timber, coal, oil and more). The climate emergency demands a similar approach to economic planning. We must again conduct an inventory of conversion needs, determining how many heat pumps, solar arrays, wind farms, electric buses, etc., we will need to electrify virtually everything and end our reliance on fossil fuels. We will need a new generation of crown corporations to then ensure those items are manufactured and deployed at the requisite scale. We will require huge public investments in green and social infrastructure to expedite the transformation of our economy and communities. And as we did in the war, we will need to mobilize labour to get this job done, banishing unemployment in the years to come.3
History from WWII and the inability of traditional “supply and demand” to consider the “externalities” of need and the threshold of available resources require a new cooperation between government and the private sector to get the transition to a low carbon economy done utilizing the skills of scientists, engineers, and economists to plan our journey.
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