A Green Recovery Is Best Way To Bounce Back From Covid-19
Taking the environment into account will not only make economies more resilient and sustainable, but create more jobs, too.
The economic havoc wrought by the Covid-19 pandemic is forcing governments into allocating billions, if not trillions, of dollars into supporting their economies.
For many, this has provided an opportunity to focus on ‘Building Back Better’ to ensure that the future economy is robust, resilient and sustainable. Now there is evidence that such an approach will not just have environmental benefits, but economic ones, too.
A new report, commissioned by the We Mean Business coalition and conducted by Cambridge Econometrics, shows that green recovery plans boost income, employment and GDP better than return-to-normal stimulus measures, with the added benefit of reducing emissions.
Everywhere they looked, (globally, in the US, the EU, Germany, Poland, the UK and India), the researchers found that green recovery plans were more effective than traditional stimulus approaches that reduce VAT rates and encourage households to resume spending as soon as they can.
“This report confirms what many companies already know – investing in the zero-carbon future is the best way to ensure business success,” said Maria Mendiluce, CEO of the We Mean Business coalition. “For governments, spending and tailoring policies in a way that boosts green technologies and innovation brings benefits to businesses, economies and people as well as cutting emissions. To invest in any other way would be to set the world on course for economic and environmental disaster at a time when we need to build resilience.”
The analysis models a five point ‘green recovery plan’ and a ‘return-to-normal’ plan, each at an equal cost to government. The green recovery plan includes a (smaller) reduction in VAT and:
- Public investment in energy efficiency
- Subsidies for wind and solar power
- Public investment in upgrading electricity grids
- Car scrappage schemes in which subsidies are only provided to electric vehicles
- Tree planting programmes
Both recovery plans provide an immediate boost to output and employment, but the impact is consistently larger in the green recovery plan.
The report’s key findings include that the green recovery plan in the US would deliver almost 1 million more jobs than a traditional stimulus package, while a green recovery in the EU would create 2 million more jobs by 2024.
The green deal would also cut global greenhouse gas emissions by 7% by 2030, the report’s authors said. While this is not enough in itself to be consistent with the targets of the Paris Agreement, the cuts are a good starting point for further reductions.
The biggest job creator and boost to growth over the next decade would come from the car scrappage scheme, the report added. In Germany, a car scrappage scheme could boost the economy while simultaneously creating jobs. However, each economy is different and green recovery plans must be tailored to specific economies. It could also reduce emissions by 12-14% if combined with measures to increase energy efficiency and the use of renewables.
Tree planting schemes are another effective way to create jobs in countries that have enough land available, accounting for 10% of the growth in GDP and 27% of the additional employment in India, while in Poland it could be responsible for half of the new jobs created.
“Covid-19 has exposed deep flaws in how we consider systemic risk. A simple return to a pre-pandemic business-as-usual would be a failure to understand what lies ahead and would store up further problems that we would be even less well suited to face,” said Eliot Whittington, Director, European Corporate Leaders Group (CLG Europe).
“We now have an urgent need to build resilience to shocks to our economies and societies like the pandemic – and climate change stands out as just such a threat. The evidence in this report clearly shows a green recovery, which lets us stabilise and regrow economies while working to face up to the climate change challenge is not only possible, it is essential. The only viable way forward is a resilient, inclusive and climate neutral recovery plan.”