by DEAN BAKER
In the United States, proposals for a Green New Deal have been getting considerable attention in recent months as activists have pressed both members of Congress and Democratic presidential candidates to support aggressive measures to combat global warming. There clearly is much more that we can and must do in the immediate future to prevent enormous damage to the planet.
However, major initiatives in the United States to combat global warming will almost certainly require some increases in taxes. There is likely some slack in the U.S. economy (perhaps we’ll see more slack as a result of Donald Trump’s misfires in his trade war), but a major push involving hundreds of billions of dollars of additional annual spending (2-3 percent of GDP) will almost certainly necessitate tax increases. This doesn’t mean we shouldn’t move quickly to take steps to save the planet, but these steps will have some cost.
In contrast, most of Europe is in a situation where it could easily make large commitments toward increased spending on clean energy, mass transit, and conservation at essentially no economic cost. In fact, a Green New Deal Agenda in Europe is likely to lead to increased employment and output. The big difference is that Europe is much further from facing constraints on its economy. It has plenty of room to expand output and employment without seeing inflation become a problem.
Before getting into the specifics on Europe’s economy, it is important to add a bit of perspective. The European countries have been far better global citizens in this area than the United States. Their per-person emissions are roughly half as much as the United States. Furthermore, many European countries have already taken aggressive measures to promote clean energy and encourage conservation.
Solar energy accounts for 7.3 percent of Italy’s electric power, 7.9 percent of Germany’s and 4.3 percent for the European Union as a whole. By comparison, the United States gets just 2.3 percent of its electric power from solar energy. There is a similar story with wind energy where the European Union’s installed capacity is more than 70 percent higher than the United States.
But in the battle to slow global warming, simply doing better than the United States is not good enough. The European Union can and must do more to reduce its greenhouse gas (GHG) emissions.
The most immediate obstacle to aggressive measures to reduce GHG emissions in Europe is the continent’s mindless push for austerity. European governments, led by Germany, have become obsessed with keeping deficits low and balancing budgets. Most have small deficits or even budget surpluses.
Germany exemplifies the European austerity obsession with a budget surplus that is close to 2.0 percent of GDP ($420 billion in the US economy). To some extent, fiscal austerity is not a choice. The eurozone’s rules require low budget deficits for the countries that use the euro, but even countries outside the eurozone have joined the austerity party. The United Kingdom has a budget deficit of less than 1.5 percent of GDP, Denmark less than 0.5 percent of GDP, and Sweden has a budget surplus of close to 0.5 percent of GDP.
There are certainly circumstances under which budget deficits can be too high, but these clearly do not apply to the countries in the European Union at present. Inflation has been persistently low and has been falling in recent months. The inflation rate for the eurozone countries has averaged just 1.0 percent over the last 12 months.
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