Growth debate 2: Welsh economy needs a shove

John Osmond asks whether we should be putting ‘green’ aspirations on the back burner while we catch up with the rest of the UK

Is ‘green growth’ an oxymoron? That was a question that went through my mind as I sat through a breakfast briefing the other day on how Wales should put itself on a path towards economic development that is compatible with environmental limits and the impacts of climate change.

My question implied that any growth at all must, by definition, be damaging to the environment. But that surely cannot be the case, can it? This is tricky territory. What are green jobs? For instance, we were told at the seminar that there are more people employed in green jobs in Wales today than work in the financial services or in the motor trades. But cannot some people who work in the financial services also be working in a ‘green’ way? And if you’re developing a car run on hydrogen, cannot that be green, too?


Way ahead retrofitting not fracking

Calvin Jones and Martin M. Jones argue that our future relies on learning to live with the sunshine that comes today.

What in this terminology constitutes being in a ‘green’ job? The answer, broadly speaking is if you work in what the statisticians call the low carbon and environmental sector. Apparently 41,500 people were employed in this sector in Wales in 2010-11. Together they achieved an increase in sales to a total of some £5.3 billion on the year before – a growth of 4.5 per cent. These statistics were supplied by Andrew Thurley, Director of Sustainability and Climate Change with PwC who has been collaborating with the Climate Change Commission for Wales on thinking about a green growth strategy. His presentation can be found here, on the Cynnal Cymru website. At the seminar Peter Davies, Chair of the Climate Change Commission, declared:

“A low carbon economy provides a significant opportunity for Wales to generate sustainable economic growth while tackling the significant challenges of climate change. Wales has made steady progress so far but if we want to be green market leaders there is a lot of work to be done. We need to ensure that strong leadership is in place, along with the policies to increase investment. A Clean Revolution for Wales will set out the interventions needed, enhance consensus amongst business and political leaders, along with planning the steps to a low carbon Welsh economy.”

Peter Davies is right to say there is a lot of work to be done. Andrew Thurley’s main message for the seminar was this:

“Wales has already started its journey – but there is no common ‘green growth’ thread. We are not fully grasping the potential.”

Instead we have economic strategies, initiatives and campaigns in a multitude of directions coming out of our ears. Thurley listed some of them:

  • Green Skills Strategy
  • Climate Change Strategy
  • Jobs and Sustainable Growth programme
  • Energy Wales: A Low Carbon Transition
  • The Climate Group’s Clean Revolution campaign
  • Arbed
  • Green deal
  • Enterprise Zones Wales
  • Key Sector strategy with sector panels made up of private sector business people

Where is the connectivity in all of this? Who is doing the joining up across government? You might say that we’ll find some integration lurking in the recesses of the legislation the Welsh Government is offering to make sustainable development its ‘central organising principle’. However, we have three legislative initiatives being promoted in the coming year – the Sustainable Development, Environment, and Planning Bills. I wouldn’t hold your breath in discovering the magical elixir of an overarching strategy for ‘green growth’ in that mix.

We need some serious thinking around this agenda. Wales is currently languishing at the bottom of the UK prosperity league, below the North East and Northern Ireland. This week we learned that our Gross Value Added (GVA) figures, which measures total value of goods and services produced, showed that in 2011 we were 75.2 per cent of the UK average per head, up from 74 per cent in the previous year. Despite this welcome, if modest, uplift our economy has been going backwards for more than 20 years.

It may be that if we’re to address this seriously we’ll have to put ‘green growth’ on the back burner for a while, and just go for ‘growth’. That would mean finding the political courage to embark on a number of seriously large investment projects, like the Severn Barrage, say, or a new nuclear power station in Anglesey, and certainly a Metro system for south-east Wales. We need to start thinking in terms of pump-priming our economy in a much more ambitious way for probably a couple of decades before reaching a point where we can say that we can afford to find a greener way to a steady state equilibrium – but on the basis of a more equitable level of living standards with the rest of the United Kingdom.

John Osmond is Director of the IWA.

12 thoughts on “Growth debate 2: Welsh economy needs a shove

  1. The Pembroke power station debacle provides a good example of what happens when we focus simply on ‘growth’. Its use of an out-dated cooling system means that it will kill millions of fish each year, degrade one of Europe’s most important marine environments, and waste energy equivalent to 40% of Wales’ electricity demand. It now looks like a large amount of money will have to be spent to install an acceptable cooling system to prevent it from breaching numerous EU environmental laws.

    While Pembroke is embroiled in controversy, a similar power station at the Isle of Grain in Kent is enjoying untroubled electricity generation and a secure future because it is using ‘green’ CHP (Combined Heat and Power) technology which reduces CO2 emission by 350,000 tonnes a year and does not harm the local marine environment.

    It’s a little difficult to understand what point John is trying to make as he suggest we put ‘green growth’ on the back burner and then recommends three large ‘growth’ projects – the Severn Barrage, a new nuclear power station at Wylfa and a Metro system for south-east Wales – all of which could all be classified as ‘green’, if not the greenest. The £30 billion Severn Barrage, for instance, would only generate 16 TWh/pa of electricity compared to the 15 TWh/pa output of a £1billion gas-fired power station. Wiser use of scarce financial resources would make money available for other low-carbon technologies.

    And if it’s growth we want, ‘green growth’, according to the CBI, is the way to go. It points out that over a third of the UK’s economic growth in 2011-12 is likely to have come from green business and that, in 2014-15, green businesses are expected to halve the UK’s trade deficit.

  2. John, that’s exactly the kind of thinking that’s got the planet staring in the face of climate disaster – the idea that because Wales is a bit poorer than England we should put environment on the back burner and grow the economy any which way. Say hello to fracking (see here), open-cast coal mining etc. What sort of message does that send to countries much poorer than Wales?

    The fact is that we simply don’t have “a couple of decades” in which we pump-prime the economy in a way that ignores the environment. You know as well as anyone, thanks not least to PwC (see here), that we need to be decarbonising the economy at a rate never before achieved for the next forty years if we’re to avoid catastrophic climate change.

    The next few decades are the decades of action. Happily we can pump-prime the economy and achieve massive environmental benefit. By a huge, state-funded retrofit programme for every house in Wales, starting with the poorest quality housing. Masses of jobs created for the housing refurbishment sector, along with research and skills that can be exported right around Europe. And by a huge upscaling in ambition for renewable energy, with clear targets and policies to take us there. Just take the lead from Scotland.
    The price of this? Probably less than the cost of Wylfa plus a Severn barrage. But with jobs and benefits spread across every community in Wales.

  3. John
    Your pleas for more ‘joined up’ government and the requirement to see greening as an economy-wide task are welcome. However, all the science, climate and resource-base, suggests that at seventy-something percent of UK economic wealth per capita we are still way beyond what we can ecologically sustain.

    Going for growth because the English are a fair bit wealthier than us seems a conceptually flawed way of developing an appropriate economic policy for Wales. Our problems here require diffuse, decentralised development that encourages community-circularity of wealth, not big-bang projects enabled by non-Welsh capital, employing lots of non-Welsh labour and thus with economic rents disappearing as soon as the ribbon is cut.

    That said, a Metro ain’t a bad idea. Run of course, as part of the post-2018 Welsh not-for-profit rail franchise.

  4. John,
    I couldn’t disagree with you more. Have you already forgotten the Stern report? That bit where he said the cost of doing nothing about climate change would far exceed the costs of attempting to mitigate against it? Putting the green agenda on the back burner is, as Gareth rightly says, exactly the reason we’re facing climate catastrophe.

  5. My take on this post? It’s economics, but not as we know it (sorry Star Trek).

    John’s idea is to try to do ‘business as usual’ better than those areas of the UK that already excel at it. Is that really the way that we’re going to improve our lot in Wales?

    How about this as an approach: figure out what the growth areas of the economy will be in 10-20 years (here’s a clue; tackling flooding, novel housing methods/approaches, new transport techniques, low-carbon infrastructure, green infrastructure, renewable energy, energy efficiency), and start working out an economic system based on that.

    Chasing economies which have figured out efficient ways of obtaining value from high-carbon structures is a game we are bound to lose, and we’ll do further damage while trying. Planning for a future economy while we have a chance to get ahead? A much smarter approach.

  6. If the economy needs a shove – it should not be over a cliff. Surely enough had been learned from the recession both in Europe and North America that the “green on back burner” approach simply does not work, nor does an emphasis on large scale projects to get things moving. It’s more subtle than that, and requires finesse not a sledgehammer.

    The question about connectivity among the plethora of programs is rightly put, and needs to be addressed. Conferences are fine up to a point, but regular dialogue between the First Minister and leaders in the Welsh economy as part of the annual budget cycle would be a better approach, with the implicit assumption that putting green on the back burner is not on the table for discussion.

  7. This is an interesting series of contributions exploring ways forward for Wales. However I’m starting to get quite confused.

    Yesterday we had Gareth Clubb from Friends of the Earth Cymru arguing for a market based personal approach to Carbon trading which unfortunately omitted to fully consider the distributional aspects of such a scheme and it’s effects over time.

    If you read some of the interesting articles in the 28th July 2012 New Scientist special report on Inequality then we find that Wealthy people have larger Carbon foot prints than poorer people who earn less, but their greenhouse emissions per pound spent are less.

    Following this logic and Gareth Clubb’s then we should be advocating economic policies that widen income gaps, making the richer richer and the poorer poorer.

    I dare anyone to take that to the Welsh population as a solution to Mitigation of Climate Change.

    Today the Director of IWA suggest we put aside environmental concerns in a “Dash for Growth” using Keynesian logic to support those large infrastructure / energy projects that are waiting for us on the Transnational companies and PFI “back burner” as a way to increase Wales’ GDP and/or GVA. Apart from reports that have suggested that the Barrage is an extremely expensive way to produce electricity (and distribute, where 8 – 12 % losses occur), or the risk and cost arguments going against Wylfa B (YnysMônShima anyone?)
    The problem with the “growth” paradigm of course is that increasing economic “growth” as perceived by neo classical economic theory is likely to dramatically increase our country’s ecological foot print.

    Logically we would then have to look to redouble our efforts in increasing inequality to counteract the adverse effects of “growth”.

    But then if we consider the effect of increased personal income (ability to consume) on our happiness then beyond a fairly low point it doesn’t. This is shown in the following graphics.

    The data shows that, despite more than doubling our wealth, life satisfaction in the UK has barely moved (see graph below). This phenomenon is known as the Easterlin paradox.

    So the upshot of following this approach, is to make rich people richer, not necessarily happier, poor people poorer, and probably less happy, whilst whiling the short period of time available to avoid the economic tipping point as predicted by the Club of Rome in their latest 40 year anniversary review of “Limits to Growth”

    Surely there are better alternatives that our small, but extremely intelligent country can offer to the World and our immediate neighbours in England and of course Europe?

    Have we forgotten our approach to wealth and revenue redistribution? What about control over important assets the true value of which should be made available to the people and government of Wales.

    If we look more closely at Water for example. Excluded from the devolution agreement, not included in Silk but one of Wales’ most important exports across the border to England. As a product of Natural Ecosystem services this resource is probably vastly under priced. (If you think about it the opportunity cost to England of Welsh water imports is the cost of England replacing it with their own reservoirs. There is room for negotiation there.) The Regional disparities in economic progress across the U.K. have been built on such poor deals for the regions allowing the over heating of London and the South East which leeches resources from our country without adequate compensation.

    Rather than going for a “Dash for Growth” we need to start thinking beyond the narrow business and market orientated “Box.”

    We need to start adopting a Post Growth approach to Economic policy.

    Indeed it would probably be more beneficial to our economy, social and ecological conditions and well being of the Welsh population to encourage a bit more home grown food production by declaring a weekly National Gardening leave as advocated by Andrew Simms of the New Economics Foundation recently. But that would be getting our hands dirty wouldn’t it.

    Give us back the true value of our assets and our time and we can start to conceive of a true resilient, happy and socially well distributed Wales.

    I look forward to Calvin Jones’ article tomorrow which knowing him should push us back in the right direction.

  8. John, I fail to see how the examples you give – a Severn Barrage, a new nuclear power station and the South Wales Metro – would be incompatible with a desire to transform Wales into a more environmentally friendly and prosperous nation. I consider myself an environmentalist, yet I differ from most of the green movement in Wales in that I do want to see a new power station at Wylfa, and, if proved a more cost-effective way of generating electricity than the unproven technology of tidal lagoons, I would certainly be in favour of a barrage across the Severn estuary too. Each one of the potential developments you cite has negative environmental impacts, yet I believe that taken in their totality the positives outweigh the negatives. Nuclear is a proven technology which has the potential to drastically reduce our greenhouse gas emissions. The Severn Barrage, its effect on habitats upstream notwithstanding, has the potential to generate a vast quantity of renewable energy. The South Wales metro should be integral to any ambition to get people out of their cars and on to public transport.

    It seems to me that each of these projects (or, if not the Severn Barrage, then at least some method of exploiting the tidal range of the Severn estuary) should be at the heart of our ambition to build a greener, more prosperous Wales.

  9. The truth is that economics is not sufficiently developed to give us the right tools to weigh all this up. Rather than a neo liberal economics, built on the fanciful pure mathematical models of academia, which puts international competitiveness and export led growth above all else, we need to regain control over the markets. This will protect us from another 2008 style crash and enable us to protect our communities and our environment, by taking proper account of all those ‘externalities’ that markets miss. Here’s a suggestion of how we could do that:

    There’s an interesting debate going on about whether we need growth at all! Some think that we in the developed world should be looking to a steady state economy which doesn’t suck in ever greater quantities of natural resources from around the world, but instead properly accounts for the global footprint of our lifestyle and measures our wellbeing instead of simply economic activity. If everyone in the world lived as we in Wales do, we’d need 3 planet Earth’s in order to have enough natural resources. The Green House thinktank is exploring post growth ideas, so if you’re interested have a look:

    Alun is quite right to point out that despite us getting wealthier since the 1950s our happiness has not continued to increase, when basic needs have been met, getting wealthier just means you have more stuff, great if your goal is to fuel turbo capitalism, but not so clever if what you wanted was to be happier! As the Spirit Level book has shown, how equal people’s incomes are in a given society, strongly links to levels of wellbeing. This is true not only in developed countries like the Netherlands and Denmark, but in developing countries too.

    Instead of gauging our wellbeing by using very blunt economic measures to compare ourselves with other areas of the UK, we would do better in looking to address inequality in Wales. Have a look at how badly the UK is doing on international measures:
    Is the best we can aspire to really just to catch up with general UK levels of inequality and in so doing maybe even increase our unhappiness, surely Wales can do better?

    Compass are a pressure group pushing for a renewed social democracy, if it’s good enough for the Danes and Dutch, why not for us? A new social democratic settlement would be built around the different political asiprations of the nations and regions of the UK. We need to debate and agree what we in Wales want to work towards as a nation, this won’t be the same as what other parts of the UK want. We can then measure our sucess against levels of wealth and deprivation, not just by an average comparison with NE England, trying to work out who has more economic activity, but by knowing we are part of a community working together to achieve common goals. Maximising our wellbeing, not how much money passes through our hands, which is all that GDP does. We’d be better off using the economy to provide for what we as a democratic society have set as our aims, not blindly following a neo liberal growth at any cost route, we all know we’ll get our fingers burnt again doing that.

    Russell Elliott, Compass Convener Wales

  10. Calvin Jones says: ” Our problems here require diffuse, decentralised development that encourages community-circularity of wealth, not big-bang projects enabled by non-Welsh capital”. That is a counsel of despair. Large projects can be triggered by a few enterprising people who know what they want. Diffuse, decentralised development requires thousands of enterprising people who know what they want and how to get it. If such people were numerous enough, the development would be happening already and there would be nothing to wring one’s hands about.

  11. As an Engineer who is kept increasingly busy by climate change, I do not necessarily see a contradiction between large construction projects and a commitment to tackling our national obligations to global warming, use of resourses, eco systems etc. It has never been a simple choice between one or the other, but there is a simple choice of whether we assess all our future Governmental actions within a clear understanding of sustainability – or stick our heads in the sand.

    I welcome this debate, but worry that some appear to believe that a sort of temporary avoidance of sustainability will somehow uplift our economy, until such time as we are more affluent and can indulge in all things green once more. I like to think that I live in the real world when it comes to development, but also have an eye on the world that I’m passing onto my children.

    p.s. Rhys. Tidal lagoon technology if proven, will make Wales an unquestionable global leader in the only form of renewable energy that can match demand with supply. The Swansea test lagoon if supported, can be up and running in 4 years, so what’s your problem?
    (It’s backed by top companies and a long way down the design path already) If it’s success leads to other larger lagoons and negates the needs for a £35 billion barrrage, then isn’t that a good thing?

  12. Well said. ‘Sustainable development’ is entirely consistent with Wales remaining in poverty and failure. The Chinese see in Kyoto style principles a hypocritical desire by the West to stop them developing. So do I. Wales needs a period of unustainable development – and while we’re at it, unaffordable housing as well. Not fracking South Wales’s shale reserves would be stupid. Wealth is the answer to poverty not ‘sustainability’. Tacitus said everything you need to understand about what the eradication of carbon-emitting industry has done to the now Green Valleys when he responded to the genocidal war of the Romans in what is now Southern France: ‘They make a desert and they call it peace’. Green Wales will be peaceful and deserted. And emptied of the Welsh language with native speakers leaving jobless scenery to be replaced by under-employed English learners of Welsh no doubt lecturing us on sustainability.

Comments are closed.

Also within Politics and Policy