Green New Deal makes sense but unlikely: Paul Taylor

-- Paul Taylor is a Reuters columnist. The opinions expressed are his own --

By Paul Taylor

LONDON (Reuters) - With Europe and the United States staring recession in the face, a growing chorus is calling for massive public investment in clean, green energy to revive economic growth while fighting climate change.

Under the slogan of a "Green New Deal," leaders from U.N. Secretary-General Ban Ki-moon to former U.S. Vice-President Al Gore and German Foreign Minister Frank-Walter Steinmeier argue that industrialized countries can kill two birds with one stone and create millions of "green collar" jobs.

The idea of using tax breaks and extra public spending to promote energy efficiency, mitigate carbon emissions and develop renewable power sources, inspired by U.S. President Franklin D. Roosevelt's New Deal public works program during the 1930s Great Depression, sounds like common sense.

But it may not happen fast enough, or on a sufficient scale, to stimulate the economy, arrest global warming or durably bring down oil prices that reached $147 a barrel earlier this year.

"This is the big opportunity to get off the oil hook, but governments have to be bold, do it on a large scale and stick to it," said Tom Burke, co-founder of environmental consultancy E3G and an associate professor at Imperial College, London.

He advocates sustained public investment in wind farms, photovoltaic and solar energy, developing clean coal technology, connecting European electricity grids, and combining heating and power from gas to make offices and homes more fuel-efficient.

Yet governments which have collectively found about $5 trillion to rescue banks and galvanize economies are hesitant to focus fiscal stimulus measures on clean energy because of the long lead-time for many projects.

Indeed, there are signs that financial crisis is causing cutbacks in public and private-sector investment in wind farms, solar and wave power, and economic angst may make the European Union scale back ambitious legislation to fight climate change.

President-elect Barack Obama said in a campaign debate that the credit crunch could slow his plans for a $150 billion clean energy program, designed to reduce U.S. dependence on imported oil and create 5 million "green collar" jobs.

Research group New Energy Finance says new investment in clean power will decline by 4 percent this year compared with 2007 due to the crisis although the conditions for growth are intact. Total new investment in low carbon technology is estimated at $142 billion in 2008, down from a record $148 billion in 2007.

Germany, Europe's biggest economy, earmarked just a fraction of this month's 50 billion euro ($62.45 billion) stimulus package for measures to renovate buildings and reduce emissions.

Governments are tempted to give money directly to voters in tax cuts or one-off payments to trigger an immediate spurt in consumption rather than take the slower route of investing in green infrastructure schemes, economists say.

A recession is also a difficult time to introduce new green taxes that promote environmentally sustainable behavior.

Some governments have found ways to combine the two, but so far mostly on a modest scale.