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The US bids adieu to Bidenomics

The future of the Inflation Reduction Act hangs in the balance following the inauguration of Donald Trump.

By Jonny Ball

In 2020, “Bidenomics” became the buzzword for a set of policies that signalled tentative moves towards a more economically interventionist, protectionist American state. In some ways, elements of Bidenism were consistent with Trump’s first term project: tariffs on Chinese imports were maintained; “decoupling” continued as a conscious aim of trade and industrial policy; and the rhetorical, public policy focus was – like much of the MAGA movement – focused on a revival and reshoring of manufacturing jobs, often in marginal, Rust Belt states. But that’s where the similarities end. Biden spent billions on green industrial subsidies through legislation like the Inflation Reduction Act. That wasn’t enough to persuade voters to pick Kamala Harris in November, and now robust support for renewables, batteries and grid upgrades looks set to be replaced by “drill, baby, drill!” and Trump’s love of “liquid gold” (although new pipeline and carbon-based extraction projects didn’t exactly nosedive under Biden).

The whole Biden agenda felt like a response to Trumpism, a way of attempting to reconnect the Democratic Patry with blue collar voters, as well as countering the challenge from China and constructing a more resilient economic model after the shocks of the pandemic. It was picked up and emulated enthusiastically by our Chancellor Rachel Reeves through her so-called “securonomics” approach, but positive implementation on that front seems to be less-than-comprehensive.

And yet, the Democrats lost. Badly. There are huge lessons for Labour here. Talk of “modern supply-side” economics, of nicely designed “industrial strategy” documents, of a “green industrial revolution”, or even of massive, Biden-style, job-creating stimulus programmes investing in green tech, aren’t enough to guarantee popularity. This kind of stuff might excite odd corners of think tank land or the New Statesman office, but clearly not enough Americans thought they’d seen enough, or indeed any, benefits of the climate spending splurge.

The Department for Energy Security and Net Zero was a huge winner in Reeves’ Budget last year, seeing the biggest spending increase of any government department. Getting to net zero by 2030 will be expensive, and hard. But Keir Starmer, Reeves and Ed Miliband may find that bringing the public with them, and ensuring people feel the benefits of net zero directly, that might be even more of a challenge.

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Ownership matters

On that note, this week’s edition of the Green Transition brings you some exclusive polling from YouGov and the Common Wealth think tank. It shows that the public’s support for having new renewable energy infrastructure built in their local areas varies massively – depending on who owns it. A clear majority would support community-owned energy projects (where profits are far more likely to benefit local people or be ploughed back into the local area), while far fewer would back a private sector endeavour, with profits accruing to distant shareholders at home or abroad.

Two of the biggest barriers to new, large-scale energy projects are financial, and legal/regulatory. Unless you’ve been living in a cave, you’ll be aware that the government is operating under tight fiscal constraints. Part of the straightjacket is of the Treasury’s own making: the Chancellor has committed to not raising any of the three highest revenue-raising taxes, as well as promising a strict debt-to-GDP rule that limits borrowing. But as recent bond market turmoil shows, the constraints on the government’s spending powers are also an unavoidable fact of life if we submit to the reality of living in a globalised, free market system (sorry MMT guys): if international investors don’t believe spending plans add up, they could start dumping gilts and provoking a run on the pound. That’s when plans have to be rewritten (see Truss and Kwarteng’s disastrous mini-Budget for details).

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But if financial barriers are a headache then surely the issues that commonly arise from the planning system can be just as severe. We know Labour wants to reform building regulations to make it easier and quicker to build homes and energy infrastructure: but many of the delays in the system are caused by genuine local opposition, not simply slower-than-usual bureaucrats. Building is hard (and expensive) because we operate what is sometimes referred to as a “veto-ocracy”, in which local nimbies (and frequently their representatives in local government) can stop developments in their tracks, turning up to object at planning meetings or even escalating to legal challenges and judicial reviews. So, if we want to get to net zero, criss-crossing the country with new power lines, wind turbines and solar farms, how can we get the public on board?

New polling from YouGov, commissioned by Common Wealth, shows that support for having new renewable energy infrastructure in their local areas varies massively – depending on who owns it.

62 per cent of those surveyed would support a community-owned renewable energy project in their areas, compared with just 40 per cent for a privately owned project. As the government formulates its Local Power Plan, which allocates £1 billion to local authorities and community energy organisations for beginning these kinds of local projects, the findings suggest community ownership models could help unlock support for a faster transition.

It’s easy to imagine why hostility to private ownership might be more pronounced. Since household bills have shot up post-Covid and post-Ukraine war, the astronomical profits, dividends and executive pay for the “C-suite” of our private generators and providers has rarely been out of the headlines. Community ownership locks in re-investment and keeps any financial value generated local, rather than seeing it offshored or extracted towards boardrooms in the City of London.

If the government wants to the public onside, lowering the hurdles of local opposition, and using the net zero transition to build a more decentralised, fairer economy, then building successful models of community ownership wouldn’t be a bad place to start.

This article was originally published as an edition of the Green Transition, New Statesman Spotlight’s weekly newsletter on the economics of net zero. To see more editions and subscribe, click here.

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