To turn the recession green

What plans are they making?

The UN called for a 'Global Green New Deal' last December and is holding a summit of economists this month to draw up plans. Many countries, Britain included, have announced green spending programmes. Japan wants a twentyfold increase in its use of solar power; South Korea intends to spend $30bn on energy-from-waste power plants, new transport-ation networks and a clean-up of four major rivers. "The financial crisis could not have come at a better time because it's forcing us to act," says Tom Burke, a former director of Friends of the Earth.

And what about the United States?

The scheme by which all others are being judged is President Obama's $787bn stimulus package, which contains more than $50bn of direct spending, tax breaks and loan guarantees for eco-friendly projects. Aiming to create five million "green-collar" jobs within ten years, Obama wants to reverse conventional thinking by making the environment an engine for, rather than a drag on, growth. There are three main items on his shopping list: a "smart" electricity grid ($11bn); a range of renewable power schemes ($30bn); and the lagging of America's buildings ($11bn).

Why such a lot of emphasis on lagging?

Because inefficient houses are a major source of CO2 emissions (30% of the UK’s, for example); and because insulation schemes are easy to get up and running. In Germany, 25,000 jobs were created from 2002 to 2004 by a public scheme to retrofit 200,000 flats. Lagging is also at the centre of the UK's 'Green New Deal': there is talk of a plan to insulate one in four British houses and flats via a system of loans which would be repaid through savings made on energy bills. As for Obama, he is devoting $4.5bn to make federal buildings energy-efficient and $5bn in tax credits to encourage homeowners to improve their insulation. But however necessary, lagging alone is unlikely to stave off world recession.

So why would a 'smart' electricity grid do better?

The existing grid, which covers the US and Canada, is antiquated and under increasing strain; and failures and power cuts in the system cost US businesses around $120bn a year. Its modernisation would involve two key green elements. The first would be building transmission lines to connect renewable power to the grid (see box). The second component, which David Cameron says he'd like to bring to the UK, would change the way electricity is distributed.

What would that involve?

With the present grid, power is delivered like water: it runs 'downhill' from power plants to consumers, who turn on the switch whenever they need it. So at periods of peak demand, power companies can only respond by summoning energy from increasingly expensive sets of power plants, with the result that the wholesale price of electricity skyrockets. But a 'smart' electricity grid, with digital meters in homes and more sophis-ticated sub-stations, would 'inform' power-hungry devices in businesses and homes of how to use cheaper power. Thus, fridges could 'learn' to defrost at night to take advantage of cheaper power from wind farms, which produce most of their power at night (where currently much of it goes to waste). In addition, a 'smart grid' would enable power to flow back from households and businesses, so that power companies would be able to buy back surplus power generated by consumers (eg in the battery of their hybrid cars, or from their solar panels).

So what's holding all this back?

Lack of readiness. Engineers in the US have been calling for an upgrade of the grid for years, to no avail; but even before billions are spent on new lines and equipment, millions have to be spent on design work. Forty-two states now have laws obliging power companies to buy back excess power from consumers; but they simply lack the meters or grid to enable them to do it. At the same time, power companies need incentives to make the new grid a reality: right now they make profit by generating and selling as much expensive electricity as possible. A system needs to be devised to reward them for selling less.

And what of the third component of Obama's plan?

By far the largest part - some $10bn in grants and $20bn in loan guarantees and tax breaks - is aimed at alternative energy. ("Harnessing the sun and the winds and the soil to fuel our cars and our factories," in Obama’s words.) But first, billions need to be spent just to shore up green tech firms hit by the recession. For if clean energy was the fastest growing industrial sector in the US economy before the downturn, it's now on a sharp decline. Until last summer, capital-intensive wind farms in North Dakota were being offered loans and investment by up to 18 banks; now they’re urgently seeking help. Solar start-ups and electric car-makers, such as Tesla, are all cutting staff as orders dry up.

So would Obama be wise to resort to subsidising them?

Probably not. However much money the govern-ment throws at renewable energy, it's unlikely to be enough to close the gap between mature 'dirty' sources of power and green ones. "The only way to create huge numbers of clean-energy jobs would be to raise the cost of dirty-energy sources," says the New York Times. Hence, to really go green, governments would have to punish polluting industries with taxes and carbon emission trading schemes and run the risk of increasing the cost of energy, and thus the cost of living and business - the last thing they want to do right now. Coal currently provides half of America's energy and hundreds of thousands of jobs. Anticipating a backlash, coal companies are already delaying construction of new plants, while investments into clean-coal and carbon sequestration projects have been put on hold as long as the regulatory climate remains uncertain. ·