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The (not so) green recovery: New report warns world is failing to 'build back better'

Analysis of 50 major economies' post-COVID spending program concludes policymakers are wasting a major opportunity to a build safer world and greener economy in wake of the pandemic.

renewable energy construction

Some $66.1 billion of COVID recovery funds have been spent on green energy as of early 2021, of which $25.3 billion focused on renewables and $18.5 billion on hydrogen.

The fiscal spending plans of major economies in the wake of the coronavirus crisis have fallen far short of ensuring the recovery from the crisis does not exacerbate ongoing climate and nature crises, with just one in every $40 committed by governments in the wake of the pandemic set to deliver a positive impact for the planet.

That is the bleak headline from a major report published this week by the United Nations Environment Program and Oxford's Economic Recovery Project, which warns policymakers are missing out on the "greatest chance we have had so far" to redirect the upward trajectory of global greenhouse gas emissions and put the world on track for meeting the 2030 Sustainable Development Goals.

The analysis, which looked at more than 3,500 fiscal policies across the world's 50 largest economies, finds that just 2.5 percent of all COVID-induced spending to date had "positive green characteristics." A huge chunk of COVID-related government spending has necessarily focused on welfare payments and the health response, but the report concludes that even when the focus is narrowed to look only at measures designed to deliver a longer-term economic recovery, only 18 percent of spending has "positive green characteristics."

As such, the report concludes that the world is "not yet building back better," despite repeated promises from governments to engineer a green recovery and the introduction of some promising green stimulus spending programs from a handful of predominantly wealthy countries such as Finland, Denmark, France, Germany and Norway.

Humanity is facing a pandemic, an economic crisis and an ecological breakdown — we cannot afford to lose on any front.

"Despite positive steps towards a sustainable COVID-19 recovery from a few leading nations, the world has so far fallen short of matching aspirations to build back better," said Brian O'Callahan, lead researcher at the Oxford University Economic Recovery project. "But opportunities to spend wisely on recovery are not yet over. Governments can use this moment to secure long-term economic, social and environmental prosperity."

For the vast majority of countries, recovery spending has been relatively low and not particularly green, according to the report, with any benefits from the greener elements contained in stimulus packages often undermined by concurrent fossil fuel and consumer-focused spending program. For instance, roughly 16 percent of recovery spending could bring positive air pollution impacts, but 16.4 percent is likely to increase net air pollution.

The United Kingdom is among a raft of countries that is "missing opportunities" to deliver a green recovery, given that only a small percentage of its post-COVID spending program has been explicitly green.

As such, the report urges policymakers to think long-term when crafting spending programs in the fallout from the pandemic, warning that a "one-dimensional focus on short-term economic recovery" risks stoking inequality and the climate emergency. Of the $14.6 trillion invested by these 50 countries to date, only $1.9 trillion has been invested in long-term recovery measures intended to spur economic activity, it notes.

UNEP Executive Director Inger Anderson urged policymakers to carefully consider the Global Recovery Observatory report, which collates examples of green recovery spending from around the world and underlines the social benefits that can be unlocked by carefully designed green policies, such as improved health outcomes, energy cost reductions and enhanced food security.

"Humanity is facing a pandemic, an economic crisis and an ecological breakdown — we cannot afford to lose on any front," she said. "Governments have a unique chance to put their countries on sustainable trajectories that prioritize economic opportunity, poverty reduction and planetary health at once — the Observatory gives them the tools to navigate to more sustainable and inclusive recoveries."

The paper identifies five core green policy areas that policymakers should focus on — green energy, low-carbon transport, natural capital, green building upgrades and green research and development (R&D) — and highlights successful green spending programs to date.

Some $66.1 billion has been spent on green energy so far, it notes, of which $25.3 billion focused on renewables and $18.5 billion on hydrogen, the latter boosted substantially by major investment programs by France and Germany. Meanwhile, $86.1 billion has been spent on low-carbon transport, $28.9 billion on green research and development and $35.2 billion on green building upgrades, although it is unclear whether this calculation factors in the recent spending cut to the U.K.'s flagship green housing stimulus program, the Green Homes Grant, which saw ministers initially assign $2.1 billion to the scheme before moving to introduce a new budget for 2021/22 of just $448 million.

Meanwhile, the report reveals that $56.3 billion has been announced for natural capital or nature-based solutions, highlighting how just 3 percent of all spending is deemed by the report to have "significantly positive characteristics" for nature protection, with 17 percent likely to have a significant negative impact on natural capital.

The report also notes how where green spending programs have been announced, they have been disproportionately focused on industrialized nations. It therefore argues that it is critical for advanced economies and multilateral agencies to "generously" support emerging markets and developing economies to meet their green recovery aspirations. Less-developed economies are hamstrung by higher borrowing costs and weaker fiscal positions than their richer counterparts, the report notes, leading to a scenario where on a per capita basis the total spending in advanced economies was 17 times greater than emerging and developing markets.

The conclusions reached by UNEP and the University of Oxford match those of an ongoing series of economic reports by Vivid Economics and Finance for Biodiversity, which has been tracking the "greenness" of different countries' recovery packages since the outbreak of the pandemic. The latest edition, published last month, concluded that governments of the 30 countries surveyed had "largely failed" to harness the opportunity to combine economic recovery with sustainable growth, calculating that just $1.8 trillion of the $4.6 trillion of stimulus spent to date in "environmentally impactful" sectors, such as agriculture, industry, waste, energy and transport, could be deemed "green."

As Europe approaches the one-year anniversary of the first wave of COVID-19 lockdowns, it is clear that policymakers must step up their game and match their much-repeated rhetoric about delivering a green recovery with concrete spending packages that have a net positive impact on nature and climate. They should also look holistically at the program of stimulus packages being unveiled by different branches of government in order to prevent the environmental gains produced by one spending program from being neutralized by the carbon-intensive impacts of another.

This holds particularly true in the U.K., as the government faces growing criticism for a lack of joined-up thinking with its climate policies that has allowed for climate and environmental considerations to be sidelined as ministers have rushed to bolster economic activity. You can boost jobs and GDP through new coal mines and domestic flights, but it makes it a lot harder to credibly claim that you are building back better.

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