This essay is an abridged version of the author’s chapter in the Transnational Institute’s recent book “Public Finance for the Future We Want.”
No other generation understands better the implication of climate change than today’s teens. As sixteen year-old Swedish activist Greta Thunberg has famously summarized it, “this is an emergency.” But despite this emergency, the response from national governments has been to hype up the private sector as the silver bullet capable of providing the financial means and innovations needed to address climate change — even when the private sector itself is pointing out it can neither fund the massive costs nor create the technological breakthroughs necessary to do the job at the pace and scale required.
FOSSIL FUEL COMPANIES ARE THE ENEMY
Over the past few months a handful of US politicians, spurred by a youth-led climate mobilization, have started to wrap their heads around of what it will actually take to mitigate the worst impacts of climate change in the country. This has led to the introduction of the Green New Deal Resolution back in February, and the recently proposed Climate Emergency Resolution.
Despite their different purposes, the proposed resolutions agree in one aspect of the climate fight; if we are to successfully transform our energy system in the next decade mobilization efforts will need to resemble those taken during World War II.
But let’s be clear about how WWII was fought in political-economic terms: when the private sector got in the way of defeating fascism, it was removed from the equation. If we want to win our fight against the fossil fuel industry, we need to center a similar commitment to nationalization.
It is well documented that in both World Wars the US government did not shy away from seizing the control of industries deemed crucial to the war efforts. This included the nationalization of the railroad system, telegraph, telephone and radio networks and manufacturers in World War I, in addition to coal mines, oil companies and refineries, and even a department store in World War II.
But nationalization initiatives did not stop there. In fact, the US nationalized what it considered “enemy” companies — US subsidiaries of German and Japanese companies, such as Merck & Co. If we were to translate those actions to today’s fight to keep any global temperature increase within the 1.5 Celsius limit, that means gaining control over companies that continuously work against climate safety in the country. In other words, fossil fuel companies are the enemy, and we need to treat them as such.
NATIONALIZATION AND RAPID DECOMMISSION
To be clear, nationalization by itself is not a panacea — there are, after all, plenty of state-owned fossil fuel companies that are just as good at ignoring the climate crisis as privately-owned ones. Donald Trump even attempted, last year, to bail out coal with a quasi-nationalization of the sector under the Korean War era Defense Production Act.
What we are proposing is very, very different — a program of nationalization and rapid decommission, designed to keep unextractable carbon permanently in the ground while creating the planning space needed for a just transition for affected workers.
A political economy that curbs the power of big finance and serves people and planet is possible. Read more in TNI’s recent book “Public Finance for the Future We Want.” Download a free copy here.
Letting the market handle the end of the fossil fuel industry is unacceptable, as the coal miners blocking tracks over unpaid wages in Harlan County could probably tell you. Capital will continue to flow into coal, oil, and gas extraction well after it makes long-term economic sense, if there is still the possibility of a quick buck to be made, and both frontline communities and the rest of a warming world will pay the price. So we need nationalization and decommission to take this catastrophically irrational market out of the picture, once and for all.
There are many ways in which such a nationalization effort could be implemented. It could follow the path adopted during World War II, when Congress enacted laws authorizing federal takeovers. But it could also take other pathways as seen in recent nationalization attempts, including the ones implemented in response to the Great Financial Recession.
As it happened in the aftermath of 2008 crash, the Federal Reserve created over US$3.7 trillion to help troublesome financial institutions, all without costing taxpayers a dime or spurring runaway inflation. For less than a third of that value the Fed could once again inject new money in the economy, but this time to secure the control of major fossil fuel reserves and, consequently, shatter the economic and political power entrenched in the fossil fuel industry. At the same time, this would quickly and definitively deflate the “carbon bubble” — the unburnable stranded assets threatening to tank the global economy.
DESIGNING A JUST TRANSITION
While this proposed nationalization pathway is built on the one adopted during the financial crisis, there are key pieces that make them strikingly different. First is the intention behind it. Rather than bailing out the private sector — by pouring money without taking control and further incentivizing their “boom and bust” mode of operation — the creation of new money would be used this time around to gain public control over the fossil fuel sector’s noxious assets.
By shifting them to public hands, those reserves would be detached from the profiteering machine that requires fossil fuel companies to continue extraction indefinitely, to the point where they are still projecting bringing new oil, gas and coal fields into operation long after science says we need to have decarbonized our energy sector.
Second, it would deflate the powerful political opposition that these companies exercise in American democracy through lobbying activities, revolving door personnel, election financing, and deceptive PR. We would still have to deal, to be sure, with the larger political problem posed by massively concentrated wealth, but we would no longer have to deal with the particularly nasty problem of extreme wealth and massive corporate power that is deeply invested in preserving an industry we cannot allow to exist.
Combined, these changes would create the space needed for a truly meaningful conversation on how to design a just transition, which can only be effective if it includes a managed winddown of fossil fuel production and decommissioning of existing facilities while creating opportunities and safety nets for fossil fuel dependent workers and communities.
Another important feature of the proposed nationalization pathway regards to financing itself. If the end goal is to shift power away from extractive companies and into the hands of people, the way nationalization initiatives are financed must also be carefully chosen. By implementing a Fed-financed fossil fuel takeover, society would once again be exposed to the debate around who creates and allocates money.
As Transnational Institute’s recently published book Public finance for the future we want exposes, there is no shortage of money to put in place the changes we want and desperately need to keep temperature increases within safe levels. What is missing is a conversation on how to encourage the US$93 trillion currently in the hands of the public sector to stop reinforcing the extractive operation propagated by the fossil fuel industry and start to support, in a cheaper and faster manner, the future we want.
Time has come for people and the planet to stop paying the costs of the failed fossil fuel and financial systems. By nationalizing the fossil fuel industry — the core industry that keep fueling the extractive mentality and further promoting social and environmental inequalities — through the sovereign monetary power of the Fed, we will be able to unleash the potential for an economy where sustainability, equity and democracy are at its center.