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Privatization is a climate killer

Privatization is a climate killer

*Originally published on Canadian Dimension*

Governments are trying to convince us that privatization and so-called public-private partnerships (P3s) are solutions to the climate crisis. The federal government has even set up institutions to pursue this dead-end, including the Canada Infrastructure Bank, the Canadian Innovation and Investment Agency, and the Canada Growth Fund.

But don’t believe the hype. As the Council of Canadians has written previously, P3s delay climate action, cost more, deliver less, and lack accountability. Privatization isn’t a climate solution; it’s climate injustice.

Here are six reasons why.

Privatization and emissions go hand in hand

When it comes to infrastructure sectors with significant emissions, privatization can have dire consequences for climate goals.

Once infrastructure is privatized, there’s ever-increasing pressure to expand and seek greater profits.

Airports are a prime example. In 2017, the Ottawa International Airport Authority shared a National Observer story that raised concerns about how the “privatization of airports will make it harder for the federal government to limit the expansion of airports and air travel” and would be incompatible with Canada’s Paris commitments.

Similarly, private ownership of car and truck manufacturing plants has been blocking a just transition to climate solutions like electric buses. This is why we’ve supported Green Jobs Oshawa’s campaign to take the General Motors factory into public ownership.

P3s and privatized projects put profit before public interest, the environment, and the climate. In the same way that privatized water projects don’t prioritize water conservation, P3 projects aren’t going to make the investments needed to limit emissions or guarantee projects are climate resilient.

Privatization undermines climate adaptation

Wildfires, flooding, and other extreme climate events are pushing our infrastructure to the breaking point. Instead of making our systems more resilient, privatized infrastructure does the opposite.

The private power utility in California, Pacific Gas & Electric, is a case in point. The corporation made international headlines for shutting off people’s power in middle of wildfires, which meant among other things that people couldn’t charge their cellphones to get updates on evacuation plans. It’s also been found that the corporation’s reckless practices have sparked wildfires in the first place.

The Climate Justice Alliance points out that “when the power goes out due to storms, wildfires, or grid failures, private utilities and energy companies get bailed out and the people get shut-off.” This highlights the importance of maintaining electricity grids as public utilities.

Privatization delays climate action

Privatized infrastructure takes longer to build than publicly owned and operated infrastructure at a time when we need to act with urgency. Even when a P3 project is “green,” the time lost to project delays—which are a common occurrence with P3s—is time we can’t afford.

What’s more, many P3 contracts are decades long. This means that even when a P3 deal is problematic for the climate, a municipality is likely locked in beyond the critical climate action deadlines of 2030 and 2050—unless it opts to pay significant financial penalties or to get mired in costly litigation.

As the Canadian Union of Public Employees (CUPE) points out, enormous delays in completing P3 infrastructure projects aren’t a bug, they’re a central feature. A common reason for this is P3 consortiums pushing for lengthy contract negotiations with local governments so they can maximize their profits. We can’t afford to accommodate this kind of profiteering at the expense of urgent climate action.

Privatization costs more while delivering less

At a time when we need cost-effective climate spending, private financing is often subject to two to three times higher interest rates compared to public borrowing. P3s also require financers to provide a return on investment for their shareholders, resulting in significantly higher project costs.

In a review of 74 P3s in Ontario in 2014, the Auditor General concluded that they cost the province $8 billion more than if they had been procured publicly. A similar report by the BC Auditor General suggested the 16 P3 projects cost the province nearly twice as much compared to public financing.

Research from CUPE shows that “using private sector financing could more than double total project costs, reducing infrastructure dollars available for the green transition.”

The billions of dollars wasted on P3s that claim to deliver climate solutions should be spent on public infrastructure projects that actually do.

The business case for P3s also often includes a significant “risk transfer” amount, presumably as the private sector takes on the risks associated with the project. However, the Ontario Auditor General has reported that this “risk transfer” factor in P3 projects is regularly inflated without evidence, often to favour the P3 option.

At the end of the day, when it comes to essential services like water, sewage treatment, or transit, the community and municipality still bear the consequences (and cost) when things go wrong.

For example, transit privatization amounts to transit workers having to literally push or pull trains back to the station when they break down because of how many corners are cut by P3s.

Privatization deepens inequality

The intersecting crises of climate, inequality, racism, colonialism, and the pandemic require interconnected solutions. But if responses are siloed into various services and infrastructure projects built and operated by different corporations and consortiums, we get unnecessary bottlenecks for planning and decision-making instead.

Privatization also exacerbates these interlinked crises. Privatization is a form of corporate bailout that wastes public funds, often at the expense of the climate, while lining the pockets of the ultra-wealthy and increasing inequality.

As Oxfam has pointed out, “the richest one percent of the world’s population are responsible for more than twice as much carbon pollution as the 3.1 billion people who made up the poorest half of humanity during a critical 25-year period of unprecedented emissions growth.”

Meanwhile, privatization only further widens the wealth gap between the one percent and everyone else. In an attempt to cut corners and maximize profits, private companies and consortiums operating P3s often try to reduce the size of the workforce, lower wages, institute user fees, and avoid investments in the public interest—all which result in not only poorer quality but also the downloading of costs onto households and communities.

P3 projects also lead to higher user fees, and in the case of public services like water and transit, it affects lower-income communities first. A US study by Food and Water Watch underscores how privatized water facilities cost users more.

P3s and privatization are boondoggles with the purpose of transferring wealth from lower income people and communities to the one percent.

Privatization is undemocratic

The undue corporate influence and control over infrastructure projects reinforces the power structures that got us into the climate crisis in the first place. The Canadian Labour Congress cautions in a report on the risks of privatization that, “not only does this path fail to keep pace with the level of investment needed, but it also fails to ensure democratic and universal access to energy, risking to further widen already embedded inequalities within and between nations.”

Hiding behind confidential contracts, the entire process of negotiating and procuring P3s is done behind closed doors. The contract, once signed, takes away public control of the infrastructure and services for several decades.

In March 2018, Ottawa city councillors only had three weeks to review their P3 contract for the Light Rail Transit (LRT) Stage 2 before signing, and they did not learn until after the fact that the winning proponent failed to meet the minimum technical score required for the contract.

In 2011, Berlin residents and citizen groups had to push for a referendum to publicize the contract for the city’s privatized water services before taking it back into public hands. There are far too many of these kinds of examples to list here.

Often operating under a consortium of private companies, it is very difficult to hold anyone accountable for P3 projects when they go off the rails. Residents cannot directly appeal to or put pressure on nameless consortiums for changes that directly affect their daily life. Putting profit before the public’s best interest, P3 operators are less likely to make investments or upgrades to guarantee public safety, promote conservation, or ensure equity.

All of this protects and serves corporate interests that are standing in the way of climate action.

Privatization isn’t a climate solution, but public ownership is

Privatization is a central feature of neoliberal capitalism, along with deregulation, austerity, and so-called free trade. And while proponents of neoliberal policies claim the free market will liberate us all, the evidence to the contrary speaks for itself.

As Martin Lukacs has pointed out in the Guardian, rather than liberating people and communities, neoliberalism has “liberated corporations to accumulate enormous profits and treat the atmosphere like a sewage dump.”

While our governments have sat back and waited for market mechanisms and corporate benevolence to get us out of the climate crisis, global emissions have only continued to soar. Decades of unchecked corporate profiteering cannot be the solution to a crisis it has itself created.

Only the public sector and community ownership can drive a just transition away from fossil fuels and prioritize the needs of workers and all impacted communities over and above private profit.

We need just transition legislation that creates new public institutions to transform our economy and expand public ownership of the sectors and services we need to decarbonize. With these investments, we can make the deep transformation that the climate emergency calls for.

We can have privatization or a just transition, but not both. Only a just transition, driven by workers, communities, and the public sector, can get us out of the climate crisis. Anything else is greenwashing.

Dylan Penner is a climate and social justice campaigner with the Council of Canadians. You can follow him on Twitter at @DylanPenner and learn more about the Council’s just transition campaign at canadians.org/JustTransition.