An analysis of possible COVID-19 economic recovery packages shows the potential for strong alignment between the economy and the environment. The direction of these measures over the next six months will largely determine whether the worst impacts of global warming can be avoided, and research published today reveals that climate-friendly policies can deliver a better result for the economy – and the environment.
A team of internationally-recognised experts, led by Cameron Hepburn at the University of Oxford, and including Nobel prize winner Joseph Stiglitz and well-known climate economist Nicholas Stern, came together to assess the economic and climate impact of taking a green route out of the crisis. They catalogued more than 700 stimulus policies into 25 broad groups, and conducted a global survey of 231 experts from 53 countries, including senior officials from finance ministries and central banks.
Drawing on this survey as well as learnings from the 2008 financial crisis, the economists found that green projects create more jobs, deliver higher short-term returns per dollar spend and lead to increased long-term cost savings, by comparison with traditional fiscal stimulus.
‘The COVID-19-initiated emissions reduction could be short-lived,’ says Cameron Hepburn, lead author of the report and Director of the Smith School of Enterprise and Environment, University of Oxford. ‘But this report shows we can choose to build back better, keeping many of the recent improvements we’ve seen in cleaner air, returning nature and reduced greenhouse gas emissions.’
Noting that ‘green’ policies could be widely defined, the study focused on the reduction of greenhouse gas emission as the key environmentally-beneficial criteria. The paper, to be published in the Oxford Review of Economic Policy, observes that desirable policies have a large return on investment, can be enacted quickly and have a strongly positive impact on climate.
Examples include investment in renewable energy production, such as wind or solar. As previous research has shown, in the short term, clean energy infrastructure construction is particularly labour intensive, creating twice as many jobs per dollar as fossil fuel investments, as well as being less susceptible to off-shoring.
Charles Donovan, Director of the Centre for Climate Finance and Investment, Imperial College Business School, says: ‘Clean energy is not just affordable and reliable, it also offers the highest return on investment. Investors have a growing appetite to put money to work in sustainable finance. Governments need to re-write the rules so that they can.’
Other desirable policies included building efficiency retrofit spending, clean research and development spending, natural capital investment for ecosystem resilience and regeneration, and investment in education and training to address immediate unemployment from COVID-19 alongside unemployment from decarbonisation. For developing countries, rural support scheme spending, such as on sustainable agriculture, was also highly ranked. Meanwhile, non-conditional airline bailouts performed the most poorly on both economic impact and climate metrics.
Most G20 governments have implemented significant relief measures, as a result of the pandemic. But, as yet, none has introduced any significant fiscal recovery measures. The study authors hope that countries will seize this generational opportunity to take account of these criteria into national plans – for their economies and the environment.\