Global green recovery plans fail to match 2008 stimulus, report shows
Efforts by governments around the world to forge a green recovery from the coronavirus pandemic are so far failing even to reach the levels of green spending seen in the stimulus that followed the 2008 financial crisis, new analysis has shown.
Only about 12% of the spending on economic rescue packages around the world is going towards low-carbon projects, such as renewable energy and clean technology, according to a report by Vivid Economics, published on Friday.
That compares with about 16% of stimulus spending that was devoted to green and low-carbon ends after the financial crisis of 2008, according to a previous landmark study by the economist Edward Barbier. The methods used to calculate spending in each case are not identical, the authors of the Vivid report note, so an exact comparison is not yet possible, but the analyses give an indication of how far governments still need to go to create the genuine green recovery that many have promised.
The overall sums this time are also much higher, which means that the total amount of green stimulus spending today is more than three times as high as it was 12 years ago. After the 2008 recession, more than $3.3tn (GBP2.4tn) was spent on fiscal stimuli around the world, of which about $522bn was classed as green or low-carbon investments.
The current stimulus spending in 30 key countries tracked by Vivid Economics amounts to about $14.9tn in total, of which $4.6tn is flowing into sectors that are environmentally relevant, including industry, energy, waste, agriculture and transport. Of that, about $1.8tn is going to efforts that will have an environmental bonus in the form of lower greenhouse gas emissions, higher resource efficiency or cutting pollution.
By contrast, about $2.8tn of current stimulus spending is going on sectors that will raise emissions or increase pollution, according to Vivid’s analysis in its latest Green Stimulus Index, which tracks relevant spending up to the beginning of this month.
The biggest change since Vivid examined the global green recovery last autumn has been the inauguration of Joe Biden as US president. He chose to prioritise action on the climate from his first day, signing a sheaf of executive orders to reverse decisions made by Donald Trump and taking the US back into the Paris agreement.
Those actions have pushed the US up Vivid’s international rankings, to 15th out of the 30 countries tracked. However, the overall net effect of the US stimulus remains negative for the environment, because so much has been spent on fossil fuels. For instance, of the $900bn stimulus spending agreed by Congress, only about $35bn went to clean energy. That leaves much more for Biden to do to put the world’s biggest economy on course for a genuinely green recovery.
Biden is still hoping to push through $1.7tn of fresh spending, of which far more will be focused on green initiatives, but he is likely to meet stiff resistance from sections of the Republican party in Congress.
According to Vivid’s index, in only 10 of the world’s major economies was stimulus spending net positive for the environment; that is, money going on efforts that would reduce emissions and produce environmental benefits outweighed stimulus spending that would increase emissions and pollution.
However, there was still time for governments to remedy the situation, said Jeffrey Beyer, lead author of the analysis. “Governments can still spend to transform their economies to something cleaner and more resilient,” he told the Guardian. “They should take this opportunity.”
He said that despite the failures, there were promising signs, as 17 countries had shown an improvement since last December in their plans for a green recovery. These include the UK, which is now fifth in the global ranking, after Denmark, the European Union, Canada and France. “Momentum is building in the right direction,” said Beyer.
Green spending would generate much needed jobs as well as improve the environment, improve health and restore nature, studies have shown. A landmark paper published last May by economists including Nobel laureate Joseph Stiglitz showed that green spending would create jobs and economic benefits in both the short and long term, as countries strive to lift their economies out of recession.
Job-creating projects that reduce emissions or increase resilience to the impacts of climate breakdown include home insulation, public transport, broadband networks and tree-planting.
However, many governments have focused on saving jobs currently in peril, while others have brought forward fossil fuel spending as a way of spurring growth. China in particular has hastened decisions on new coal-fired power plants, despite making a new pledge last September to reach net-zero emissions by 2060.
Fatih Birol, executive director of the International Energy Agency, told the Guardian that countries must forsake coal as a matter of urgency, and avoid repeating the mistakes of the 2008 financial crisis. “Some countries did listen [to calls for a green recovery],” he said. “They have done a good job, and have followed a more sustainable path. But the majority of countries did not.”
Edward Barbier, professor of economics at Colorado State University in the US, said there was still time for countries to take a longer-term view of the recovery. “By definition, short-term stimulus must be targeted, temporary and timely, and in this regard, the majority of stimulus efforts globally have focused on immediate economic relief for badly affected households and businesses as well as emergency healthcare priorities.
“Thus, the finding of this new study that global fiscal stimulus is only 12% green should not be surprising. It is imperative that as major economies recover, they develop a long-term policy strategy of pricing reforms and spending commitments that ‘greens’ that recovery.”