Covid-19 has caused shockwaves around the world, creating a health crisis and economic impacts beyond anything we have seen in our lifetimes. As governments scramble to provide fiscal stimulus packages and create recovery plans for the short term, with G20 countries earmarking $7.3 trillion in spending so far, there is a threat that environmental considerations will be sacrificed in favour of rebuilding the economy quickly.
However, if we pursue economic recovery at all costs, “we will leap from the Covid frying pan into the climate fire.” These worries are well-founded when we consider that carbon emissions rose significantly in the aftermath of the 2008–2009 financial crisis, with the economic impacts of coronavirus expected to be far worse.
The World Bank warned against actions that yield short-term benefits at the expense of long-term sustainability. They suggested investments in areas such as energy efficiency improvements for buildings, resilience to floods and droughts, and sustainable transport infrastructure.
Projects already identified within existing climate change adaptation plans should form the basis for response and be adapted based upon “their potential to fit the needs of a stimulus”. Needs should be assessed using short, medium and long term perspectives, preferably funding projects and actions that yield benefits across all timeframes.
The European Commission echoes this message, saying that a transition to a Green New Deal must be the way forward and “not a single Euro should be spent propping up old, dirty industries.”
In the UK, government advisers within the Committee on Climate Change (CCC) warned away from a carbon-heavy economic recovery, instead recommending that Covid-19 funds should go to firms that seek to reduce their emissions.
They proposed climate actions based on six principles, including using climate investments to support economic recovery by providing training and reskilling and create jobs; leading a shift towards positive behaviours focused on health and wellbeing and emissions reductions; incentivising emissions reductions via tax changes that do not hurt the consumer (e.g carbon taxes on low oil prices); and building resilience to the risks of climate change alongside the response to Covid-19.
Oxford University economists described the current situation as a golden opportunity for change, adding that “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.”
Their research surveyed 231 experts in economics and finance, asking for individual assessments on potential policy responses. Respondents rated each potential policy against four criteria: speed of implementation, multiplier effect, the potential impact on net-zero climate targets and overall desirability. Liquidity for households and small businesses, healthcare capital investment and direct provision of basic needs ranked as the top three overall policies.
Policies with potential for high economic impact and positive climate implications include energy efficiency modifications in existing buildings, investment in natural capital and funding education and training.
Perhaps unsurprisingly, income tax cuts, traditional transport infrastructure and liquidity support for large corporations all scored poorly overall. Interestingly, the policy that scored rock bottom overall, including on multiplier effect and on climate impact was airline bailouts. This is a divisive issue and one that I have written about previously.
When looking to the future, there are several interesting pandemic observations worth addressing.
Firstly, for the most part, people are listening to expert advice and acting upon it. Social distancing and stay at home advice have largely been heeded. While this appears obvious, expert commentary and suggestions on issues such as climate change often go unheard.
Naturally, some groups, including protestors, do not wish to listen to the latest research, creating a shared headache and mutual sympathy between epidemiologists and climate scientists alike. However, the vast majority of people understand that short term sacrifice will help facilitate long term recovery — a necessary message for the climate crisis and encouraging foundations to build on.
Secondly, the world has witnessed significant environmental changes. Without the normal levels of production, greenhouse gas emissions have fallen. China, the world’s largest emitter, saw a 25% reduction in CO2 emissions resulting from its lockdown. Analysis by Carbon Brief found India’s CO2 emissions fell by around 1% for the fiscal year ending March 2020. In March, estimates show an emissions reduction of 15% and 30% for April. As oil and coal consumption fell and the demand for renewables increased, the country experienced its first reduction in 40 years.
Air pollution in cities in China, India and the UK fell to levels unseen for years, clean waterways in Venice attracted dolphins and emissions are at their lowest in years. Of course, we cannot stay home forever but these impacts occurring within a few weeks of lockdown highlight how our actions affect our environment and how quickly things can change. Perhaps this can make us more mindful of our decisions once lockdowns are eased.
Third, the current crisis has also changed the landscape of financial responses to global challenges. For many years, governments have been quick to say that they cannot afford to invest in climate change at the required scale. Yet, in the space of a week in March, the US agreed a $2 trillion stimulus package, the UK announced financial aid totalling over £330 billion ($405 billion) and the European Central Bank agreed a €750 billion ($812 billion) bond-buying program to prop-up financial markets.
While these are exceptional circumstances, and widespread future quantitative easing should not be encouraged for fear of inflationary pressures, it certainly shows that money becomes available when a situation is made a priority. Future denial of funding on climate change will likely be met with public pushback.
Lastly, and perhaps most importantly, public opinions are changing. While a future focused around green growth may appear like an idealistic utopia, individuals are yearning for change. A poll of 20,000 people in the UK found that 22% want to use their car less after lockdown, over 30% intend on cycling more and a fifth are happy to work from home more. Moreover, over half suggested they wanted to see significant changes in their lives, of which the environment is a major part.
Additional polling across 14 countries illustrates these views further. On average, 71% of respondents agreed that climate change is as serious as Covid-19 in the long term and 65% agreed that a green economic recovery should be a priority. Despite these figures being lower in the US, 59% and 59% respectively, major emitters China and India scored 80% or more on both, providing some encouragement.
Covid-19 has proven devastating, the impacts of which will reverberate around the world in the short term. Despite the cliché phrasing, the notion that we should move forward from this rather than returning back to the pre-pandemic status quo certainly holds value. We have an opportunity, unlike anything we have seen for decades, to set the tone for the future.
A delicate balance must be struck. Reopening and rebuilding the global economy is imperative. Ensuring people have access to education, jobs and can provide for their families must be the top priorities but should not be done at the expense of the environment. While it is likely that governments will allow some flexibility in the pursuit of economic recovery, short term actions and policies cannot further derail medium- and long-term climate objectives. Moving from one crisis to another is not progress.
Research has shown that not only are climate-friendly, economically beneficial policies feasible to implement, but they are also supported by both experts and the public. As the pandemic continues, the true extent of its economic impact will not be known for some time. Nonetheless, it is increasingly obvious that environmental economics has to be a key consideration in any recovery plan.