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Pollin: Massive investment in energy efficiency and public transport can drive economy

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay, coming to you today from Amherst, Massachusetts. I’m now joined by Bob Pollin. He teaches economics here at the university. He’s codirector of the PERI Institute (Political Economy Research Institute). Thanks for joining us, Bob.

ROBERT POLLIN, PROF. ECONOMICS & PERI CODIRECTOR: Thank you very much for having me.

JAY: So last week there was preliminary meetings of countries heading towards the Copenhagen conference on climate change, and the African countries as one bloc walked out, saying that the industrialized countries aren’t doing anything seriously to reduce their carbon emissions, and saying if they don’t, it’s the poorest countries that are going to suffer most. You have the more developed countries in the West saying, well, we’re not doing anything until China and India does something, and we’re in too big a recession to worry about it anyway. You’ve got other forces talking about, well, you’ve got—everyone has to slow down their growth, sometimes addressing that to China and India, who say, well, easy for you to say, ’cause you have already grown and it’s our turn to grow. So what is a rational answer to all of this if one assumes the climate change crisis is as serious as scientists are telling us it is?

POLLIN: Well, first of all, I don’t even think it’s necessary for us to believe that it’s necessarily true that what the majority of climate scientists are telling us is true. It’s enough that they say it’s true, even if it’s not true, because that means that we have a nontrivial threat of ecological catastrophe. Even if it doesn’t necessarily have to happen, it could happen, and so that therefore we have to take urgent action to dramatically reduce greenhouse gas emissions throughout the world. I don’t think it’s fair to say that the US and other industrialized countries are doing nothing; I think it’s fair to say they’re doing not nearly enough. For example, here in the US, the stimulus package that was passed last February under the Obama administration was probably the most dramatic positive initiative to fight climate change and to make a transition to a clean-energy economy that’s ever been done in the United States. So that was a lot. That doesn’t mean it’s enough.

JAY: Well, let’s dig into that just a bit. Like, what’s in it that’s a lot?

POLLIN: So the total stimulus was $787 billion over two years, spread over various things—extending unemployment insurance, aid to state and local government. But of the total, $100 billion was for investments in energy efficiency and renewable energy, and that’s a lot of money. So that was one eighth of the entire stimulus package. And on top of that, most of the money is there to really encourage private businesses and state and local governments to make further investments. So they’re incentive programs.

JAY: But the countries like the African bloc are saying it’s not nearly enough, even if it’s something compared to previous eight years or more of nothing. For example, Congress has decided now on what they’re calling the transition stage towards real alternative energy, which could be a 20-, 30-year phase, and they seem to be committed to coal rather than natural gas. So the amount of carbon emission does not seem to be—there doesn’t seem to be a plan in place to really cut it in the way these other countries are claiming it needs to do.

POLLIN: It’s not enough. It’s definitely not. I mean, the first thing in the US—because we consume so much energy per person relative to the rest of the world, including Europe, including Japan, the first thing that we can do is make big investments in increasing energy efficiency. We actually have that luxury that no other country can do, and we have put a lot of money through the stimulus program in encouraging energy efficiency and government doing that themselves. And so if that works—I mean, and it’s just been implemented now—if it works, you will get very dramatic improvements in energy efficiency. That said, even if we get all the improvements that you can get out of the stimulus program, we’ll still be consuming more fossil fuels per person in the US than is done in Europe or Japan. So, yes, there has to be much more to be done. The main thing that needs to be done right now is to make these short-term investments in energy efficiency, massive ones, such as building retrofits, such as public transportation, making the electrical grid more efficient. So those things need to be done immediately and can be. And then, on top of that, we have to make renewable energy cost competitive with fossil fuels, with oil, coal, and natural gas. And if there is a big enough investment market for that, I think that we can be successful, say, within a decade. We’re not that far off right now in having competitive wind energy.

JAY: So you’re defining successful as getting the price of alternative energy competitive with fossil fuel energy.

POLLIN: Yeah. Now, the main way to do that is government does have to subsidize it. The single biggest consumer of energy is, of course, the federal government—and the Pentagon, among entities within the government. So, for the government to start insisting that, you know, the energy they’re going to purchase is going to be renewable. And that is going to create the market, and that’s going to guarantee a market for private businesses to start investing in commercializing their technologies. And then you’ll see a hothouse effect.

JAY: But from what the poorer countries are saying, less-developed countries are saying, is on the regulatory side or maybe some market mechanism. But given the window scientists are telling us we have to do this, then you have to simply stop the production of coal. You have to take some serious measures on that side to cut carbon emissions, because the energy-efficiency side just can’t kick in fast enough.

POLLIN: It can’t. No. Well, it can kick in—I mean, we could retrofit—you know, there’s roughly, I calculated, about $800 billion worth of building retrofits that can be done in this country. We have 2 million construction workers that are unemployed. We could do that within a matter of three or four years, and that would save 30, 40 percent of energy consumption in buildings, and energy consumption in buildings is about a third of the problem right there. So there are things that we could do massively now, given the state of the economy and the slack in the economy, to mobilize people into jobs.

JAY: Well, that’s sort of the big counterargument. We have people saying the economic crisis here is so serious, you’d better concentrate on jobs, not environmental regulations. And then you have China and India saying, “You’ve had your time to grow. Now it’s our time.” So what about this dichotomy between growth and green?

POLLIN: Right. Basically, we have had a serious intellectual revolution in thinking on this that I don’t think has adequately been noticed, which is, even up to three years ago, the essential premise around environmental protection was that of course you can do it, but you’re going to sacrifice economic growth and you’re going to sacrifice jobs. That’s just a given. It’s an either/or. Choose which one is more important to you. Even in Al Gore’s movie, you know, Inconvenient Truth, that is the closing premise even in his movie. He says, yes, we’re going to have to sacrifice, but we have to save the planet. So the thinking now, and that is embedded in the Obama stimulus program, is that actually investing in a clean-energy economy and a transformation to a universal clean-energy economy is an engine of growth and an engine of job creation. That’s the idea in the stimulus. That’s why I’m pretty favorable on the stimulus, even if it wasn’t adequate, because it embeds that very idea. And the idea is correct. I mean, if we just think about any kind of large-scale public infrastructure investments and forget about whether it’s green or not, we’ve known for generations that public investment can drive a private-sector economy. It could be the engine of growth, engine of stability, engine of productivity.

JAY: Okay. In the next segment of our interview, let’s dig into this, cause you’ve done some modeling on that with real numbers.

POLLIN: Absolutely.

JAY: So let’s look at what that might look like.


JAY: Please join us for the next segment of our interview with Bob Pollin.

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Robert Pollin

Robert Pollin is Professor of Economics at the University of Massachusetts in Amherst. He is the founding co-Director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His latest book is Back to Full Employment. Other books include: A Measure of Fairness: the Economics of Living Wages and Minimum Wages in the United States, and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.