As the economic impact of Covid-19 rages on, stimulus funding is still needed in the US and Europe, both to provide immediate relief and to drive an economic recovery that countervails the recession triggered by the pandemic. However, the question remains of how to initiate and sustain that recovery, especially since we will likely not know the full extent of the recession nor the full economic impact of the coronavirus for years. Investments in decarbonisation and clean energy – what I refer to as green stimulus – offer a compelling path forward.
Elected leaders have the responsibility to rebuild the economy; they also have a unique opportunity to advance a justice-driven approach that invests in working people, builds strong communities, and reduces inequality – investments long needed to end the decay of our global economy. But if the stimulus packages passed thus far are any indication, we may not only miss that chance but also jeopardize any hope for a full recovery.
In the US, stimulus funding appears to be climate-neutral; the CARES Act – the major stimulus package passed in response to the coronavirus pandemic – does not appear to explicitly benefit clean energy or fossil fuel companies. However, after intense lobbying from fossil fuel advocates, the Federal Reserve loosened eligibility conditions for the emergency “Main Street” lending programmes to make it easier for oil and gas companies to receive loans and to use them without restriction.
Europe has taken a decidedly more green approach to economic stimulus. For example, the EU has committed to allocating 25 per cent of its proposed economic recovery package – more than €188 billion (£170 billion) – to decarbonisation measures including sustainable land use. Several EU member nations have also designed national recovery packages that provide additional green stimulus measures, including €4 billion for green renovations to social housing in Denmark and €41 billion to support low-carbon transportation and energy alternatives in Germany.
For its part, the US could recognise this moment for what it is and work to craft stimulus packages that address two existential crises at once: Covid-19 and the climate crisis.
It is, however, unlikely that even Europe’s proposed green investments will reduce emissions or realign markets enough to sufficiently offset the uncertainty caused by climate change or the coronavirus – especially since non-climate spending dwarfs climate spending at least 3:1, even in the most climate-friendly recovery packages. Furthermore, without strong supporting policies – such as climate finance reforms and investments in marginalised communities – it is unlikely that green stimulus policies as proposed thus far will lead to more equitable and just societies, let alone a lasting economic recovery.
Green stimulus programmes have the power to spark a private investment boom as technological change and transformations in the market encourage productive new investments. If designed correctly, green stimulus policies can help address the structural causes of the current economic collapse, while averting an even bigger climate crisis. It has never been more timely, appropriate, or possible to make green jobs a driver of good jobs that provide health benefits, paid family leave and a living wage.
While climate change is not an acute crisis like Covid, it holds the seeds of many other similarly acute and damaging crises, including future pandemics that will arise from changing land use and shifting disease vectors – each with the potential to catalyse sustained economic damage. To ensure a resilient future, we need bold, intersectional action today.
Rhiana Gunn-Wright is director of climate policy at the Roosevelt Institute
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