The five green heresies of Sir Dieter Helm

First they ignore you, then the laugh at you, then they fight you, then you win – Mahatma Ghandi

Have we finally won?

We obviously haven’t fixed the climate. Emissions hit a new record last year. In fact, you could make an almost-inarguable case that we are losing like never before. But that would be a rather short article!

Instead, have we finally won the argument on the need to solve climate change?

That is the contention of my most recent guest on the podcast. He believes we have reached a ‘net-zero consensus,’ in Europe at least. Only 5 of the 600+ MPs in the British Parliament voted against the Climate Change Act. Politicians of all stripes now understand that we have no choice but to get this done.

Our next task is to solve that disconnect between consensus and action. And that is where things might get uncomfortable for climate folk.

?In the years when we were debating the deniers and fighting off the naysayers, it was only sensible to rally around the green narrative and draw upon its core talking points. But now that the climate case has taken over the mainstream, a window of opportunity has opened up to reflect on our own shibboleths.

?Which of our traditional arguments – useful at the time – may now be standing in the way of getting this thing done?

?My new favourite heretic

?Enter Sir Dieter Helm : Professor of Economic Policy at the University of Oxford; formerly Chair of the Natural Capital Committee; and the author of numerous highly regarded books on the environment, the latest being Legacy: How to Build the Sustainable Economy.

?There is perhaps no-one in the country with a better understanding of climate policy. So, when he spent our most recent episode of Conversations on Climate LINK skewering contemporary green thought as complacent and wrong-headed, I had to sit up and listen.

Honestly, it felt like taking a cold shower – uncomfortably bracing at the time, but I felt better for it afterwards. And like any cold-water convert, I now won’t shut up about it!

So here are five of Professor Helm’s most important climate policy heresies, and the reflections they have sparked in me since.

This might hurt at first, but keep reading. You’ll thank me later.

?1. Repairing the climate is not an investment. This is one of the foundational reframes in Professor Helm’s perspective and lies at the root of much that is to follow:

“You don't invest in fixing the holes in the road. That's a current operating cost. And I actually believe quite radically, you don't invest in fixing the climate. You make sure it doesn't depreciate.”

Our society’s perpetual assets – natural capitals like a safe climate, clean air and water, critical infrastructure such as transport, power grid etc – have been depreciated at a shocking rate. Repairing these assets requires a whole lot of money, but we can’t call it investment. Properly understood these are operating costs. We need to repair the damage we’ve caused; we can’t pretend that will somehow leave us with a new, richer set of capitals.

My question: When a company has operating costs structurally higher than it can afford, it has to cut other spending or dilute shareholders. In other words, does this mean we need degrowth until we have repaired and rebalanced our perpetual assets?

2. We can’t borrow our way to sustainability. Using debt for genuine investment makes sense. Borrowing to pay operating costs is running a zombie company – and it’s deeply unethical.

Our generation has switched from pay-as-you-go to maintain the assets to meet our intergenerational requirements, to this get-out-of-jail-free card: we carry on consuming and then dump you with the debt going forward. It is, in a true sense, a bankrupt approach.

Most greens have been shaped by the historical anomaly of the ‘free money’ era (1990-2020) and hope governments can print our way to net-zero through MMT and the like. But that party is over, and we now face the hangover.

My question: What are the implications here for a sustainable money system? MMT is rooted on an analysis of fiat money directed by central banks. Does ecological balance require a return to a money base limited by actual resources – as per Zoltan Poszar’s commodity-based ‘Bretton Woods III’?

?3. Net-zero will leave the West poorer. If we can neither invest nor borrow our way out of our climate jam, then there is only one option left – a radical increase in savings. Dieter points out that all major economic transformations rest on very high savings rates: around 30% for Japan’s miracle, closer to 50% for China. These savings fuel the spending that is required to rejuvenate assets and capitals. In the West however, deindustrialisation and current account imbalances have seen us actively dissave.

When we talk about investing in net zero in windfarms or solar panels or whatever, okay, that investment has to be financed from someone's savings. So, what we've been doing in the UK and US is using savings from China and elsewhere to live beyond our means.

In the absence of debt, higher savings demand lower consumption. That means a more sustainable economy will be a poorer one – at least in terms of traditional financial metrics.

My question: Dieter also says we need to reimagine society around the subject of the citizen, not the consumer. That might point the way to reimagining our conceptions of wealth too.

If governments changed economic metrics away from income and growth towards the health and distribution of capitals, could we end up as poorer consumers but richer citizens? Could new macro metrics shift democratic norms away from transactional/pocketbook appeals and towards a politics of stewardship?

4. Modern democracies may be incapable of solving overconsumption. The function of healthy institutions is to restrain the insatiability of human nature. But they’re not really working today to protect citizens from the ecological consequences of their desires.

It isn't always true that a democracy will result in excess consumption, but it probably will…The worry is there's no longer any consensus about the rules of the game.

As Dieter puts it, the West chose to the Big Bang of the 1980s in full knowledge that it meant taking the safety rails off depreciating our capital base. Today, it looks hard to stuff that genie back in the bottle. We see this with the rise of anti-green right-wing populists across the West; even though their arguments are ecologically illogical, they can’t be wished away in representative democracies.

My Question: This suggests we need a new form of democratic compact to solve the environmental challenge, and it’s not as simple as tweaking the voting system. The US, UK and Germany all have very different models, but all are beholden to the anti-green right today.

Should the repair of public assets – including the climate – be shifted beyond the democratic sphere, in the same way that independent central banks are charged with control of the money supply? Should we reboot the Natural Capital Committee as an executive, rather than advisory, function? How would we cope with the sheer scale of the interventions such undemocratic bodies would command?

5. Our climate targets are garbage. Building NDCs around territorial emissions creates a statistical fiction that is deeply distorting effective climate action.

People think that climate change is going to be fixed in Oxford or England, but they don't seem to understand the global problem. They're told by our Climate Change Committee that when we get to net zero, we will no longer be causing climate change. It’s utter nonsense.

Because NDCs ignore imported carbon, countries like the UK are incentivised to shutter all production at home – even when its comparatively more efficient – and instead buy goods from more intensively polluting countries overseas. The result is to salve Western consciences at the cost of higher global emissions. For example, the UK NDC calculation suggest 2014 emissions were 29% lower than 1990. Accounting for imported carbon, they were actually higher.

My Question: This raises a number of worrying implications about the disconnect between the scale of efficient climate action (global), and the scale of democratic accountability (national). Throw in the ethical demand from the Global South to experience the same developmental arc as the Global North, and we have some real dilemmas.?

Can this problem be solved on the level of accounting congruent with existing political units, by switching from measuring territorial carbon production to consumption? Or does it imply the need for supranational global governance to take over some of the coordinating management functions of national governments: setting unified carbon taxation, redistributing resources between winners and losers, and being accountable for global targets?

What do you think?

Congratulations – you made it!

I’m sure these ideas will stew away in you over the coming weeks – and you can find much more detail in Dieter’s brilliant new book, Legacy.

In the meantime, let me know what you think in the comments.

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