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7 key priorities for a green and resilient recovery

Person holds sign that reads "We need green economies now"
arindambanerjee

The support for green recovery packages has been vocal, wide-ranging and not a little surprising.

In the wake of the 2008 financial crisis, calls went up for green stimulus plans, but while they gained some traction support was largely confined to environmental campaigners and clean tech industries. The opportunity to deliver sweeping climate-focused recovery packages ultimately was squandered.

But 12 years later, as governments plot their path out of the coronavirus crisis, the coalition of groups demanding an explicitly green recovery strategy has proved to be broader, deeper and armed with compelling polling and encouraging data.

Unsurprisingly, environmental campaigners have been to the fore once again, with Greenpeace last week projecting its message directly onto the House of Commons. Meanwhile, low carbon industries have set out their stall with the Global Wind Energy Council last week becoming the latest trade body to highlight how it can provide a "cornerstone of the global economic recovery." 

But these groups have been joined by a wide array of mainstream businesses, with a host of blue chips across Europe calling on politicians to place the net zero mission at the heart of their stimulus packages. At the same time, over 200 top economists last week have demonstrated that climate action will not only help to minimize long term risks, but also provide the most effective path for reviving moribund economies in the short term. And today, the Committee on Climate Change, the U.K. government's official advisers, joined the chorus of organizations making the case for a climate-focused recovery, setting out in clear terms why the government should prioritize climate resilience in its post-coronavirus economic plans.

While there have been plenty of calls for a green recovery there has been less discussion of precisely how a net zero focused stimulus might work in practice.

Inevitably, some media commentators are trotting out the tired argument that a net zero stimulus will prove too costly, and some carbon intensive industries are lobbying hard against environmental conditions being attached to bailout packages.

But the early signs suggest these arguments are struggling to cut through with policymakers or the public, on the European side of the Atlantic at least. The French government publicly has confirmed that its bailout of Air France is contingent on the airline's axing some short haul routes. Senior ministers in the British and German governments and top officials in Brussels have stressed how climate action must be a guiding principle for their recovery plans. Meanwhile, polling commissioned by Greenpeace found little public support for bailouts for carbon-intensive industries.

However, while there have been plenty of calls for a green recovery, there has been less discussion of precisely how a net zero focused stimulus might work in practice. Last week, both the CCC and the industry-backed Energy Transitions Commission (ETC) have sought to address that question and flesh out what a climate-friendly stimulus package should entail.

The CCC's letter to British Prime Minister Boris Johnson and the leaders of the devolved administrations set out six guiding "resilience principles" for a green recovery plan. First up, it called for measures that generate jobs across the U.K. and argued that any bailouts of carbon-intensive sectors should be contingent on commitments to take "real and lasting" action on climate change and avoid "locking in" high carbon infrastructure. It also advised that tax policies should be leveraged to incentivise emissions reduction and recommended a renewed focus on enhancing climate resilience across the economy. And finally, it advised that leaders should take an active role in encouraging a shift towards new, environmentally friendly social norms, such as biking and home-working, that also enhance wellbeing, and ensure that fairness is be embedded in all coronavirus response packages. "The benefits of acting on climate change must be shared widely, and the costs must not burden those who are least able to pay or whose livelihoods are most at risk as the economy changes," the letter warned.

In contrast, the latest report from the ETC provides a series of practical recommendations for where governments should focus their efforts. It echoes many broad principles proposed by the CCC, but perhaps befitting an organization that represents 40 high profile corporates — including both high and low carbon businesses such as BP, Heathrow, HSBC, Orsted and Iberdrola — the ETC highlights specific investment "priorities" that its members want to see governments act upon.

Overall it suggests seven areas of focus for a "wave of government stimulus to boost economic recovery while building a heathier, more resilient, net-zero-emissions global economy":

1. Unleash massive investment in renewable power systems: The case for a big uplift in renewables investment is obvious, with a recent study from the International Renewable Energy Agency suggesting renewables could create more than 17 million jobs globally by 2030 while providing cheaper power to households and businesses. "Governments should accelerate investment in renewable power generation, flexibility provision and grid infrastructure," the ETC says. "They can achieve it by de-risking private investment through competitive auctions for renewable power generation, enabling investment in transmission and distribution grids, and fast tracking the planning process on shovel ready projects."

2. Boost the construction sector via green buildings and green infrastructure:  Again the case for "massive investment" in greener buildings is obvious. There is no way to meet emissions targets without upgrading the global building stock, while at the same time construction is a labor-intensive industry and energy efficiency improvements have strong multiplier effects. Moreover, the ETC notes how beyond buildings, major infrastructure projects focused on new energy networks, low-carbon transport, digital and urban development would stimulate the economy and improve quality of life in developed and developing countries alike.

3. Support the automotive sector while pursuing clean air: The auto industry has seen sales plummet to record low levels and is front of the queue for stimulus measures. But the ETC, which includes a number of oil majors, highlights how any support packages need to help ensure the clean air experienced during the lockdown becomes a new normal. Specifically it argues car-scrapping and purchase subsidies should include greater support for electric vehicles and enable a rapid phase-out of support for internal combustion engines vehicles. "Direct financial support to car manufacturers could also be subject to setting a phase out date for ICE production (ideally in the early 2030s for two/three-wheelers and passenger cars) and focused on investments needed to shift to electric mobility," it adds.

4. Make the second wave of government support to businesses conditional to climate commitments: Some lobbyists are already privately calling for stimulus plans to come with no "green strings attached," but here is a body representing a host of carbon intensive firms stating clearly that second wave of economic support from governments focused on rebuilding national economies should "incentivize the transition to more sustainable and resilient business models to strengthen each country's economic fabric ahead of future climate-related shocks." However, it also argues that green conditions should be both ambitious and determined on a case-by-case basis. "Climate conditionalities should focus on medium term targets so as not to slow down recovery and may need to differ between corporates and SMEs," the ETC advises. "They should include clearly defined decarbonization targets for 2030, in line with an objective of net-zero emissions by 2050, an obligation to disclose climate-related financial risks from 2021, and investment plans demonstrating how new investments will contribute to the companies' emissions reduction trajectory."

5. Provide targeted support to innovative low-carbon activities: Clean tech R&D is one of the few areas of the green economy that did relatively well out of the post-2008 stimulus packages and the ETC argues that government should repeat the trick this time, only at an even bigger scale. Zero-carbon hydrogen production, low-carbon fuels for the shipping and aviation industry, low-carbon materials such as green cement or green steel, circular business models and digital solutions for system and energy efficiency are highlighted as areas where government can help drive innovation. "Government can support this new economic sectors through continued innovation support focusing on early stage development and industrial-scale deployment, financial support mechanisms such as loan guarantees to de-risk and lower cost of capital for early deployment, and new regulations like fuels mandates or lifecycle emissions regulations to create demand at scale for new products," the ETC explains.

6. Accelerate the transition of the fossil fuels industry: Some campaigners have argued government support should eschew the fossil fuel industry altogether, but the ETC proposes a different tack, arguing the economic crash and plummeting oil price offers a "window of opportunity" to transform the sector. Specifically, it argues that major energy importers should remove any remaining fossil fuels consumption subsidies, made unnecessary in a period of low prices, and increase fossil fuel taxes at a time when such moves will not trigger significant consumer price increases. "Those reforms could provide a useful source of fiscal revenues in a period of high countercyclical public spending," the ETC argues, adding that oil and gas producing countries and coal-rich economies should use their fiscal stimuli to invest in an early phase-out of their least competitive assets, the diversification of their economies and supportive measures for workers and regions which will be affected by the transition.

7. Do not let carbon pricing and regulations spiral down: If all of the ETC's first six priorities are about driving bolder climate action, the last is about defending the progress made to date. The group recognises that in the wake of the COVID-19 crisis, carbon prices and carbon regulations already in place might find themselves under renewed attack. As such, it is calling on governments to "stand firm." "Stimulating demand across multiple sectors of the economy will be more effective for economic recovery and have more lasting economic effects than deregulation," it concludes. "Although carbon prices and regulations might be perceived by some as a cost today, they are essential policy tools to build a resilient economy and lessen the risks of major climate-related economic crises in the coming decades."

The overarching rationale for this ambitious package of measures is compelling and links directly to the tragic crisis that triggered the economic crash that governments are looking to recover from.

In their open letter to world leaders, the CEOs and chairs of the 40 organizations that make up the commission issued a stark assessment of the crisis that has claimed more than a quarter of a million lives and plunged the world into its deepest economic crash in over 100 years.

The overarching rationale for this ambitious package of measures is compelling and links directly to the tragic crisis that triggered the economic crash governments are looking to recover from.

"We are acutely aware of the imperative to support corporates shaken by the crisis and restart the global economy fast," the letter states. "We are also committed to learn the lessons from the COVID-19 crisis, which has dramatically demonstrated the unpreparedness of the global economy to systemic risks, despite early warnings from scientists."

The parallel with the systemic risks presented by climate change, hence the group's clear message to governments: "Our companies — and many others around us — have the ambition, the technologies and the skills to build a healthier, more resilient, net-zero-emissions economy that drives sustainable economic prosperity. The Energy Transitions Commission, of which we are members, has defined some key priorities to help the global economy recover while building this better economy. Governments have the choice, the power and the responsibility to build it faster with us."

Calls such as this have been made in the past, of course, and the past few weeks has seen hundreds of business groups, campaigners and politicians put forward similar proposals.

But what is particularly striking about the ETC's contribution is the combination of specific policy and investment plans and the backing of major carbon intensive companies that a few years ago would have been widely perceived as opponents of rapid climate action.

Commenting on the ETC's proposals John Holland-Kaye, CEO at Heathrow Airport, was clear on the opportunity to shift the aviation industry's decarbonization efforts up a gear. "Aviation will be fundamental to the economy recovering," he said. "But we must take the opportunity to build back better, cutting carbon from flying so that we tackle the greatest long-term challenge we face." Specifically, he argued that "there is one big thing aviation must do in the 2020s — scale up its use of Sustainable Aviation Fuel," adding that creating the right incentives and regulations could "help make low-carbon fuels commercial and kick-start a whole new industry." 

Similarly, Pierre-André de Chandelar, chairman and CEO at Saint Gobain, highlighted how stimulus packages offered a chance to tackle a scenario where "too many buildings such as homes, schools, hospitals, for example, around the world are highly inefficient." 

"Governments should earmark a significant portion of their recovery plans to energy retrofitting the housing and construction sector," he said. "Besides helping to reduce greenhouse gas emissions, such a large-scale retrofit would provide health and well-being, numerous jobs and stronger social cohesion."

Many of the world's largest and most powerful businesses are desperate to see the economy recover as quickly as possible, but they do not want a return to business as usual, far from it. They are publicly demanding that governments help build a better economy that is more resilient to the kind of crippling shocks and instability the climate crisis will bring.

As Laurence Tubiana, CEO of the European Climate Foundation and an architect of the Paris Agreement, observed: "All the evidence we have suggests people want cleaner air [and] after months of worrying about our lungs, it would be crazy to pump money into dirty businesses. What the commission clearly identifies is that there is another way. Not only do renewable energy, electric cars and the host of new clean technology we have at our fingertips make health sense, they also make economic sense and will create thousands of new jobs. It's time we embrace the economy of the future, not dirty ones of the past."

This article originally appeared on BusinessGreen.

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