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Inexperienced New Deal for Zimbabwe? Funding the Transition

Green New Deal for Zimbabwe? Funding the Transition

Zimbabwe, like the rest of the developing world, faces a looming economic and environmental meltdown propelled by a combination of a credit-fuelled financial crisis; accelerating climate change and the looming peak in the extractive industries particularly coal mining and electricity generation from fossil fuels. Policy makers are on record setting new production targets in these industries. In my previous article published in this newspaper a fortnight ago, I urged the government to stop funding new coal projects. All ideas have their moments. Some of them are pivotal. The trouble is knowing when those pivotal tipping points arrive. The rest of the world is now focusing on developing green energy avert the accelerating climate change, Zimbabwe cannot miss this opportunity – especially as the country steps into a ‘new dispensation under the newly elected government led by His Excellency E.D Mnangagwa. As much as the government is making frantic efforts to attract foreign direct investment (FDI) under the Zimbabwe is open for business mantra, there must be equal efforts to direct such investments towards developing infrastructure for a green energy. The government must start to strategically fund the infrastructure for greener, smarter and cleaner energy to reap the attendant benefits.

Evidence from other countries have shown that it is possible to subsidise the national energy grid through renewable energies of solar and wind. Germany being the most outstanding example. Locally, authorities must be commended for the piloting of ‘smart energy’ in traffic lights systems – noticeably in the city of Gweru, Harare (Airport road) where traffic lights are powered by solar energy. The efforts must now be rolled out to a larger scale. Many traffic casualities have occurred particularly in high volume traffic roads due to failure of traffic lights caused by power cuts. Government and local authorities are urged consider powering all traffic lights with solar.

It is a fact that transition to low carbon cannot be achieved fast enough to avoid dangerous climate change without massive direct government investment. It is unfortunate that the Gwanda Solar project could not see the light of day due to corruption and greedy by some few individuals at the expense of the country’s progress but that was a move in the right direction. However, all hope should not be lost due to one failed project – rather it must be taken as a learning curve. For starters, why should government sub-contract such a high priority project? In my view, the government of Zimbabwe not only has the technical capacity but also the resource capacity to run the Gwanda Solar project and many other related projects. With high levels of unemployment of university and college graduates, these are projects which the government should be employing young people to run even on a short term basis.

Funding renewable energy has been shunned for high capital demands. However, in recent years economists have argued that the cost of Solar renewable energy generation has been declining dramatically for more than a decade, and the decline is predicted to continue. The International Monetary Fund (IMF) and World Health Organization (WHO) further point out that, the health costs of just local pollution from fossil fuels include 3-4 million annual premature deaths from outdoor air pollution, as well as extensive morbidity.

On the other hand, ending fossil fuel subsidies and properly taxing carbon emissions would actually provide a large fiscal surplus for consumers, most equitably if the tax proceeds were returned to citizens on an equal per capita basis as a ‘fee and dividend’ - perhaps the most politically acceptable form of carbon pricing, which benefits the poor who use least energy on average.

And of course these measures would accelerate the ongoing transition from fossil energy to green energy. Combining all the savings from abolishing fossil fuel subsidies, reducing health costs of pollution, increasing energy efficiency, taxing carbon emissions, and gradually phasing out the world’s huge current investment and production expenditure on fossil fuels of around $5 trillion (globally) annually would not only generate major local health benefits in the medium term, but also provide a financial surplus more than sufficient to fund the transition. So in funding the transition to green energy, government should not only consider the immediate capital demand (quantifiable costs), but also the avoidable costs (qualitative benefits accruing) in return.

However, much of the benefit will be delayed, so much new investment is urgently needed to speed up transition and ensure that the majority of lower income consumers do not suffer initial losses, and this could be accomplished by the ‘Green New Deal’ discussed below. The additional and incalculable benefits of averting dangerous climate change represent the ultimate bonus of survival in the long run.

Expanding government expenditure when resources are under utilized in recession, or as currently, when most economies are far from full employment and suffer from extensive underemployment and low participation in the labor force, typically generates a larger increase in output than the initial expenditure the ‘Keynesian multiplier’. In the end, the extra expenditure more than pays for itself.

Direct public investment in a Green New Deal thus enables the urgent goal of a low carbon economy being achieved sooner and limits the risk of irreversible climate change, while increasing growth and employment on the way. A progressive Zimbabwe cannot miss this opportunity.

The Green New Deal will rekindle a vital sense of purpose, restoring public trust and refocusing the use of capital on public priorities and sustainability. In this way it can also help deliver a wide range of social benefits that can greatly improve quality of life in the future. The Green New Deal includes policies and novel funding mechanisms that will reduce emissions contributing to climate change and allow us to cope better with the coming energy shortages caused by peak oil. It consists of two main strands. Firstly, it entails a structural transformation of the regulation of national and international financial systems, and major changes to taxation systems. And, second, a sustained programme to invest in and deploy energy conservation and renewable energies, coupled with effective demand management. This huge transformational programme must be designed to substantially reduce the use of fossil fuels while in the process tackling the unemployment and decline in demand caused by the credit crunch.

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