The Economist magazine recently wrote an article criticising plans for a Green New Deal. It makes some good points, but in general I found its treatment of the subject quite superficial, so I wanted to write something here in response.

Firstly, it claims that subsidising renewable energy would be a bad idea, citing the example of biofuels. It’s fair to say that US Government subsidies for the biofuel industry have been a complete catastrophe. Howefver, the article doesn’t address the point that the oil and gas industries have been subsidised for decades, and this has been incredibly effective in bolstering the productivity of those sectors; it’s rash to dismiss the same potential effect for a clean energy sector.

The claim that the wrong technology choices could be made by government by introducing subsidies is not very well thought-through, and makes huge assumptions about the nature of the subsidies that may be introduced. For example, in the oil industry, money is provided to enable oil exploration; the Government doesn’t tell the companies exactly where it has to go and drill immediately. Similarly, in the renewables sector, money could be provided to fund research to reach a certain level of carbon efficiency, rather than prescribe exactly which technologies should be manufactured.

Another assumption the article makes is that by subsidising renewable energy, big polluters would not be penalised. There’s no evidence to suggest that a hybrid policy won’t be employed by Obama (similar to the policy suggestions made by Oliver Tickell in Kyoto2). The article references Europe’s cap-and-trade markets as a ‘better’ way to deal with carbon reduction than a green new deal. Even though the EU trading scheme has massive shortcomings, that is beside the point: Obama has not declared that Government spending on renewables will replace a trading scheme, and in fact has stated that there will be a cap-and-trade system put in place.

Given the lack of substance on all of Obama’s policies (not just in relation to energy/climate change), a more apt leading article would have been “Green new deal policies need more substance”. The policy mix that will confront carbon and economic problems won’t be simple, but criticising the entire notion of a green new deal because of its over-simplicity is incredibly premature.

The point about explicitly naming a set of policies that can deal with climate change and the economy a ‘green new deal’ is not to pronounce that we’ve found a magic bullet, but is simply to communicate the issues in terms that will allow a groundswell of opinion to build relevant ideas. The Economist plays a good part in moving debates forward and constructively criticising ideas, but in this case it has simply dismissed the beginning of a discussion before it has had a chance to get started.