Laissez-faire is out and intervention is in. The era of small government is over, as Bill Clinton once didn’t say. Yes, ICYMI: big government is back, baby.
Big green investment packages are being used as a weapon in the war against a quadruple set of conundrums plaguing many advanced economies: slow growth; geographic inequalities; climate change; and, for some countries more than others, an over-reliance on fossil fuel imports from despotic foreign regimes.
In 2023 the green agenda was increasingly framed as a way of creating jobs and reducing our dependence on oil and gas from unstable parts of the world, rather than as a mission to save the polar bears, or other worn-out tropes. That’s just the way that Keir Starmer wants it. Remember he was reported to have said he “hated tree-huggers”? He denied it, of course – but it spoke to a wider truth about net-zero policy: the centre left has embraced the transition, but on new, arguably far less fluffy, terms.
Biden purposefully gave his game-changing green energy and manufacturing legislation the name of the Inflation Reduction Act (IRA) and talked up its job-creating measures. He didn’t call it the Save the Planet Act and focus on emissions reduction and ice caps. In a similar vein, the Labour leader wants the green agenda to be seen as a bit less Extinction Rebellion, and a bit more national renewal; a bit less “Just Stop Oil flinging paint at a Van Gogh”, and a bit more “professionals in suits doing deals on grid upgrades”.
Geopolitics is fragile. In a year in which a record-breaking number of countries is headed to the polls, populism simmers beneath the surface of liberal democracy. Nation-states are turning inwards and away from open, globalised markets. Policymakers need a route out of decline, and have decided it’s best not to associate themselves, in the minds of voters, with the often deeply unpopular direct-action protestor wing of the green movement (even though green policies themselves tend to poll relatively well).
And 2024 is a big election year. More people will go to the polls than ever before in human history. The world’s largest energy producer, Russia, will decide whether to re-elect Vladimir Putin, in what is likely to be a closely fought and totally free and fair process (ahem!). Slightly more competitively, Narendra Modi will seek re-election in India, the world’s most populous democracy. The Hindutva nationalist is presiding over a steady slide away from liberal-democratic values and inflaming ethnic tensions against Muslim minorities. When Western countries stopped purchasing Russian oil and gas following the invasion of Ukraine, India stepped up its imports. But Modi will probably cruise to victory. The country is undergoing a rapid economic transformation, with its industrial base and service industries expanding as quickly as its carbon emissions, but its per capita output remains low. Modi, for his part, has been open to investment in renewables, but cheap fossil fuels still, of course, make up the lion’s share of India’s energy needs.
We’ll likely see an election here in Blighty, too. Labour is carrying on with its expectation management over the £28bn green prosperity plan. The Manchester mayor, Andy Burnham, last week urged the party leadership to “stick to its guns” over the policy, while shadow chancellor Rachel Reeves and Keir Starmer have continued to emphasise that the figure is actually only £20bn in new spending, and that lowering the national debt as a proportion of GDP will take precedence over investment.
If you’re not addicted to Twitter/X, you might have missed this mini-beef that started off the back of a Guardian article, between Chancellor of the Exchequer Jeremy Hunt and the Institute for Public Policy Research’s senior economist, Carsten Jung. One thinks the £28bn spending plans would be inflationary, the other doesn’t. No prizes for guessing which is which. Sky’s Ed Conway also had this very useful explainer for broadcast, which shows that, in the grand scheme of things, the £28bn isn’t all that much, and will barely shift the UK’s place in the OECD’s overall investment rankings, if implemented.
But arguably the most globally consequential election this year will take place in the US. Donald Trump is ahead of Joe Biden in more or less every opinion poll, and his green transition policy roughly equates to “drill, baby, drill” (nb this is what he has actually said). The former president is also committed to re-exiting the Paris Climate Accords, ending IRA clauses on subsidies for electric vehicles and pollution limits, and getting rid of new regulations on energy efficiency for lightbulbs, gas ovens, and dishwashers.
The car manufacturers Nissan and GM have warned that Trump’s measures on electric vehicles would reverse progress on building domestic supply chains and re-shoring industries in new car and battery manufacturing (not a great look for a man presenting himself as a champion of the blue-collar worker). And yet, should Trump win, there will be some continuity with the Biden administration: the Republican candidate (he still hasn’t clinched the official nomination, but his rivals trail a long way behind), is unlikely to undo all the vast, broad measures set out in the IRA. In his first term, Trump was no free-market ideologue, and will shy away from dismantling policies bringing jobs to the Rust Belt.
Indeed, Biden has maintained many of the tariffs Trump imposed when he was in the White House. In fact, following his victory in 2020, the octogenarian Democrat did not return to a Clintonian-style status quo ante, restoring the US’s position as a beacon of free trade, open markets, and limited government. His Infrastructure Investment and Jobs Act, and the Chips and Science Act, received bipartisan support in Congress. Bidenomics was conceived as a response to Trumpian populism, not as its opposite. The Democrats interpreted the 2016 election as a protest against a failed consensus, and promised what Biden has called a “fundamental break from the economic theory that has failed America’s middle class for decades now”. Between the two presidents, with their very different styles and demeanours, there may be more similarities than at first appear. At the beginning of his term, Biden even granted more oil and gas licences than his predecessor, while simultaneously pursuing the biggest expansion of green energy projects the US has ever seen.
In short, we’re in for an extremely consequential year. 2023 has been confirmed as the hottest year on record. The results of the coming elections and the delicate balance of our chaotic, proliferating geopolitical crises will determine the future of the planet. We are cursed to live in interesting times – and the Green Transition commits to being with you every step of the way.
Jonny Ball is associate editor of the New Statesman’s policy section and supplement, Spotlight. He writes on a range of topics, including local economies and regional policy agendas.
This article was originally published as an edition of The Green Transition, Spotlight New Statesman’s weekly newsletter on the economics of net zero. To see more editions and subscribe, click here.