Next System Project

By Thomas Marois and Ali Rıza Güngen - Next System Project, September 20, 2019

In ways unimaginable just a few years ago, public banking and its potential for catalyzing a transition to a green and just future have been catapulted to the center of political and economic debate. The reason: The greed-driven excesses of Wall Street and global finance that gave rise to the 2008-09 global financial crisis are now continuing to drive today’s global crisis of climate finance.

The financial sector today offers seemingly limitless access to debt for financing planet-damaging consumption but does not carry its weight in financing solutions to the climate crisis. Of the $454 billion in climate finance invested in 2016, the private investment sector, which controls 80 percent of all banking assets, contributed $230 billion, while the public sector contributed $224 billion. That is, with only 20 percent of total assets, public banks invest nearly as much as all private banks combined. The short-term, return-maximizing horizons of private finance have failed, utterly, to drive anything like a green transition. The future of climate finance must look to the public sphere, not the private.

We must also ensure that the green transition is just. The costs of the global finance and climate crises have fallen disproportionately onto workers, women, racialized communities, and the most marginalized in society. In the financial crisis, failing corporations got direct bailouts; their low-wage workers and the unemployed got imposed austerity as public support systems were axed. The challenges the climate crisis will impose on both the natural and built environment will also necessarily be faced unequally and unjustly. The most marginalized will bear the brunt of transition by virtue of existing structural barriers and in-built systems of oppression.

What is urgently required is strategy and action on a green and just transition for all. Democratized finance will be key. Low-carbon infrastructure needs constructing, local jobs protecting, fossil fuels need to remain in the ground, the planet needs cooling, and social equity needs action. Yet there is no hope of this type of green and just transition without financial institutions that can be democratically commanded to function in the public interest.

It is for this reason that we propose the creation of a democratized US Green Investment Bank (GIB). A democratized GIB has the potential to catalyze a transition to a socially just and environmentally sustainable future that is otherwise impossible under the short-term, high-return regime of private financiers (regardless of the extent of their financial resources). The GIB’s potential is, of course, only realizable within a grander strategy of socioeconomic transformation, such as is envisioned within the Green New Deal. The proposed design of a new GIB is meant to fit strategically within this evolving framework. Its potential depends on the GIB catalyzing structural change in the public interest.

Read the report (PDF).

By Johanna Bozuwa - Next System Project, February 27, 2019

Executive summary

Electric utility (re)municipalization is gaining popularity as a strategy to shift away from a reliance on fossil fuel extraction in the context of combating climate change. Across the world—from Berlin to Boulder—communities have initiated campaigns to take back their power from investor-owned (private) utilities and create publicly owned and operated utilities. Moreover, such efforts are increasingly taking on the perspective and language of energy democracy.

Energy democracy seeks not only to solve climate change, but to also address entrenched systemic inequalities. It is a vision to restructure the energy future based on inclusive engagement, where genuine participation in democratic processes provides community control and renewable energy generates local, equitably distributed wealth (Angel, 2016; Giancatarino, 2013a; Yenneti & Day, 2015). By transitioning from a privately- to a publicly owned utility, proponents of energy democracy hope to democratize the decision-making process, eliminate the overriding goal of profit maximization, and quickly transition away from fossil fuels.

Utilities are traditionally profit-oriented corporations whose structures are based on a paradigm of extraction. Following the path of least resistance, they often burden communities who do not have the political or financial capital to object to the impacts of their fossil fuel infrastructure. Residents living within three miles of a coal plant, for instance, are more likely to earn a below-average annual income and be a person of color (Patterson et al., 2011); similar statistics have been recorded for natural gas infrastructure (Bienkowski, 2015).

These utilities are in a moment of existential crisis with the rise of renewables. From gas pipelines to coal power plants, their investments are turning into stranded assets, as political leaders and investors realize that eliminating fossil fuels from the energy mix is paramount to creating healthy communities and stemming climate change.

Unfortunately, often publicly owned utilities in the United States have similar energy generation profiles to their privately owned counterparts (American Public Power Association, 2015). This paper explores the extent to which publicly owned utilities are reticent to take on the new energy paradigm and evaluates their ability to provide energy democracy compared to investor-owned utilities.

By Johanna Bozuwa - The Next System Project, October 17, 2017

“We would line up all of our inhalers in a row on the benches before we would go run, just in case,” recounts Kristen Ethridge; an Indiana resident near some of the most polluting power plants in the country. Asthma rates are so bad from the toxic emissions that many students cannot make it through gym class without their inhalers. Cancer and infant mortality rates in the area are through the roof.

These plants are owned by some of the biggest names in the utility business including groups like Duke Energy and AEP. Gibson Power Plant, the worst of them all, emits 2.9 million pounds of toxic compounds and 16.3 million metric tons of greenhouse gases a year. What’s more, most of the energy generated in these plants is transported out of state, leaving Indiana with all the emissions and very little gain.

Indiana’s power plants provide a window into how our current electrical system works. It is a system dominated by a small number of large powerful companies, called investor-owned utilities. Their centralized fossil fuel plants are at the heart of our aging electricity grid—a core contributor to rapidly-accelerating climate change.

The carbon emissions associated with these power providers are but one symptom of larger systemic issues in the sector. Investor-owned utilities are traditionally profit-oriented corporations whose structures are based on an paradigm of extraction. Following the path of least resistance, they often burden communities who do not have the political or financial capital to object with the impacts of their fossil fuel infrastructure. For example, the NAACP reported in Coal Blooded: Putting Profits before People that residents living within 3 miles of a coal plant were more likely to earn a below average annual income and be a person of color. Similar statistics have been recorded for natural gas infrastructure. Just like in Indiana, living next to such pollution hotspots has instigated widespread health effects like asthma and cancer, hitting residents with high medical bills and more sick days. Discriminatory health care and inflexible work further spiral communities into hardship.

These utilities are in a moment of existential crisis with the rise of renewables, though. Every solar panel installed eats away at their centralized, fossil fuel production—sending utilities and their traditional business model into a proclaimed death spiral. From gas pipelines to coal power plants, their investments are turning into stranded assets. In an attempt to slow the transition they’ve thrown their weight behind campaigns to stymie the growing renewables sector.

In some ways it feels as if they’re doubling down on fossil fuels. The drop in natural gas prices has led many investor-owned utilities to continue to build infrastructure like pipelines, often through nefarious self-deals that their rate-payers have little to no say in. Yet, rate-payers’ electricity bills will rise for projects whose use must be obsolete soon to stay below 1.5 degrees warming.

Ironically, utilities justify their advocacy for fossil fuels as a strategy to ensure affordable rates. For instance, they argue that net-metering policies for renewables increase rates for low income residents, as grid maintenance costs are shifted onto those who don’t have rooftop solar. This analysis has been thoroughly debunked. First, it refuses to acknowledge the true costs of fossil fuels—from health effects to environmental damage. Second, it glazes over the subsidies that prop up fossil fuels and continue to make them cheap, but horrible investments.

By Hans Baer - The Next System Project, April 28, 2016

This essay is guided by two imperatives: (1) how do we live in harmony with each other on a fragile planet of limited resources, which have become unevenly distributed; and (2) how do we live in harmony with nature, particularly as humanity lurches forward into an era of potentially catastrophic, anthropogenic climate change that to a large degree is a by-product of the capitalist world system. Social systems, whether they exist at the local, regional, or global levels, do not last forever. Capitalism, as a globalizing political economic system committed to profit making and continual economic growth, has created a treadmill of production and consumption that is heavily dependent upon fossil fuels and has resulted in greenhouse gas emissions that drive climate change.

While capitalism has produced numerous impressive technological innovations, some beneficial and others destructive, which are very unevenly distributed, it is a system fraught with numerous contradictions, including: growing social disparities within most nation-states, authoritarian and militarist practices, depletion of natural resources, environmental degradation, including global warming and associated climatic changes, species extinction, and population growth as a by-product of poverty. Even more so than in earlier stages of capitalism, transnational corporations and their associated bodies, such as the World Bank, the International Monetary Fund, and the World Trade Organization, make or break governments and politicians around the world, although the extent to which this is true varies from country to country. Although capitalism has been around for about 500 years, it manifests so many contradictions that it has become increasingly clear that it must be replaced by a “next system” or an alternative world system—one oriented toward social parity and justice, democratic processes, and environmental sustainability, which includes a safe climate.

Read the report (PDF).