7 Ways to Fund a Green New Deal: Worldwatch Institute Researchers Offer Suggestions
by Matthew McDermott, New York, NY 
on 11.13.08
photo: Eric
A lot of people have been throwing around variations on the phrase “Green New Deal” in the past month in their plans/recommendations on how the US and/or world economy can morph into a greener form. A new opinion piece from two researchers at the Worldwatch Institute is no different (though they prefer the term "Global Green Deal") and contains many of the same elements that have been highlighted before: Increase renewable energy deployment, increase energy efficiency, create a greener infrastructure, using resources more wisely.
The interesting thing about the Worldwatch recommendations are that it suggests a number of ways that a Global Green Deal could be funded, as well as including a component addressing growing wage inequality:
A Fairer Distribution of Wealth Within and Across Borders
Here’s Gary Gardner and Michael Renner from Worldwatch Institute on rising wage inequality.
According to the International Labour Organization, two-thirds of countries for which data are available underwent an increase in income inequality in 1990-2005 between the top 10 and bottom 10 percent of wage earners. Management - worker pay disparities rose to new heights. CEOs at the S&P 500 leading U.S. firms averaged $10.5 million in 2007, 344 times the pay of the average American worker. (And the top 50 U.S. hedge- and private-equity fund managers averaged $588 million each, some 19,000 times as much as the average U.S. worker.) Just three decades ago, CEO pay averaged only 30 to 40 times the pay of the average worker.
Before anyone starts typing m-a-r-x-i-s-m in the comment box, there are very sound economic reasons why less wage discrepancy between the top and bottom earners in a capitalist system. Forgive me for oversimplifying: A robust middle class means that people are more socially mobile, are capable of making more (hopefully green) purchases, and better able to not have to depend on the government for support. No one is talking about absolute wage equality, just decreasing current excesses.
How to Fund a Global Green Deal?
Pointing out that governments of all nations can rally funds for other national emergencies, Gardner and Renner make some suggestions as how we could do this for a Global Green Deal:
Divert a Portion of Military Spending
The Stockholm International Peace Research Institute reports that world military spending in 2007 ran to a record $1.3 trillion - 45 percent higher in real terms than a decade earlier. The United States alone is spending about $700 billion per year on maintaining the Pentagon and conducting wars in Iraq and Afghanistan. In a world with no major power conflicts, a substantial portion of these budgets would be better dedicated to a Global Green Deal.
Tap Sovereign Wealth Funds
Oil rich nations and governments with large trade surpluses held $2-3 trillion dollars in wealth in 2008. Why not design incentives for government holders of such capital to invest in a Global Green Deal?
Start a ‘Tobin Tax’ on Foreign Exchange Trading
Trade in the world's currencies amounted to $3.7 trillion daily in 2007. Why not institute a Tobin tax - a levy named for its earliest proponent, economist James Tobin - as a way to raise Green Deal revenue? Even a minimal tax on foreign exchange transactions could bring in many billions of dollars, as well as dampen destabilizing currency speculation.
Remove Fossil Fuel Subsidies
These are estimated at $150-$250 billion each year. Oil companies are highly profitable, and their product is toxic to climate stability. Why not remove government supports and pledge those funds to a Global Green Deal? And a tax on "windfall" oil profits, carbon taxes, or proceeds from the auction of carbon allowances could all serve the same dual purposes.
Get the Insurance Industry Involved
The cost of weather-related natural disasters is on the rise, and is considered a "strategic threat" to the insurance industry. Between 1980 and 2004, the cost of such events totaled $1.4 trillion, of which $340 billion were insured. The industry may have a strong incentive to contribute to the climate stabilization piece of a Global Green Deal.
Issue Treasury Bonds
Bonds are commonly used for a variety of purposes, and could be dedicated to green investments. For instance, China's government has supported hundreds of energy conservation projects since 2006 in part by issuing treasury bonds.
Shift Private Capital Flows
The energy industries alone invest several hundred billion dollars each year in fossil fuel-related projects; a share of that capital could be redirected to energy efficiency and renewable energy initiatives.
OK readers: Weigh in on this one. What do you think about the notion that wage inequity should be addressed as part of systematic shift towards a green economy? How can we best fund such an economic shift?
And again, let’s not have any calls that this is Communism, nobody is remotely suggesting that. Ditto, letting the market alone work its voodoo magic: The playing field is so far from level right now and our base economic methodology so discounts environmental costs that we might as well forget that anyone ever said the words laissez-faire in an economic context, at least until those structural issues are addressed.
Full article: OPINION-Building a Green Economy
A Global Green New Deal
A Green New Deal: 100 Months to Save the World from Climate Chang
Will Next US President Consider a “New Green Deal” to Solve the Credit, Employment and Climate Crisis?
Fall in TreeHuggers: Obama’s Environmental Suggestion Box is Full
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The idea of a new deal is that it will increase GDP by getting the economy on its feet again and will essentially pay for itself through higher tax revenue from higher salaries.
Based on this, traditional financing by selling treasuries is acceptable.
Or would be, if we didn't already have $10T in debt and $63T in unfunded social security and medicare obligations.
Given our current situation, I'd look into re-purposing part of the military into environmental efforts. They have the manpower and expertise to build big projects quickly, so why not do the whole "swords to plowshares" thing? It'd be budget-neutral, so new debt wouldn't be required.
I agree, there is no need for such a wage disparity. Much of that excess goes directly to paying for excess behavior, in fact... private jets, wasteful and overindulgent living spaces and eating, etc. It simply gives CEOs more of an excuse to waste, to live inefficiently, simply because they can afford it.
In the same way that bottom- and midlevel- earners need to cut back, CEOs should have to cut back as well... especially as they often waste more than their proportional share of resources. The days of wretched excess need to end.
For the record, the same goes for world leaders, especially the U.S. Congress.
From a purely statistical point of view, I'd like to point out that you haven't actually shown that wage disparity hasd increased. I've heard and read from other source that, in fact, it has, but what you say here is different.
You say that "average CEO pay" 3 decades ago was 30-40x the average worker, whereas the average of S&P500 CEOs today is 344x the average worker. But shouldn't we EXPECT S&P500 CEO pay to be higher than average CEO pay? It isn't a valid comparison.
the Tobin tax sounds like the best and most plausible idea to me -- not that these ideas are mutually exclusive. But why not extend the Tobin tax to the stock market, wouldn't that raise even more revenue and discourage speculative investing which destabilizes the stock markets?
(I'm looking for an answer, not making a suggestion)
Another way to look at CEO pay is that the incentive for someone to work hard and further their education so they are capable of being a CEO is 10 times higher than it was 30 years ago.
Most income equality arguments begin with "No one is talking about absolute wage equality", but if you automatically assert that less income inequality is more fair, where do you stop? What is that magical level of income inequality that is fair? It is a very slippery slope.
Finally, if you are discussing ways to increase government revenue to fund a Green New Deal, you should mention increasing CEO pay. Individuals making $10M/year pay much higher tax rates than the average U.S. worker. One person making $10M pays much more taxes than 344 people making a combined $10M. While the average U.S. worker will have little if any left over to invest, someone making $10M will probably invest the majority (maybe if we're lucky into something green), leading to innovation as well as further government revenue from capital gains taxes.
Anthony,
Where's the incentive to make sure the average worker has a decent salary if the top executives' salaries are not even loosely tied to them?
For the record, I have no problem with the owner of a company having a stratospheric salary, I'm just a little freaked out that even in the midst of a financial bailout paid by taxpayers, places like Goldman Sachs are still planning on handing out billions in BONUSES this year. And the automakers might need some help, but do the executives really deserve 344x the average salary for driving (pun unintended) the industry into the ground? Nevermind the disparity in taxes...As one professor friend said, "We're dangerously close to becoming Mexico," where the uber-wealthy live in enclaves, don't leave them except by armored car or helicopter, and everyone else is on their own.
Anthony,
Where's the incentive to make sure the average worker has a decent salary if the top executives' salaries are not even loosely tied to them?
For the record, I have no problem with the owner of a company having a stratospheric salary, I'm just a little freaked out that even in the midst of a financial bailout paid by taxpayers, places like Goldman Sachs are still planning on handing out billions in BONUSES this year. And the automakers might need some help, but do the executives really deserve 344x the average salary for driving (pun unintended) the industry into the ground? Nevermind the disparity in taxes...As one professor friend said, "We're dangerously close to becoming Mexico," where the uber-wealthy live in enclaves, don't leave them except by armored car or helicopter, and everyone else is on their own.
I'm sorry, but this seems extremely poorly thought out. This is one of the silliest suggestions for use of capital in the green economy I've ever seen.
One suggestion is somehow to force private investors to put their money in green projects while the absurdly obvious tax on carbon emissions is left off.
The insurance industry is definitely interested in this - see Warren Buffett's annual letters to shareholders for an example - but they weigh costs and benefits in their business. They will see no benefit to this.
The diversion of military expenditures and the removal of fossil fuel subsidies are the only reasonable suggestions here, in my opinion.