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Published on Tuesday, March 3, 2009 by Financial Times

Eco Groups Fear Opportunity Lost

by Fiona Harvey

Economic stimulus plans being rolled out across the world could commit countries to rapid growth in greenhouse gas emissions, canceling some of the green initiatives included within them, analysis has found.

The packages of tax cuts, credits and extra spending have been trumpeted for their environmental credentials by the governments proposing them, but a closer look shows that green spending account for only a small part of the bigger initiatives.

"This is a once in a lifetime opportunity that is being fumbled," said Ben Stewart, spokesman for Greenpeace, the environmental group.

Much of the spending will go to projects that will, in fact, increase emissions, such as new roads or fossil fuel power stations, while too little money will be devoted to low-carbon projects to make a real difference, experts believe.

For instance, Barack Obama, the US president, wants $27bn (€21bn, £19bn) to be spent on new roads, which will raise traffic emissions. Although some funds will be spent on developing low-carbon vehicles such as electric or hydrogen cars, the benefits gained will be outweighed by the emissions generated by the extra petrol-driven cars.

Such increases in spending on high-carbon activities are a serious threat, according to a growing number of economists, politicians and environmental groups.

They are concerned that a failure to "green" the huge fiscal expansion proposals will doom the world to ­decades of high-carbon economic growth and spell ­disaster for the planet.

Andy Atkins, executive director of the environmental charity Friends of the Earth, said governments must do more to avoid locking the global economy into decades of high-carbon growth. "We need urgent and comprehensive green action, not more token gestures and hot air."

The United Nation's Environmental Programme estimates that only South Korea is now spending enough of its stimulus on green investment to cut the costs of climate change later.

Japan and India will spend paltry sums on green investments such as renewable energy, energy efficiency and low-carbon technologies.

Tokyo will devote 2.6 per cent of its spending to green investments, mainly energy efficiency for buildings, out of a total stimulus package of $486bn, according to an analysis by HSBC.

New Delhi has no plans to spend any of its $14bn fiscal package on low-carbon ­activities.

The same analysis suggests China will spend 38 per cent of its $586bn on green themes. However, the size and details of the Chinese stimulus are still unclear and many economists believe the green impact will be much more modest and could be outweighed by ­polluting infrastructure projects.

On current plans, Europe and the US fare a little ­better than Asia in green terms.

Mr Obama has held out the prospect of millions of new "green-collar" jobs, in activities such as refurbishing federal buildings to making them more energy efficient and overhauling the country's creaking electricity transmission networks. According to HSBC, about a tenth of the US's proposed tax breaks, extra spending and other incentives can be classed as green.

France and Germany are leading the way in Europe, with a fifth of the $34bn French package and 13 per cent of Germany's to be targeted at low-carbon industries. In the UK, where ministers have promised hundreds of thousands of new green jobs, about 7 per cent will go to environmental goods and services.

Meanwhile, Italy will channel only 1 per cent of its planned $100bn to green measures and Poland, which is highly reliant on coal-fired electricity, does not plan for any of its stimulus to be green.

Lord Nicholas Stern, the former World Bank chief economist who wrote the landmark study that found the cost of tackling climate change would be far less than the costs of unchecked global warming, has led calls for green measures to be at the heart of global stimulus measures.

He said: "It is vital that these investments do not lock us for many more decades into an unsustainable high-carbon economy."

Investing in low-carbon technologies would improve the world's economic prospects for the long term, he said. "If we are going to make this expansion, let's look at what is going to be the growth story of the future. Low-carbon growth is going to be the only growth story of the future."

Lord Stern calculates that governments need to spend $400bn on green measures to achieve the emissions cuts required and to help the global economy recover.

Only if spending was concentrated on low-carbon technologies would the world escape the prospect of raising emissions for years to come, and "thus having to spend much more in the future to bring them back down to safe levels", Lord Stern said.

Still, green companies are generally hopeful about the packages and it is easy to see why. Sums of the sort being contemplated under the stimulus plans dwarf the amounts devoted to green subsidies and other government incentives in recent years.

"If the financial crisis has done anything, it has made sums like $50bn seem small," said Steve Howard, of the Climate Group, an influential organization that attempts to bring businesses together to tackle climate change.

So if even a small proportion of the proposed stimulus packages was spent on projects such as more renewable electricity generation, energy efficiency and developing low-carbon technologies, that would represent a huge increase to the companies involved in such plans.

Pavan Sukhdev, a senior banker from Deutsche Bank who has worked on green ideas with the UN, said: "Investments will soon be pouring back into the global economy. The question is whether they go into the old, extractive, short-term economy of yesterday or a new green economy."

Copyright The Financial Times Limited 2009
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