Climate-friendly stimulus policies to reboot economies in the wake of the coronavirus crisis offer a far better mechanism for boosting jobs and growth, compared to unconditional bailouts for high-carbon industries, a major new analysis by a group of leading economists has found.
The University of Oxford study, published this week, assesses a host of potential COVID-19 recovery packages and concludes there is significant potential for a strong alignment between economic growth and accelerating the push towards net zero emissions if governments use the many green stimulus tools at their disposal.
Led by a team of internationally renowned economists — including Nobel prize winner Joseph Stiglitz and the United Kingdom's Lord Nicholas Stern — the study argues that investing in infrastructure such as clean energy networks, electric vehicles, broadband connectivity, clean R&D and worker retraining could offer a far stronger economic recovery from the impending recession, while also helping combat long term climate risks.
"The COVID-19-initiated emissions reduction could be short-lived," said Cameron Hepburn, lead author of the report and director of the Smith School of Enterprise and Environment at the 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."
Global emissions are expected to plummet an unprecedented 8 percent in 2020 due to the economic slowdown caused by the pandemic and accompanying lockdown measures, but there are fears the economic recovery could see both a sudden upsurge in greenhouse gases and investment in new high-carbon infrastructure that locks in increased emissions over the long term, undermining the goals of the Paris Agreement.Non-conditional support for high-carbon industries, such as airline bailouts, performed the most poorly in terms of economic impacts and climate change metrics.
However, while the study acknowledges "reasons to fear that we will leap from the COVID frying pan into the fire," it argues that decisive intervention from governments can usher in a swift, long-term recovery as well as stabilizing the climate.
During the last global economic crisis in 2008, emissions dropped in the immediate term, but stimulus packages largely failed to take climate change into account and global emissions quickly grew again throughout much of the 2010s despite increased investment in low-carbon infrastructure.
The new study is thought to be the first of its kind to critically evaluate the benefits of tackling climate change alongside delivering economic recovery, assessing more than 700 stimulus policies undertaken by governments and the resulting impacts since 2008. Moreover, the researchers conducted a survey of more than 230 experts from over 50 countries, including senior officials from finance ministries and central banks, to help shape their conclusions.
The resulting paper, published in the Oxford Review of Economic Policy, concludes that green stimulus policies tend to have a large return on investment, can be enacted quickly and also have positive impacts on the climate and the wider environment.
For example, it highlights renewable energy projects, such as the development of wind and solar farms, as being among the most effective forms of economic recovery spending, as clean energy installation is often labor-intensive, creating twice as many jobs per U.S. dollar compared to fossil fuel investments. Renewables are also far less susceptible to offshoring the jobs and economic benefits elsewhere, compared to other industries, the study argues.
Other stimulus policy areas scoring well in the study include spending on energy efficiency retrofits, clean research and development (R&D), carbon capture and storage (CCS), natural capital investment for ecosystem regeneration, and investment in education and training to address unemployment resulting from COVID-19 and decarbonization. In developing countries, meanwhile, rural spending on sustainable agriculture programs also performed well.
In contrast, non-conditional support for high-carbon industries, such as airline bailouts, performed the most poorly in terms of both economic impacts and climate change metrics, the study found.
"This paper identifies stimulus policies that are perceived to deliver large economic multipliers, reasonably quickly, and shift our emissions trajectory towards net zero," the study state. "The recovery packages can either kill these two birds with one stone — setting the global economy on a pathway towards net-zero emissions — or lock us into a fossil system from which it will be nearly impossible to escape."
It comes amid growing calls from politicians, businesses and investors for COVID-19 recovery measures to prioritize climate change considerations and help accelerate the shift to a net zero economy. This week, a coalition of investor groups boasting trillions of dollars of assets under management called on governments to eschew risky, short-term, high-carbon projects in their stimulus packages in favor of supporting green infrastructure. It followed similar calls from over 90 French corporates and a coalition of leading German companies.
Moreover, Labour Shadow Business Secretary Ed Milliband, an architect of the 2008 Climate Change Act, last weekend warned thousands of U.K. businesses face an "existential threat" as a result of the coronavirus crisis unless the government acts urgently to enhance support packages, with a particular focus on driving a green recovery. "Let's create an army of zero carbon workers, retraining and redeploying those who can't work into different industries, from home insulation to wind turbine manufacture to tree planting," he wrote Sunday in The Guardian.
A new YouGov poll of more than 1,600 U.K. adults commissioned by Greenpeace also reveals little public appetite for using taxpayer funds to bail out high-carbon industries, with 93 percent of respondents indicating they do not consider aviation a priority for a bailout. Healthcare spending was seen as the top priority by 58 percent of respondents, while the education, manufacturing and farming sectors all received over 35 percent support for bailouts, the survey found.
There are signs that such calls are cutting through with policymakers across Europe, where the EU Commission is drawing up a major coronavirus recovery support package and has indicated the economic reboot should help rather than hinder its vision of a net zero continent by 2050.
On the other side of the Atlantic, the White House is taking a different stance, with President Donald Trump mulling a major bailout for the beleaguered oil and gas industry without any green conditions attached. China also looks to be embarking on a major coal power plant development drive in 2020, alongside increased investment in low-carbon infrastructure.
But the findings of the University of Oxford research arguably offer the clearest evidence yet that focusing on a green recovery from the crisis offers the optimal path for governments from an immediate economic perspective, without even taking into account the huge benefits for public health, climate resilience and financial stability as investors seek to avoid stranded assets at risk from the net zero transition.
The findings were used to inform a briefing for U.K. policymakers setting out recommendations for 10 fiscal recovery policies that the authors argue can bring short-term, high economic impacts as well as long-term structural change to ensure the U.K. meets its 2050 net zero target. Drawn up by a group of more than 30 U.K.-based universities, the paper calls for the U.K.'s economic recovery efforts to focus on renewables, CCS, broadband coverage, electric vehicles and nature-based solutions to climate change.Let's create an army of zero carbon workers, retraining and redeploying those who can't work into different industries, from home insulation to wind turbine manufacture to tree planting.
It also recommends the government's Cabinet Committee on Climate Change is renamed to the Climate Emergency Committee to "reflect the urgent need for action."
Leading climate scientist Emily Shuckburgh, co-author of the briefing paper, said positives can "be extracted from even the darkest hour, but it requires clear thinking, imagination and bold leadership."
"Shaping the national and global recovery from the coronavirus pandemic in a way that supports the response to climate change and other environmental threats simply makes sense — not only does analysis suggest that green recovery packages deliver greater economic benefit, but investing appropriately in research, innovation, infrastructure and skills training, and matching that with robust institutional structures, will help create a fairer, more resilient, sustainable world with benefits for all," she said.
As governments survey the economic wreckage from the coronavirus crisis and mull their next moves in order to combat both the pandemic and stimulate as quick a return to relative prosperity as possible, the findings offer clear evidence that the green economy offers the best pathway out of the recession. The economic tools and public support for such action are all falling into place, but whether governments heed the calls remains to be seen.
This article originally appeared on BusinessGreen.