Why Saving the Planet Could Save the Economy

Yesterday's GDP figures reveal that we're back in recession. It's clear that urgent action is required to prevent our economy from slipping back even further - but this news comes on the back of a lack of leadership by the government on one of the few sectors of our economy that is actually expanding.

The downgrading this week of a much-trailed keynote speech on the environment by the prime minister into an informal chat with ministers and business leaders sends a worrying signal to our growing low-carbon industry right when growth in other sectors is falling back.

The leader of the 'greenest government ever' can seemingly barely bring himself to talk about the environment. The signal this sends is potentially disastrous, and not only for green campaigners, but for the economy too.

At the moment private investment is at the kind of low point rarely seen in Post War years. This is in large part down to nervousness about future demand. Investors and businesses need some confidence that demand will be strong enough to make it worth expanding whatever business they are in, with the increase in employment that this generally entails. Of course, if investment remains weak then getting out of the downward spiral becomes ever more difficult. If we are to escape the gravitational pull created by the low investment vortex then the economy needs stimulation from policy-makers.

A recent paper by the Grantham Research Institute proposes a way of providing one such signal. In times of constrained spending, the government can stimulate additional demand by encouraging private spending on goods which are required to meet long-term policy objectives. The classic example in modern times is the low carbon technologies provided by a growing set of industries already worth hundreds of billions worldwide.

It is possible to increase investment into these industries, and in the process to stimulate growth and job creation, while at the same time advancing energy security and tackling climate change.

There is already limited movement in this direction - electricity companies are required to source a small percentage of their energy from renewable sources, thereby encouraging a low level of investment in wind, solar and marine energy. The potential for doing more is huge. And money invested into these industries is not money that would otherwise be spent elsewhere, but is rather resources that are presently being sat on by nervous corporations in the form of cash or low-risk financial investments like government bonds.

If these financial resources could be mobilised into productive industries, then economic benefits would quickly follow. For example, the wind power industry alone is expected to invest £5 billion in the UK economy this year, with projects in the pipeline out to 2020 worth a further £50 billion. Nearly 12,000 jobs have already been generated in the UK through wind, wave and tidal energy projects and this is set to rise to nearly 90,000 people by 2020. Moreover the jobs and investment that come with wind energy are spread around the country, including many economically weaker areas. The same can be said for solar and other clean energy sources.

The technology exists and investment is waiting to be mobilised. So what is missing in getting the two working together? The simple answer is policy and politics. The coalition government has been at best equivocal about renewables, while many backbench Conservative MPs have been actively hostile to the sector - despite polls showing strong public backing for renewable energy. The government's reforms to the electricity market, originally planned to be released in May, could potentially drag on for years, causing further uncertainty for investors.

If the government appears to be against investment and UK job creation, who can blame the private sector people for sitting on their money? To get us out of this hole some clear leadership signals are needed from the government, preferably from the top and prime minister himself. It is time to ramp up investment in renewables, and the only way that will happen is if the government sends the signals that show it is serious. A clear way the prime minister could do this is by publicly resisting calls from his back benchers for a further cut in support for that most totemic of renewables, onshore wind.

Original published by the Huffington Post