Transforming economics

10 ways we can make the system better for people and planet

How can our economic system be transformed so that it helps us to meet the key challenges of the 21st century?

London business district, Canary Wharf

With the urgent need to rise to the climate challenge and address global economic instability, many people have been working on new approaches that ensure a level playing field for all zero and low carbon choices. New business models and economic indicators could transform how society sets out its goals and evaluates our progress towards them.

Such innovations can offer communities a much better share in the profits while exploring ways to have more meaningful work — without the fantasy that never-ending growth is possible on a finite planet.

As part of our ‘100 Good Ideas’ series drawing on research for CAT’s Zero Carbon Britain: Making it Happen report, we look at ways we could create an economic system that puts people and planet ahead of private profit.

Where we are today

A great many of the barriers to the zero carbon transition are deeply rooted within the current economic paradigm, including fossil fuels appearing to be cheaper because of hidden subsidies, externalised costs and economies of scale.

There is also an investment gap for the necessary huge investment in renewable energy and other zero or low carbon systems, which often have higher initial costs but lower longer term costs, and which struggle to find cost-effective sources of finance.

The key ideological barrier resides in resistance to ‘interference’ in markets rising from neo-liberal faith in the primacy of market forces.

There is also a pervasive assumption that perpetual economic growth is synonymous with improved well-being and is both sustainable and desirable. Yet, somewhere between 1950 and 1970 the increase in social welfare stagnated or even reversed in most rich countries, despite a steady increase in GDP.

10 ideas to re-boot our economy

81) Let’s measure what matters

A shift from the narrow focus on economic growth and GDP could transform how society sets out its goals and evaluates progress towards them, encouraging business and ownership models that prioritise climate and social benefits as much as economic returns.

While in 2015 the UK was ranked fifth in the world in terms of GDP by the World Bank, it was ranked 23rd in terms of World Happiness and 14th in terms of Human Development (now 16th), revealing much about what we measure.

Developed by the Kingdom of Bhutan, the concept of Gross National Happiness measures psychological well-being, health, education, time use, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards.

Other alternatives to GDP include the Genuine Progress Indicator, the Human Development Index and UN Sustainable Development Goals.

To find out more see Zero Carbon Britain: Making it Happen page 214

82) Level the economic playing field

Ending the massive subsidies given to fossil fuels and adopting a ‘polluter pays’ policy would ensure that for any energy choice the related costs of environmental damage, such as poor air quality or the need for future climate adaptation, are no longer externalised.

UK subsidies for fossil fuels are conservatively estimated at £26 billion a year and the UK is one of the few G20 countries that is increasing its fossil fuel subsidies while cutting renewable subsidies.

A report by the Nordic Council of Ministers provides useful guidance on principles for successful reform of subsidies, including clear and robust consultation and communication to build support. The report also highlights that social safety nets have been provided in many countries, for example reforms of coal subsidies in Germany and Poland were accompanied by support for regional economic development, social assistance and generous severance packages for affected workers.

To find out more see Zero Carbon Britain: Making it Happen page 209

83) Don’t tax goods, tax bads

Canada’s province of British Columbia introduced a revenue-neutral carbon tax (where the revenue is used to reduce the rate of other taxes). Since the tax was introduced in 2008 the province’s fuel consumption has reduced by nearly a fifth, GDP has kept pace with the rest of Canada, and the tax shift has enabled British Columbia to have Canada’s lowest income tax rates. About 60 other countries, states and provinces are now considering implementing carbon pricing.

Congestion charging in London has been successful in reducing car dependency and raising revenue for investment in public transport. According to Transport for London in 2013 car driver trips in London were 14% lower than in 2001, despite a 15% increase in London’s resident population over the same period, while the volume of road traffic fell by a similar amount.

To find out more see Zero Carbon Britain: Making it Happen pages 210 and 241

84) Improve access to finance for renewables

Germany’s long tradition of civic and municipal ownership of energy is thought to have been facilitated through regular access to finance from co-operative, state owned and local banks.

There is a similar story in Denmark, where co-operatives and, more recently, larger scale citizen ownership models have contributed to a rapid expansion of onshore wind.

The County of Hampshire has now established a community bank, inspired by the German banking models in support for renewable energy.

Other emerging examples of citizen finance in the UK include Abundance Investment, which offers debentures for small-scale investors, Pure Leapfrog, which provides affordable finance through a Community Energy Fund and the Robert Owen Community Banking, which seeks to invest in community energy projects.

To find out more see Zero Carbon Britain: Making it Happen page 212

85) Provide low and zero interest loans for energy efficiency

Making affordable finance accessible for all energy choices creates a level playing field. For example, Salix have provided interest-free loan schemes for energy saving investments in the public sector, paid back through energy savings. These have proved popular with local authorities, the NHS, schools and universities. There are many examples of successful ‘pay as you save’ energy efficiency loan schemes from other parts of the world, including How$mart in the US, Energiesprong in the Netherlands and KfW in Germany.

To find out more see Zero Carbon Britain: Making it Happen pages 212 and 213

86) Alternatives to perpetual growth

Infinite growth on a finite planet is clearly impossible. Proponents of ‘Degrowth’ have been exploring ways to offer meaningful work, sustain a functional welfare system, increase equality and eradicate poverty, without the need for never ending growth.

Buen Vivir (Spanish for “good living”) is a transformative programme based on the concept of collective well-being which embraces many elements of degrowth. It has gained ground in South America since the mid-2000s and has already been incorporated into the constitutions of Ecuador and Bolivia.

To find out more see Zero Carbon Britain: Making it Happen page 218

87) Explore new business models

Alternative business or ownership models can offer a huge opportunity for key stakeholders to demand responsible behaviour, whilst delivering a better deal for people and the environment.

Transition Enterprise, for example, is defined by the Transition Network as “a financially viable trading entity that fulfils a real community need, delivers social benefits and has beneficial, or at least neutral, environmental impacts.”

Other examples include Energy Local — working with Community Energy Wales they are developing a ‘farmers’ market’ for electricity that would allow communities connected to the same substation to buy electricity directly from local renewable suppliers. It is estimated that a 100kW micro-hydro scheme could retain £25,000 a year within the local community using this system.*

A number of companies are also using circular economy principles, designing out waste in a closed loop system rather than following the traditional ‘take, make, dispose’ linear economy model. In London alone it is estimated that there is the potential for 40,000 jobs in the circular economy sector.

To find out more see Zero Carbon Britain: Making it Happen page 221

88) Public and municipal ownership

Key assets like the national grid or railways can be moved into new and innovative forms of public ownership to ensure that the necessary transitions take place and that profits are reinvested.

The ‘We Own It’ campaign calls for an energy system based on a combination of national, regional and local public ownership. This includes a publicly owned grid, which would allow renewable energy projects to get connected to the national grid at a reasonable cost and would better deliver the necessary investment and improvements in the electricity grid.

Taking our railways back into public ownership could save £1 billion a year, which could both lower fares and improve services. This could be done in a step-by-step approach with minimal cost to the public purse, through acquisition of franchises as they expire or as companies fail to meet franchise conditions.

To find out more see Zero Carbon Britain: Making it Happen page 229

89) Re-think consumerism

Policies that drive excessive and disposable consumerism must change. There are clear gains to both people and planet from promoting both the sharing economy and the circular economy, for example.

The Swedish government is reducing the VAT rate on repairs and introducing tax rebates of half the cost of repairs to appliances. Such policy measures can help address ecological limits whilst also increasing happiness and well-being. Such a shift could also be supported by reducing the working week; the New Economics Foundation suggests that a reduction to 21 hours could help tackle over-consumption, overwork and unemployment, increasing our quality of life.

To find out more see Zero Carbon Britain: Making it Happen page 263

90) Support community investment

There is enormous scope to increase community ownership, particularly in energy supply and distribution. This has been achieved through law in Denmark, and in Germany around half of renewable energy capacity is owned by citizens either by individuals, co-operatives or community groups, or as community shares.

To find out more see Zero Carbon Britain: Making it Happen pages 212, 226 and 229

Making it Happen

Shifting our economic ideology away from an outdated model that has exacerbated environmental problems and social inequality can bring to life a fairer and more future-proof paradigm.

Our economic system needs to deliver on wider goals set by society, and work within the limits of natural resources — facilitated through new business and ownership models that can help tackle over-consumption, overwork and unemployment whilst increasing our quality of life.

You can download the full Zero Carbon Britain: Making it Happen report here.

The Centre for Alternative Technology also offers a wide range of education, training and short courses which can help support us in exploring new ways of doing things — visit www.cat.org.uk

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* Chris Blake, presentation to Rapid Energy Transitions Workshop, CAT, 29 April 2016.