Building back better, the importance of a green stimulus

Manon Roberts on the importance of investing in a climate-friendly economy and society.

The Coronavirus pandemic-driven lockdown imposed across the UK has upended most aspects of day-to-day life. Whilst the economic cost of the lockdown is severe, one noticeable side-effect has been the impact of lockdown on the environment. Globally, CO2 emissions have reduced more as a result of the Coronavirus pandemic than from any other world event.  

However, there is a risk that policies adopted to get the economy moving might cause emissions to rebound in an environmentally damaging way, delaying the fight against climate change – and the longer the pandemic continues, the greater the risk of a pendulum swing towards promoting economic growth over and above the potential impact on the environment.

Policymakers might instead wish to consider ways to take advantage of the need for economic stimulus and public concern about climate change to encourage a ‘green recovery’ from the pandemic.

However, while the lockdown has clearly caused a dramatic reduction in individual activity and (at least temporarily) in some industrial sectors, it has also highlighted the limits of individual actions.

While carbon emissions have reduced, this has varied depending on the carbon intensity of local industries: New York has only observed a 10% reduction in emissions, despite effectively shutting down the entire city, while in Paris, the reduction is in the region of 80%. 

This is because fossil fuel plants within the New York city limits contribute a significant proportion of emissions, meaning the reduction in transport had a comparatively smaller effect on overall greenhouse gas emissions. 

By contrast, however, air pollution levels in the UK at the end of March were comparable to “an Easter Sunday”, with nitrogen dioxide levels decreasing by a third to a half in London, Birmingham, Bristol and Cardiff.

The greatest reductions in air pollution have been observed in the areas with the most heavy road traffic, as in general, most urban air pollution comes from traffic.

This implies that, although positive, it is not enough to assume that behaviour changes that have occurred as a result of the pandemic and lockdown will continue once the restrictions are lifted, nor that this will be sufficient to tackle the climate crisis.

Consequently, there will need to be much broader considerations of how energy is produced and transmitted to be able to maintain and build on the observed environmental gains as the restrictions are gradually eased. 

Previous experience provides cause for both optimism and concern. Following the financial crash in 2009, a drop in emissions was observed followed by notable rebound in emissions in 2010, followed by a continuous upward trajectory.

This is because the stimulus focused on recovering economic growth above environmental considerations, including stimulus spending that increased fossil fuel consumption.

Researchers who examined the issue concluded that the carbon dioxide emissions rebound following the global financial crisis represented a missed opportunity to move the global economy away from a high emissions trajectory.

To avoid a repeat of this situation, there has been a concerted effort to ensure that environmental and climate change considerations are factored into the post-Coronavirus recovery.

For example, the Committee on Climate Change wrote an open letter to the UK Prime Minister, Boris Johnson, advising how “effective climate policy can and should play a part in the recovery”.

The committee outlined six principles against which the government should align stimulus spending, aiming at both individual and systematic policy changes.

There is some evidence that taking this approach could provide better short and long-term returns on governmental stimulus spending compared to conventional stimulus spending, as argued in a forthcoming paper based on a survey of 230 leading economists. 

In Wales, delivering a ‘green’ stimulus will depend on the funding that is available (the bulk of which will likely rely on Barnett consequentials from UK government spending) and on the specific powers devolved to Welsh Government.

Notwithstanding these considerations, there are areas where Welsh Government could act to advance its own environmental policy and promote a ‘green recovery’ in line with a ‘just transition’ agenda. These could include:

  • investment in clean physical infrastructure through encouraging small-scale renewable energy, using the powers devolved to Welsh Government;
  • efficiency programmes for renovating and retrofitting homes; 
  • investment in education and training to tackle rising unemployment as a result of the pandemic and encourage structural shifts towards decarbonisation; and
  • natural capital investment for ecosystem resilience and regeneration.

It will be important to advance these alongside more traditional stimulus measures, given the expected depth of the recession, which might limit the extent to which Wales can advance these policies.

However, the recovery offers a pivotal opportunity for encouraging a climate-friendly economy and society, with expert opinion indicating that ‘green’ stimulus measures are able to deliver this on top of an effective economic recovery. 

Manon Roberts is a Research Associate at the Wales Centre for Public Policy.

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