Covid-19: will the economic recovery be green?

Regardless of the airlines, oil groups, and other polluting industries, which, all in economic distress, ask for financial support to survive the recession caused by the Covid-19. The best way to ensure that the recovery is well after the pandemic shock is to go "green", concluded economists at the University of Oxford, in a large study, published by the Oxford review of economic policy Tuesday May 5, and supported by Joseph Stiglitz, 2001 Nobel Prize winner in economics. Even if it means sacrificing the polluters of the world before the pandemic or conditioning any aid to these sectors on concrete efforts to preserve the environment.

They thus join an ever-increasing procession of decision-makers and international organizations who are calling for recovery plans that massively integrate investments in renewable energies. The European Parliament, the World Bank, the UN, through its secretary general, Antonio Guterres, or even Pope Francis all seem to want the recovery to be “sustainable”, both economically and from an environmental point of view.

Forget the old recipes of 2008?

But, while these declarations essentially appeal to the goodwill of the States, without going into the details of what could be a “green” stimulus plan, the Oxford economists set out a precise roadmap, while explaining why past recipes may be less effective this time.

Economists warn against the temptation to believe that it is in the old pots, those of 2008 in this case, that we would make the best recovery plans. Massive and indiscriminate financial support for banks and companies on the verge of bankruptcy, accompanied by fiscal measures such as VAT reductions to boost consumption would come up against the particularities of the economic shock caused by the health crisis. "The uncertainties related to the current situation are deeper than in 2009. This can push individuals to be more careful with their spending, reducing the effectiveness of tax incentives", note the authors of the study. They also question the economic interest of flying to the aid of aircraft manufacturers or cruise lines if, as would be expected, travel and tourism habits will be durably transformed by the pandemic episode.

"In 2008-2009, governments were convinced that support for the economy should take precedence over environmental policies, which could be sacrificed while the crisis was resolved," said Cameron Hepburn, the lead author of the study. 'Oxford, in a forum published on the Carbon Brief website. Preserving jobs and avoiding a surge in poverty was more urgent than caring for Mother Nature. But even at the time, countries that took the opportunity to invest in “green” technologies were more successful in getting out of the economic slump, say the study authors.

Quickly applicable “green” measures

To reach this conclusion, Oxford economists analyzed 196 bailouts deployed worldwide after the financial crisis. The sixties having left a large place to investments in renewable energies or in building insulation projects have made it possible to better fight against the rise in unemployment in the short term, while improving in the long term the economic efficiency of the country. "Construction sites such as building insulation require the rapid mobilization of a low-skilled workforce, which is often the hardest hit by an economic crisis," notes the study.

Read also on France 24 >> Covid-19: will ecology be sacrificed in the name of economic recovery?

What was already true in 2008 would be even more true today, according to these experts. One of the main criticisms made at the time of investments in the green economy was that they took time to materialize, because they were new technologies. "The effectiveness of a recovery plan in times of crisis depends on the speed with which it can be implemented to get people back to work," admit Oxford economists. In terms of jobs, it was easier to save a coal mine than to build, for example, CO2 capture sites, a technology that was still in its infancy.

But the Paris climate agreement has gone through this, opening a new and fertile era for research devoted to the fight against global warming. Result: "There are many more ready-made projects that could be implemented very quickly," said Cameron Hepburn. The installation of a network of charging stations for electric vehicles, better broadband Internet coverage to promote telework and, therefore, reduce car travel or even the rehabilitation of natural environments to promote biodiversity are all tracks proposed by the economists of Oxford. “So many projects which, moreover, are in phase with the new reality of social distancing”, underlines the study. 

From words to deeds?

However, decision-makers must not miss these opportunities. The initial financial response does not bode well. Of the 7,300 billion dollars released worldwide to limit the economic impact of the pandemic "we estimate that around 4% of the funds are spent on 'green' projects", underline economists at the British university. 

But they hope that this is only the first wave, intended to provide emergency aid to the poorest and the most affected sectors. There is hope, however: more than 200 political and economic leaders, including central bankers, finance ministers, IMF economists, and business leaders, have been tasked with assessing several stimulus packages concocted by economists from Oxford. All have considered that support for airlines, the outright bailout of near-bankruptcy companies are the least effective measures to get out of the crisis. On the other hand, investments in “clean” energy, in improving connectivity and in research and development are among the most “desirable” measures alongside temporary wage increases or support for small businesses. and medium-sized enterprises.

The study authors recognize the limitations of such a survey. There may be a gap between what is desirable and the measures that are then implemented when politicians are faced with pressure from public opinion and lobbies. 

It would also be enough for one or two major countries to ignore these recommendations for such a plan supposed to reconcile economic recovery and fight against global warming to fall apart. Donald Trump's United States does not seem to be on the same wavelength as Oxford economists, the BBC notes. The American president has repeatedly said that saving the highly polluting oil sector is one of his main priorities. Ditto for China, which “knows how to be expected at the turn to restart its production machine in order to support the world economy”, underlines the BBC. Not sure that Beijing hears the expression “return its economic indicators to the green” in a very respectful way for the environment.

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