Andrew Simms's Blog, page 13

The Green Economy – which way to look in 2012

Re-engineering our transport, energy, food systems and building stock for a low carbon future could provide a much needed economic boost, says Andrew Simms

Right now, the green economy should have the world at its feet. It offers what we all need at the moment: jobs, cost and carbon saving technologies, and more convivial ways of ensuring our livelihoods. So why, then, as we look to 2012, does it seem to be on its knees? It's not just because the economy more generally is bent low.

No, 2012 is looking bad more because of wilful and perverse political acts of national self-sabotage.

When the solar industry should be looking skyward, the government's abrupt and capricious decision to more than halve its feed-in-tariff (FIT) has left it downcast, gazing at an emptying order book and planning redundancies.

A glimmer of Christmas hope came on 21 December when a judge ruled that the decision was flawed because it contravened rules on policy consultation.

If further symbolism were needed, the oil giant BP, which a decade ago promised its name would come to mean "beyond petroleum", dumped its solar investments in spite of the company having made $5bn in profit during the previous quarter, and continuing to spend $20bn a year on new oil and gas. BP blamed "economic challenges".

But the solar debacle, combined with an apparent U-turns - such as roads and planning policy, and the return of expanding aviation with a new airport in the South East – sees the green economy cast once again as a luxury, disposable in recessionary times, rather than the only foundation of future sustainability.

A chorus has re-emerged in the business press chanting that environmental policies are no longer viable. That's a shame because, as a subset of a healthy biosphere, if the green economy is not viable, then what we're really saying is that the economy itself is not viable. In which case, bye-bye us.

A consensus beyond those who follow, or even understand, the government's economic approach of "expansionary fiscal contraction" (which is as funny, in a bad way, as it sounds) is that the economy's biggest problem is a lack of demand.

This presents a challenge that progressive environmentalists feel the need to tiptoe around. They needn't though, an apparent paradox, needn't be a real one. Because while demand is thought to low, from another perspective, as a nation the UK still massively over-consumes against its fair and sustainable share of the world's resources.

But this can be squared in a transitionary phase because the task of re-engineering our transport, energy and food systems and building stock for a low carbon future is a massive one. If the Green Investment Bank was allowed to issue bonds, bought by the Bank of England via a green form of quantitative easing, there could be a huge economic boost, from targeting a green new deal to create jobs, energy security and tackle climate change.

Because we would be increasing productive capacity to build a bridge to the green economy – rather than consumption for its own sake - that should quell any fears of it being inflationary.

Also, positively, in the meantime, wherever you look there is something of a cultural revolution happening in which people are abandoning the old, debt fuelled passive consumption.

Calls to re-imagine our high streets as places where we do more than just shop, but live, do things and meet people, are merging with initiatives to rebuild a more human, local financial system to support it.

Out of both choice and sometimes necessity people are making or restoring their own stuff, and producing their own entertainment, and feeling the better for it.

So, while the outlook for the green economy in 2012 might appear bleak, watch out, a new economy is growing beneath our feet. When the government decides to look down, it might consider actually supporting what works, rather than being spell-bound by zombie economics.

Andrew Simms founded the climate change, energy and interdependence programmes at the New Economics Foundation , and is author of Ecological Debt: Global Warming and the Wealth of Nations .

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Ed Miliband is not the leader of the opposition | Andrew Simms

Dead economic ideas are still walking in Westminster. But elsewhere, people are showing the courage and vision we need

"I pondered […] how men fight and lose the battle, and the thing that they fought for comes about in spite of their defeat," wrote William Morris, the socialist artist and craftsman in A Dream of John Ball in 1888, "and when it comes turns out not to be what they meant, and other men have to fight for what they meant under another name." Perhaps he can be half-forgiven the lack of gender awareness for making such an acute political observation.

He could have added that the struggle is never over. Morris and contemporaries such as John Ruskin, who famously said "there is no wealth but life", cast a critique of economic systems that fetishise money and its accumulation as relevant now as in the 19th century.

Protest is restless. We've come through the insurgence of last century's labour movement to its ossification in the modern, technocratic Labour party, to the birth and urgent rebirth of the green movement in the face of climate change, and from the animated grassroots protests of the last decade against summits of heads of state, the World Bank, IMF and WTO to the creative campaigning reinventions of the last few years. Does that mean nothing has changed fundamentally? I don't think so.

Before the systemic financial crisis of 2008, however energetic the protest, the economic establishment at all levels maintained a tribal belief in their rightness. But now, that is no longer true. The former Soviet Union collapsed apparently with little warning because those deep within its apparatus ceased to believe in it. What shape will a similar evacuation of emotional and intellectual faith in neoliberal economics take?

What can be seen on the UK's streets and around the world is a determination more toward social experimentation than the search for an alternate, but equally hermetically sealed political philosophy to replace existing ones.

UK activists who set up annual "climate camps" explored self-organisation, eschewed charismatic leaders and, with virtually no resources, created small but inspirational theatres of communal possibility. That experience, and some of the same individuals, fed into the optimistic and creative subversion of UK Uncut. It cleverly pulled a thread that revealed unsupportable inequity at the heart of the operation of government economic policy. That so few, with so little, could upset the complacent functioning of the UK's macroeconomic policy, when so many others had tried for so long and failed, is astonishingly hopeful. With Occupy, the next evolution of protest, joyful challenge and reimagining of all the things society stopped, or forgot to keep questioning, is limited only by, well, imagination.

We can think and worry about systemic economic and environmental threats, and fear to step because of complexity, uncertainty and imperfect information, but paths are made by walking.

Over the festive period Ed Miliband, sought to reposition his leadership of the opposition by criticising the government's lack of an alternative vision to years of unfolding austerity. It was painful, almost embarrassing, when news presenters asked the obvious follow-up question, namely, what specific alternatives did he offer? What real difference was their between their spending plans, their mutual acceptance of consumer economic models and the extraordinary, continuing submission to the domination of global financial markets?

Depressing? On one level, maybe. Next year it will mark 20 years on from the Rio Earth summit, yet less than five years before crossing a critical threshold of greenhouse gas accumulation in the atmosphere. But, also, here is a reason to look to 2012 with some excited anticipation. Because whoever leads the Labour party for the next few years will not be the real leader of the opposition. That is being led by the calm, creative and unrelenting groups who now neither wait for, nor seek the approval of the political system that is failing us so badly. We'll need to look outside parliament to see the future.

Chosen and pushed we are in a period of great transition hampered, mostly, by dead economic ideas still walking. It will best be shaped by those who are able to escape the trap spotted by John Maynard Keynes, to recognise the power of defunct economists, and be brave enough to exempt themselves from their influences. As a principle with which to re-examine our values and redesign our financial system we could well proclaim again, loudly, that real wealth is life, and finance must be its servant, not its master.

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We must bank local to get the UK back on track

The Vickers report lacked real structural solutions to our banking crisis, but we could do worse than follow Germany's example

We can quibble over detail in the Vickers commission report – whether, for example, to detoxify banking by merely "ringfencing" or fully separating its casino-like investment arms from day-to-day retail activities. And, this week, we will trawl over the government's official response.

Since David Cameron justified the use of the UK's veto in Europe on grounds of protecting the City from a financial transaction tax, and after multiple meetings with bank lobbyists, expect to see the first signs of a steady erosion of the commission's proposals.

But the real problem is the report's lack of vision, and a defeatist attitude to preventing future crises. It only asked to soften the worst excesses of bad banking, not what good banking looks like. That explains the lack of structural solutions. Britain needs a rebirth of finance explicitly linked to social and environmental goals, along the lines of mutuals, co-ops, credit unions and green banks.

Germany's economic success is built on local banks and larger, regional Landesbanks supporting the real economy in way that is unrecognisable in the UK. A recent conference organised by nef (the New Economics Foundation) heard how such local banking is more resilient, trusted, has less volatile profits, thinks longer term, and produces better relationships.

The government could lay the foundations for dynamic UK local banking by freeing credit unions, setting up a universally accessible post bank, and breaking RBS up into a network of county banks, with a primary role to support local business.

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George Osborne – a greener, bolder alternative is right behind you | Andrew Simms

It's official, we only have five years to take action on climate change, yet still the chancellor favours a heavy, dirty economy

Imagine you are on a ship that is holed beneath the waterline and starting to list. Then you notice the chief petty officer running around knocking more holes into the hull in a desperate, though obviously misguided, bid to keep the ship afloat. Welcome to Britain in winter 2011.

In August 2008, on the basis of the best information available and a few conservative projections, colleagues and I estimated that the world had 100 months before it would no longer be "likely" (a definition of risk used by the Intergovernmental Panel on Climate Change) that we could hold global warming below the threshold of a two-degree temperature rise – the agreed target of the EU and others.

To some at the time it seemed dramatic, alarmist. To us we were just pointing out the inevitable physical and chemical consequences of greenhouse gases steadily accumulating in the atmosphere.

Then two weeks ago, the International Energy Agency (IEA), typically a very conservative voice, concluded that the time frame for meaningful action on climate change was just as we had said. On our ticking clock, as of 1 December there are 60 months, or five years, to go. And five years is what the IEA too says we have left.

Also back in 2008, we faced a financial crisis and volatile energy prices. There was an opportunity then to re-regulate the financial sector and to use public investment and new ownership of the banks to reboot the economy. Jobs, stability, carbon reductions and energy security were within our grasp – setting the foundations of a modern economy fit to face future challenges. Under the previous government that chance was spurned.

The current chancellor, George Osborne, has not learned that lesson. He supports energy-intensive industries and road building, destabilises renewable energy, delays fuel tax rises, delivers an apparent U-turn in favour of new airport building and is openly hostile to environmental regulation generally. His government also secretly lobbies on behalf of Canadian tar sands, one of the dirtiest fuels of all. It's a lurch from tentative steps toward a "light, clean, modern" economy to a "heavy, dirty, old" one that makes Osborne look like a general building medieval siege equipment to ward off a modern, hi-tech invasion.

He either doesn't understand, or doesn't want to understand, the nature of the threat from climate change, volatile energy markets and a still-untamed financial sector. The bluster would be laughable if it didn't leave us so critically vulnerable, with the poorest people pushed to the front to absorb the worst of the consequences.

In the name of economic growth, Osborne appears nostalgic for the days of England's old dark satanic mills, and an approach to the labour market akin to holding someone's head under water and exhorting them to swim.

Yet, whichever letter of the alphabet you would like to name it after, if he were not so ideological, he would see a huge range of alternatives. From the original Green New Deal launched in 2008, to the recently published Plan B backed by a bevy of economists, there is bold new thinking out there.

Instead of a contradictory plan for growth whatever the cost (a BBC radio drama called The Hamster broadcast at 14:15 on 1 December, explores the consequences of that), a more intelligent economic policy would ask first, what do we actually want? And then, what is the most affective way to get there?

Plan B has a vision for "a safe place to put our money, a rewarding job and a natural environment enhanced for the next generation; an affordable home; security, though not necessarily in purely financial terms; a society committed to nurturing, and prepared to pay for the health and development of its people; communities where we can belong, that have some autonomy and identity; and the chance to get off the consumer treadmill more often and find a life balance that leaves enough time to engage meaningfully with family and friends, and pursue interests outside work". There's also an arm-long list of proposals to fulfil those bold aims.

Osborne's only vision seems to be a deficit reduction plan that is doomed to failure, and a further crippling of the public sphere, which was the only thing that stood between the failure of private financial markets and economic disaster. Yet jobs, a vibrant economy, carbon reduction and an economy better insulated from external economic and environmental shocks are there for the grabbing. In the meantime, in the run-up to Christmas, it feels a bit like a pantomime where the curtain is about to come down, George is the dame at the front of the stage feigning that he can see no alternative, and we're all in the audience, shouting "behind you".

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Small is beautiful … but Schumacher's economics of scale runs deeper | Andrew Simms

EF Schumacher was interested in appropriateness of scale, not smallness – a challenge the 'too big to fail' banks should heed

If EF Schumacher's great work on rethinking economics had been called the Principle of Subsidiary Function its audience, I suspect, might not have reached the millions that were touched by Small is Beautiful.

Yet the former is a more accurate description of the concept at the heart of his work and the latter, in spite of being key to his book's success, not only did Schumacher resist, but it became a caricature of his ideas, easier for opponents to dismiss than the subtlety of his actual arguments. Because Schumacher's interest was not in smallness, per se. That would, in every sense of the term, be small-minded. He was interested in "appropriateness of scale".

The more accurate, if cumbersome, term "subsidiarity" he borrowed from the teachings of the Catholic church. In a papal encyclical, Pope Pius XII put it like this: "It is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organisations can do."

Things are best done, in other words, at the smallest appropriate scale. Hence, Schumacher's vision wasn't that everything should be small and local, but that in all things, ranging from decision-making in firms, to growing and distributing food and generating energy, our default position should be toward human scale. In this, the distance between decision and consequence, production and consumption, is kept as short as usefully and practically possible.

Every neighbourhood might, therefore, have its own bakery, but not a factory making trains. He wrote: "There is wisdom in smallness if only on account of the smallness and patchiness of human knowledge, which relies on experiment far more than on understanding." In a warning that with the growth, concentration of ownership, power and market share of modern multinational corporations more, not less relevant Schumacher adds: "The greatest danger invariably arises from the ruthless application, on a vast scale, of partial knowledge such as we are currently witnessing in the application of nuclear energy, of the new chemistry in agriculture, of transportation technology, and countless other things."

The bitterly ironic phrase synonymous with the finance-driven economic collapse of the last four years – "too big to fail" – is a perfectly dark reflection of Schumacher's irresistibly optimistic vision for reinventing economics as if people (and the planet) mattered.

There couldn't be a better illustration of the failure of economics at the macro level to develop a theory of scale than the current crisis over the future of euro. How ironic that a European Union that designed in "subsidiarity" as a political insurance policy, is collapsing partly because its super-size currency is chronically incapable of meeting the needs of such a diverse range of economies.

In some ways Schumacher was culturally conservative. His understanding of the role of women in the economy was a poor reflection of his times. Marilyn Waring's classic work on feminist economics, If Women Counted, published a decade after Schumacher's death, is a necessary addition to Small is Beautiful. But, otherwise, the sheer breadth of his challenge to economics, and its bristling relevance to now is extraordinary.

Even with the benefit of far more sophisticated ecosystems modelling (which merely reinforces his analysis) his thoughts on how to re-engineer industry and work, the management of natural resources and the purpose of economics itself have not been bettered. He understood very clearly the need to make finance subservient to human needs, environmental imperatives and the real economy, and promoted democratic trusteeship as an ownership and management model to achieve it. This, he wrote, overcomes, "the reductionism of the private ownership system and uses industrial organisations as a servant of man, instead of allowing it to use men simply as means to the enrichment of the owners of capital".

As we look around the world at the backlash against inequality and the tyranny of casino finance, a passage from Small Is Beautiful's epilogue rings out. He quotes admiringly from a government report that concluded: "The fundamental questioning of conventional values by young people all over the world is a symptom of the widespread unease with which our industrial civilisation is increasingly regarded." Without a paradigm shift, it adds, "the downfall of civilisation will not be a matter of science fiction. It will be the experience of our children and grand-children".

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A rising population is not the problem – growing inequality is | Andrew Simms

The larger the gulf between rich and poor the harder it is to find solutions for problems such as climate change

Is no-win politics on the rise? Unemployed protesters campaigning against a failed financial system are thought feckless, but employed ones get condemned as part-time and fair-weather. Economic growth drives environmental destruction, but without it, we're told the economy will fall apart. A rising global population is deemed a threat, but so is a falling national one. All brilliantly confusing.

Anyone pondering the right way ahead feels paralysed by choices and apparent contradictions, but only the status quo benefits if we get frozen in the headlights. Several half-relegated issues, such as the population debate, have ridden the issue of climate change back into the centre of public debate. Population, of course, is about much more than that.

Germany, for example, is paranoid about the economic implications of a shrinking, aging population, while anti-immigration activists in the UK fan a range of scares about our rising population. The fact that UK population size is now on an apparent trend to overtake Germany is meant to be hugely symbolic, exactly how, though, is less clear. The difference between Germany and the UK is largely explained by different migration patterns, immigration history and average age of population (we're much younger in the UK meaning more women are still likely to have children: the median age of women differs by a significant five years between the two countries).

Immigration compensated for the UK's declining domestic birthrate and has brought a wide range of economic benefits. Taxes paid by migrant workers, for example, outweigh their costs. And "regularising" undocumented migrants already resident and working in the country could bring a £3bn economic benefit, according to a study by the London School of Economics.

But what benefits the UK in terms of the thousands of trained health and education professionals who migrate here to staff our schools and hospitals, can be a damaging drain on the sending countries.

Globally, fertility rates have fallen at such a rate that it is hard to imagine any socially acceptable policy intervention making any significant impact. About half a century ago, the average woman had between five and six children; now she has 2.6. At the level of 2.1 populations stabilise, and below that begin to decline.

High birth rates are crucially a function of poverty, related to lack of basic education (particularly for girls); lack of access to reproductive health services; high infant/child mortality rates; and dependence on adult children for income (not least as migrants). Whatever undermines health and education services in poor countries with high birth rates – the economic policies of international financial institutions or the drain of skilled professionals to rich countries – exacerbates the problem. In a less unequal world, the pressure to migrate would be greatly reduced.

The current economic system against which the "occupation" protest across the industrialised world are directed, both creates and depends on unsustainable consumption, and has driven income and asset inequality within and between nations. Fred Pearce, author of Peoplequake, argues that an obsession with population distracts from the real issue, overconsumption among the rich.

He quotes Stephen Pacala, director of the Princeton Environment Institute, who calculated that the world's richest half a billion people – about 7% of the global population – account for half of the world's emissions. Whereas, the poorest half of the world's population account for just 7% of emissions.

Inequality is at the heart of the problem, whether the split is between the 99% majority and the 1% minority in whose interests the financial system operates, or the 7% representing half the world's emissions and the rest.

Contrastingly, a huge range of problems, including over-consumption, become easier to solve in societies that are more equal (inequality drives status competition which in turn fuels consumption). The evidence of the last three decades is that redistribution is far more effective at tackling poverty than waiting for trickle-down from increasingly unequal growth. When the New Economics Foundation modelled the impact on the UK economy of reducing consumption to meet our climate change targets, we found that moving to Danish levels of equality compensated for the impact on GDP.

Which brings us full cycle to the protests in favour of financial reform (employed or not). Andrew Haldane at the Bank of England estimates that the ratio of CEO pay at the biggest seven banks compared to the national median wage in the US was 100:1 in 1989 and rose to 500:1 in 2007.

Reversing such startling polarisation, with active economic policy designed to increase equality at the national and global level, might not solve everything, but if it helps tackle economic stability, population concerns and climate change, that would be a good start.

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Occupy London is cleaning up the big bang's mess | Andrew Simms

A quarter of a century after deregulation of the City, the St Paul's protesters are highlighting the results of deference to finance

Oddly, the era of modern, triumphal, deregulated finance was much shorter than the lifespan of its apparent antithesis, the old Soviet Union. Here were two systems, very different, yet equally centralising of power and privilege, and arrogantly certain of their own mission. Both, also, left an awful mess behind.

Twenty five years on from the "big bang" in the City of London we can survey how the period of great deference to finance reshaped our landscape. Consequences are everywhere in the results of an economic scorched earth policy, still unfolding in business failures, instability, unemployment, loss of public services and recession.

But as well as the way in which untethered finance fuelled expansion and divergence in the global economy, it equally re-engineered society and the environment. Alongside the financial explosion have been others in debt-driven over-consumption, greenhouse gas emissions and inequality. New Scientist magazine last week reported that "our current emissions trajectory is close to the worst case scenario of the intergovernmental panel on climate change".

Twenty five years ago the concentration of carbon dioxide in the atmosphere was 347 parts per million (ppm); today it is 389ppm. The level in 1986 just happens to have been almost exactly the safe concentration that Nasa climate scientist, James Hansen, argues we need to return to. At the moment, however, we are heading towards 1000ppm, or higher, by the end of the century. That's a level generally considered so bad from a human point of view, it is beyond apocalyptic, if such a state is imaginable.

Just as finance loosed its moorings from the real economy, the economy has loosed its moorings from the real world. The other great destabilisation over the last quarter of a century has been the growth of inequality. In the large majority of OECD countries inequality rose from the 1980s. Inequality matters, pushing up a wide range of social costs, weakening the social fabric and producing less convivial places to live. While things have been bad in English-speaking countries such as the United Kingdom and United States, the negative trend has caught up with traditionally more equal countries such as Denmark, Germany and Sweden. Here, inequality grew more over the last decade, according to the OECD, than anywhere else, and it rose in 17 out of 22 countries for which comparable data was available.

Globally, the share of the benefits of economic activity reaching the poorest – those on less than $1 per day – fell dramatically between the 1980s and 1990s. Inequality also rose even in the major developing countries, India and China, which fared economically much better than, for example, did most of Africa.

As well as within countries and the global population as a whole, intergenerational gaps are opening up too, as recent ILO figures revealed young people making up a disproportionate share of both the unemployed and the working poor, and youth unemployment hitting a record high in the UK.

Ironically, it took the US comedian Jon Stewart, on his spoof news programme, the Daily Show, to point out that no one in the business media, who filter our understanding of finance, either called the economic crisis before it happened, or championed the need for reform of the banks and financial institutions.

As nature abhors a vacuum so, it seems, does culture and politics. The Occupy movement has, almost by accident, taken on the role of self- and public education about the financial system. Here are unpaid amateurs attempting a necessary critique of finance that paid professionals woefully failed to provide. And, of course, they are being damned for doing so.

The recent riots and lootings were a dark reflection at the economic bottom of society of the excessive, and often criminal, sense of entitlement displayed by those at the top, whether in MPs' expenses scandals or bankers' highly paid, publicly underwritten reckless bets. It must be confusing to be young, seeing rioters rightly condemned, but then to witness others intimidated and kettled for constructively protesting in favour of a more stable and fair economy.

"Have you got a bank account?" sneered the BBC Radio 4 Today programme journalist at a protester at the occupation outside St Paul's cathedral – as if having one, without which it is almost impossible to function in society, invalidated any proposals they might have for reform of a system brought to the point of collapse by speculative investors.

It's fashionable to say that the protesters' demands are too broad and vague. Yet, what they are achieving is to reclaim a public realm for debate and engagement, one that the privileges given to finance have done so much to destroy. If nothing else, practising a different kind of politics and calling for finance to be made subservient to useful social, economic and environmental purposes, to make things better rather than worse, is enough for one demonstration. And, in contrast to government policy, I'm fond of JM Keynes's observation that it is it is better "to be broadly right than precisely wrong". I can think of no better, more appropriate place to mark the anniversary of the big bang today than at the occupation outside St Paul's. And that is where I will be.

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Why protect BAE jobs when you can convert them to the green economy? | Andrew Simms

The arms industry doesn't lead to additional productive economic activity. Those engineering skills are needed elsewhere

If the International Monetary Fund tells you that your austerity programme has gone too far, don't be surprised if, next, the ghost of Stalin calls to complain about your cruel treatment of political opponents.

In times of crisis austerity is pretty much the only medicine the IMF ever prescribes. Its economic mono-vision is famous. When the only tool you have is a hammer, it's said, all problems look like nails. The IMF distils a faith in the power of deregulated market economics and a suspicion of collective public action. So much so that Nobel prize winning economist Joseph Stiglitz once branded the IMF an enemy of democracy.

That puts into context the UK's current economic course, and its colourful belief in the neoliberal sub cult of "expansionary fiscal contraction". Whatever your political persuasion, the economics remain the same if you want to reduce the deficit. You have to generate employment so that people and businesses can earn and pay taxes.

And, when even heavily protected sectors like the arms industry, which can pull favours at the highest political levels to get contracts, subsidies and beneficial treatment by the legal system, begin to suffer, you know you have a problem.

In the wake of BAE announcing the loss of 3,000 jobs in the middle of party conference season, and in spite of the nature of its business, there have been calls from across the political spectrum to protect the jobs.

But why protect when you can convert? The arms industry is notoriously capital, not labour, intensive. In spite of its supposed importance to the UK economy, the arms sector represents just 0.7% of total UK employment. A study by the University of Massachusetts looked at employment creation in various sectors for every dollar spent. Compared with arms manufacture, building houses and work on energy efficiency generated 50% more jobs, the figure for investing in public transport 131%, health 50% and education 107%.

More than that, of course, spending on arms is politely referred to as "unproductive expenditure" by economists, partly because the products, rather than laying the foundations or providing the infrastructure for additional productive economic activity, do exactly the opposite.

Yet, engineering skills are very much needed, precisely in the areas that are vital to building a modern, low-carbon economy. It's time to retrain for the green-collar economy. And now provides an ideal opportunity, as even the IMF suggests the government rethink its economic strategy in a more progressive direction. A second phase of so-called quantitative easing (QE) is one of the few options open to breathe life into the economy, and now seems imminent. But the official rationale for QE is to lower the cost of borrowing, and interest rates already cannot go much lower. It also suffers the unattractive quality that the banks that caused the crisis cream off millions in fees just by sitting there and mediating the bond trades through which QE operates.

Already there are calls, even from some voices in the financial press, that this time the money could simply be spent directly into the economy by government to create jobs. Right now, it is hard to imagine a sixth form economics student doing a worse job of allocating resources than the financial markets, let alone the state. If government spending added to the UK's productive capacity it also needn't be inflationary.

We are, once again, back in that slightly delirious world in which vast sums of money are being earmarked to rescue unreformed banking systems. The reluctance of governments to call the bluff of financial systems, whose anti-social character was so brilliantly exposed by the trader Alessio Rastani in a BBC interview.

Last time around, the Bank of England bought a mix of corporate and government bonds from the banks to inject money into the economy. This time, why not simply have them buy bonds issued by an expanded green investment bank, making resources available for the roll-out of green energy, sustainable transport systems, the energy efficient renovation of buildings, and on and on. It would create jobs, reducing the deficit, help do what we have to do for climate change, and strengthen the UK's energy independence. It would also demonstrate, unequivocally, that the public sphere can make more intelligent, socially and economically useful decisions about allocating financial resources than Rastani and his kind.

Green jobsBAE SystemsUnemploymentGreen economyAndrew Simms
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Is fracking environmentally friendly? | Andrew Simms and Rob Lyons

Andrew Simms and Rob Lyons debate whether the fracking process of gas extraction is safe

Andrew Simms: 'Fracking represents real and substantial risks to people and the environment'

Shale gas and tar sands are big, sticky and controversial. Energy-intensive and messy to extract, the fossil fuel industry sees them as a buffer during the dying days of conventional cheap oil. In Canada, the debate has taken an almost hallucinatory turn, rightwing blow-hard political activists have begun promoting tar sands as "ethical oil". The intellectual gymnastics are achieved by implying that the exploitation of oils sands can replace importing oil from the oppressive regime of Saudi Arabia.

In the UK the debate has been important but distant, until now that is, and apparent confirmation that large amounts of shale gas lie beneath Lancashire. An inverse relationship seems to exist between the overall prospects for the oil industry, and the excitement generated by any new fossil fuel find. So, after the hype, how positive should we be?

The Tyndall Centre at Manchester University observed that the "fracking" process – pumping a liquid cocktail of water, chemicals and sand into rock to release the gas – represents real and substantial risks to people and the environment. Even though this is gas from shale, rather than tar sands, as an "unconventional" fossil fuel it has in common with sands a higher climate impact than conventional gas. That's because fracking releases more methane which is a potent global warming gas. What's more, our regulators seem to be hopelessly ill-prepared for the rapid development of shale gas in the UK.

In spite of all these concerns, and others, the company behind the find and potential development, Cuadrilla Resources, probably feels it has a trump card. In times of recession, and other times too, the favoured gambit to suspend all debate and win your case is to talk about the promise of jobs. A potential number of 1,700 has been quoted in the area the company are licensed to operate in.

And yet, of course, equal if not greater numbers of jobs could just as easily be created with all the work that needs doing to reduce our energy usage: the employment intensive task of making homes and offices more energy efficient so that we need less gas in the first place, and creating the wide range of renewable energy alternatives that Deutsche Bank concluded in a study produces between two and four times more jobs for every pound invested.

This won't be the last example, but there's something of an air of desperation about the tenacious clinging to the old fossil fuel economy. Each glimmer of continued promise is greeted with the nostalgic flush of the ageing diehard still longing for the return of the dictator. But its time to move on and lay the foundations of the modern clean energy economy, it will be better for Britain's short- and long-term economic prospects, and better for the planet.

Rob Lyons: 'Claims made about problems caused by fracking seem to be greatly exaggerated'

The rapid rise of shale gas has been possible thanks to recent developments in hydraulic fracturing: basically drilling horizontally into rock formations deep underground, using charges to blow cracks in the rock, then using fluid (over 99% of which is water and sand) to keep those cracks open to allow gas to escape.

World Energy Outlook suggests that alongside conventional sources of gas, unconventional sources like shale gas could supply the world's gas needs for 250 years at current levels of consumption. At present, the majority of shale-gas output is in the US, but the announcement that there may be large reserves in the UK suggests that shale gas could become a very significant part of energy supplies here, too.

Burning gas produces fewer greenhouse gas emissions than coal or oil because the ratio of hydrogen to carbon in methane is higher. It's not a low-carbon energy source, like renewables or nuclear, but it is certainly lower carbon. Research from Cornell University published earlier this year suggested that shale gas was as bad, if not worse, than coal. But, as critics have pointed out, the paper is flawed in both its methods and its data. Gas can be used for heating and to generate electricity, but it can also be used as a substitute for oil for motor vehicles. Compressed natural gas is already widely used in developing countries. Worldwide, there were 11.2m natural gas vehicles by 2009.

Those who oppose gas tend to raise two main objections. First, that gas will distract investment from renewables. Given that wind power in the UK is currently extremely expensive and only feasible through large subsidies, that's no bad thing. Gas could buy us some time so that we can implement renewables when R&D has made them more cost-effective. Using more gas would provide quick and relatively cheap emissions reductions. If the UK does indeed have substantial supplies of gas, it would provide energy security, too.

Second, there are fears of water sources being contaminated either with methane or with chemicals used in the fracking process. However, the gas resides at much deeper levels than the water table and the pipes are sealed with concrete. The industry should, of course, be held to high standards over the quality of those concrete seals, but the claims made about problems caused by fracking seem to be greatly exaggerated.

With the world's population heading toward nine billion by mid-century, and with more of those people having access to electricity and motorised transport, we will need all the energy we can get. Turning our backs on a major source of cheap, easily used and lower-carbon energy seems perverse.

Shale gasPollutionGasEnergyFossil fuelsAndrew SimmsRob Lyons
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Climate change: an eye on the storms | Andrew Simms

We all know particular events can't be attributed to long-term warming of the atmosphere. Actually, it's no longer that simple

When Mount Vesuvius erupted in AD79 the residents of Pompeii were taken entirely by surprise. Inactive for more than 1,000 years, the local people living in its shadow didn't even realise Vesuvius was a volcano. But when it blew they had a choice: chance it and stay, or run. The eruption lasted two days, and from a town of 20,000 inhabitants, evidence of around 5,000 buried in the ash and pumice remains. It doesn't mean all the others got away, but some did, and it shows people were divided about what to do.

Many Americans must have felt similarly torn when President Obama took the unusual step of warning about the "historic" threat from Hurricane Irene, and the residents of New York City were reminded of their vulnerability and immense natural forces as a state of emergency was declared.

Some might see irony in the president's warning, as his administration was simultaneously committing itself to develop some of the world's dirtiest fossil fuels, such as backing a pipeline to carry oil from Canadian tar sands to Texas.

Protests against Obama's decisions saw a wave of arrests, ranging from Nasa climate scientist James Hansen to author and activist Bill McKibben. To be ironic, however, there would have to be a link between extreme events like Irene, and the global warming that results from burning fossil fuels. And we all know that direct attribution between particular events and the long-term warming of the atmosphere is not possible, don't we? In fact, it's no longer that simple.

While both scientific and more ideological debates rage, a relationship between warming and extreme events has been quietly working its way into economic risk assessment. The insurance industry hasn't waited for definitive proof of attribution, or been distracted by the bluster of debate, because it works on the basis of probabilities, and it's been clear for some time that these are changing.

In 2003, the climate scientist Myles Allen explained in the science journal Nature how they do it. Insurers, for example, will raise the cost of premiums to householders where warming creates an increased risk of flooding. All you have to do, wrote Allen, is work out a "mean likelihood-weighted liability by averaging over all possibilities consistent with currently available information". So, if past greenhouse gas emissions have increased flood risk (or storm damage, or crop loss due to drought) tenfold, 90% of the damage caused by a flood might be attributed to past emissions. Insurance costs get incurred in advance due to changing risks. But similar calculations could possibly be used in "tort" style claims after extreme events to seek compensation for actual damages.

In this way attribution becomes an economic reality owing to observed changes before more narrow cause-and-effect relationships to particular events are established. But, here too, the science is getting more confident.

Two pieces of research published in Nature earlier this year made the case that the fingerprint of human-driven global warming could be seen in a number of recent extreme events. In a warmer world, the atmosphere holds more water, creating bigger events. As the paper by lead author Seung-Ki Min points out, "atmospheric water content is increasing in accord with this theoretical expectation". That research found that "human-induced increases in greenhouse gases have contributed to the observed intensification of heavy precipitation events found over approximately two-thirds of … Northern Hemisphere land areas", for which data was available. It also concluded that current models were underestimating actual extreme events.

Another paper looking at flooding in the UK in October and November 2000, the wettest autumn since records began in 1766, found that warming had increased flood risk by over 20% in nine out of 10 cases, and up to 90% in two thirds of cases.

Separately, warming was found to have doubled the likelihood of the extreme European heatwave of 2003.

All this leaves us with a rather simple conundrum. How bad do things have to get, how loud does the mountain have to rumble and the ground shake before, in policy terms, we decide to leave the old town and build our livelihoods on more secure ground?

In giving his warnings about the storm hitting the eastern seaboard, Obama was driven to distinguish himself from George Bush's incompetent handling of Hurricane Katrina and the wrecking of New Orleans. But if he can't distinguish himself from Bush's other defining association, with the oil industry, ultimately he'll be the man that history remembers for telling people to shelter in their homes beneath the active volcano.

Natural disasters and extreme weatherHurricane IreneClimate changeAndrew Simms
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