The European Union as a whole and Germany and France in particular have taken the first big steps among G20 leading economies towards a green stimulus, aligning COVID-19 recovery funds to restore jobs and livelihoods with measures to head off climate and biodiversity crises, according to a report published on Thursday by Vivid Economics and the Finance for Biodiversity (F4B) initiative.
Only four of the world’s leading G20 economies will achieve a net beneficial impact on climate and nature, using “once in a century” COVID stimulus funding now exceeding US$12 trillion, found the “Greenness of Stimulus Index” study, even though these countries often state support for sustainable, inclusive growth.
Much of the government stimulus is in sectors, such as health, that have limited impact on the environment. Regarding environment-related sectors, recovery funds announced to date will more often have a negative environmental impact (accounting for an estimated 9% of total stimulus) than positive impact (5%).
But countries are starting to heed calls to “build back better”. In her “State of the Union Address” last week, the President of the European Commission Ursula von der Leyen said that some 37% of the EU’s latest, €750 billion “Next Generation EU” stimulus would be spent on green deal objectives.
Analysts, policymakers and campaign groups say that it is vital for governments to use stimulus funding both to protect lives and boost economies by supporting jobs and incomes, while seizing the opportunity to stem a climate change crisis, and reverse mounting damage to natural capital which produces services that people depend on including food, fibre, reliable freshwater and protection from extreme weather.
The Vivid-F4B “Greenness of Stimulus Index” found that leading economies are combining these goals in sectors including energy, transport and agriculture, by funding shovel-ready, “green infrastructure” projects that deliver local and national jobs at all skill levels, and also cut carbon emissions or repair natural ecosystems, for example by supporting renewable power projects, hydrogen energy research, or subsidising vast, scalable schemes for forest protection and conservation agriculture.
Through forensic analysis of hundreds of stimulus measures announced worldwide, Vivid and F4B identified a toolkit of green stimulus measures that deliver both environmental and economic benefits.
“Governments accept the premise that we cannot return to normal, to business as usual environmental threats such as climate change and biodiversity loss. We have identified a toolkit of measures that countries can use to lower dramatically the future environmental impact of economic stimulus today,” said Mateo Salazar, lead author of the Greenness of Stimulus Index (GSI) and Vivid Economics analyst.
The toolkit includes measures such as:
Airline and automotive bailouts that are conditional on companies shrinking their carbon footprints;
Investment in forest protection and tree planting that is socially distanced, scalable and can both protect nature and store carbon;
Loans and grants for low-carbon energy infrastructure including renewable power, electric vehicle charging and energy efficiency;
Green R&D across five target sectors (energy, transport, agriculture, waste and industry);
Subsidised pricing for green products ranging from EVs to LED lighting; and
Reinforcing environmental regulation and avoiding deregulation.
The EU collectively, in particular, is leading the way with its €750 billion (US$830bn) ‘Next Generation EU’ recovery package, announced in June, the most ambitious green stimulus to date, which allocates an unprecedented 37% of funding towards specifically green initiatives. These include targeted measures to reduce dependence on fossil fuels, enhance energy efficiency and invest in preserving and restoring natural capital. In addition, all recovery loans and grants will have attached ‘do no harm’ environmental safeguards. Economic stimulus plans in Western Europe, South Korea and Canada also show promise, with at least a portion of spending likely to be nature-friendly, coupled with green infrastructure investments in energy and transport. South Korea, in particular, has stepped up, with its ‘New Deal’, announced in July. The deal includes initiatives to support electric and hydrogen vehicles, renewable energy and energy efficiency over the next five years. The US$52 billion in ‘green’ funding is equivalent to 15% of the country’s total stimulus, the largest proportion of any individual G20 country. Many other G20 countries are still actively leading to environmental damage, however, through stimulus support for industries with a legacy of carbon emissions and nature destruction, for example in Brazil, Indonesia and Russia. Indonesia and Brazil are major agricultural commodity producers with a track record of lax environmental policies. Brazil has historically struggled to enforce forest and land use policies, a situation worsened under its COVID-19 response as a result of a Presidential decree relaxing land use enforcement. Indonesia, meanwhile, has approved a stimulus that supports state-owned oil and gas and electricity companies and airlines. Russia has supported its oil and gas sector further. The most concerning G20 country is the United States, as the country with the largest stimulus package, which includes in its measures environmental deregulation in energy, industry, transport and agriculture, and the bailout of the aviation industry without any green conditions. Monday’s GSI report scores the greenness of countries’ stimulus spending, based both on historical trends and specific measures, with most improvement since April shown by the EU, France, Germany and Korea. Download the full report >
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