23 June 2023

To achieve net zero, Labour needs to break with market coordination

Public institutions such as GB Energy and the green National Wealth Fund must lead the green investment push.

This week the Labour Party finally began to put some flesh on the bones of its climate plans. Eighteen months after the announcement of its Green Prosperity Plan, which offered significant public investment in green projects, and nine months after setting out its proposals for a Great British Energy company and a 2030 target for clean electricity, Keir Starmer elaborated upon the party’s mission to make the UK a “clean energy superpower”.

Starmer’s speech gave a prominent place to both GB Energy and the proposed green National Wealth Fund. Indeed, such institutions of public investment and democratic coordination must be central to the design of the Green Prosperity Plan. Yet given the need to break with market coordination of the transition in general, and in light of the fundamental roles transport infrastructure, heating systems, housing and heavy industry will have to play in our path to net zero there is a need for Labour to go much further.

The UK is at a critical juncture, with the need for climate stabilisation and rebalancing of the economy clearer than ever. But while the established approach has induced some investments in clean energy, decarbonisation on the scale needed to meet the UK’s climate targets – and global ones – has failed to materialise. The Climate Change Committee, which advises the government, has highlighted that the UK is set to miss its official target for 2030 (which is even less ambitious than the UK’s “nationally determined contribution” to meet its international climate obligations). As the committee wrote in 2022 “the policy framework is not yet fully in place to drive the large programme of delivery required within this decade”.

Meanwhile, the UK is unique among high-income countries in the extent to which it suffers from issues of structural underinvestment, regional inequality and material insecurity. In this context, a market-led approach – which coordinates the transition through private investment, market-based governance and profitability – threatens malcoordination: it risks issues such as underinvestment, inflation and breakdowns in physical production.

Meeting Labour’s target of 100 per cent clean electricity by 2030 will thus require an investment sprint along with a managed phase-out of fossil fuels that is different in kind – both quantitatively and qualitatively – from the current paradigm.

[See also: Towards a new, green economy]

As we argue at Common Wealth in our latest report, the solution to structural underinvestment, the cost-of-living crisis and the climate emergency is a publicly led investment push to accelerate decarbonisation. As governments turn toward state-led green development to address the crisis, with the Biden administration leading the way, we are entering a new era of climate policy characterised by a more active green industrial strategy.

Labour’s Green Prosperity Plan is heading in this direction. Compared to the £50bn of green investment a year by 2030 that the Climate Change Committee called for in its Sixth Carbon Budget, the commitments are still wanting (especially given Labour’s decision to only ramp up to £28bn a year by 2027). Nonetheless, it is a step toward decarbonisation, and if designed and delivered effectively – via new public institutions that allocate and oversee green funding – it can play a crucial role in resolving the UK’s energy-driven cost-of-living crisis.

Alongside a truly ambitious and maximal iteration of GB Energy, and a publicly accountable National Wealth Fund, we argue that four more key institutions of public coordination are necessary: a National Green Housing Authority to decarbonise household energy efficiency and socialise the associated costs; a National Transit Authority to oversee the building of a comprehensive sustainable transport system; a Green Economic Development Council to sit at the centre of the coordination strategy; and efforts to democratise company decision-making, including worker representation and green veto powers.

Through a range of robust and accountable public institutions, rather than coordination by markets and private investors, the UK can make up for lost time and lead a just and effective transition. A climate strategy with this level of ambition, and the will to confront our imbalanced and unstable economic settlement, can drive a transition which protects and creates jobs, and enhances living standards.

To achieve a democratically coordinated transition, Labour must embrace public asset ownership, enterprise, financing institutions, and pluralistic decision-making. This would allow us to decarbonise the economy by democratising and decommodifying it simultaneously. Institutions capable of undertaking green investment without the need to make a profit can restructure provision, helping to move us towards decommodification and the security offered by guaranteeing social needs.

By deploying public coordination to guide and directly do what the transition demands, we can build socially useful green enterprise and new patterns of consumption and decision-making that support shared social wealth and stronger democracy.