Why are experts calling for a green stimulus? - China Dialogue
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Why are experts calling for a green stimulus?

Fixing the economic crisis requires stimulus plans that address climate change and social injustice too, reports Olivia Boyd
Sunrise at an off-shore wind farm near Shanghai (Image: Alamy)
Sunrise at an off-shore wind farm near Shanghai (Image: Alamy)

The extraordinary spending figures announced by governments in recent weeks are one signal of the scale and breadth of Covid-19’s impact: a $2.2 trillion US rescue package; multibillion-dollar welfare interventions in the UK, France and elsewhere; and a “neo-infrastructure push” on the horizon for China.

But as states scramble to deal with the public health emergency and its immediate economic fallout, a growing number of experts and campaigners are turning attention to what happens after the pandemic. And they are making the case for economic recovery policies that also confront climate change and social injustice.

“We have converging crises – the Covid crisis, record levels of inequality and the climate crisis,” said Mijin Cha, senior fellow at US think-tank Data for Progress and co-author of an open letter to US Congress calling for a menu of green stimulus measures to be made “shovel ready” for when the disease is brought under control.

The authors propose an American recovery package of at least $2 trillion to create green jobs, transition away from fossil fuels and raise living standards, to be renewed annually at 4% of GDP until the economy is fully decarbonised and the unemployment rate below 3.5%. Suggested policies include everything from electrification of ports to grants for farmers transitioning to regenerative agricultural practices.

“I hate to say ‘use this moment’ because the moment is so dire,” said Cha. “But we know there will be a stimulus, so it’s up to us to make sure it’s one that invests in a low-carbon and more just future.”

Cha is not alone. Over 1,000 academics, campaigners and citizens have signed the letter. And prominent figures around the world have made similar pleas. International Energy Agency chief Fatih Birol, for example, has urged policymakers to “put clean energy at the heart of stimulus plans”.

Their calls come at a pivotal moment for the planet. The year 2020 was meant to be a turning point for climate and biodiversity, with a packed line-up of negotiations intended to ramp up action to stave off dangerous warming and species extinctions. The push for green deal policies promoting environmental and social justice had also been gaining momentum, with US presidential contenders debating them and the EU announcing in December a $1 trillion plan for a “just and inclusive” economic transition.

The question now is whether policymakers can be persuaded not to turn their backs on these processes, but to accelerate the move to cleaner, greener economies.

Planning for a stimulus

Michael Jacobs is professor of political economy at the University of Sheffield, and was once a special adviser to then UK prime minister Gordon Brown. He argues that, when the time is right, a sweeping range of stimulus and policy measures – from investing in smart grids, home insulation and conservation schemes to adjusting taxation regimes to boost renewables – could help drive a “green, equitable and resilient recovery”.

Stimulus planning is complicated by the fact we don’t know quite what society will look like coming out of the pandemic, said Jacobs. For example, will a level of social distancing be required for some time, keeping certain economic activities off limits? But one advantage is that there are already many well-developed ideas and proposals around for helping the transition to low-carbon societies: “It’s not as if nobody has thought about this before,” he said.

Some things are easier to forecast than others – corporate bailouts will likely be the first thing needed, said Jacobs, and should come with conditions. Aviation companies, for example, could be given funds on the basis that they start paying fuel tax, or become broader transport companies and invest in railways. The public sector could also take equity in companies and direct change from within.

Perhaps most important of all, said Jacobs, is that governments avoid doing things that may seem easy but would be devastating for the planet, like massive investment in road building or oil extraction, which would lock in years of avoidable emissions. “The core of the message is we cannot afford to exacerbate our climate problem as we come out of this. So let’s not do the things we shouldn’t,” he said.

Proponents of green recovery measures also argue that they can provide crucial employment in a time of historic joblessness. Helen Mountford, vice president for climate and economics at the World Resources Institute, said a US tree planting programme, for example, could put 150,000 Americans to work while sequestering 540 million tons of CO2 per year by 2040.

We believe an economic revival package should focus on people. The most vulnerable communities hit by this crisis deserve help

When it comes to infrastructure investment, greener choices – like public transport and EV charging infrastructure – can be more effective at generating jobs than their dirtier counterparts, said Mountford. She pointed to research showing that, after the 2008 financial crisis, one billion dollars spent on public transit projects in the US created almost double the number of job hours as the same money spent on highways.

There are signs such arguments are finding traction. A joint statement from the European Council last week called for “the green transition and the digital transformation” to be integrated into recovery measures. And in South Korea, the ruling Democratic Party launched a climate manifesto on 16 March stating an ambition for a zero-carbon society by 2050 and promising an end to coal project financing and a carbon tax.

This is so meaningful because Korea is heavily dependent on the fossil fuel industry like its neighbouring countries,” said Justin Jeong, a Greenpeace campaigner in Seoul, calling it a “great message to all Asian countries”.

Chang Hoon Lee, vice president of the Korea Environment Institute, called for more detailed proposals for achieving these goals, but said the announcement came at the right moment: “Korea is now preparing a vast economic stimulus package, and the investment in greening of industry and in green industries is not only environmentally but also economically rational.”

China plans more infrastructure spending

China, where Covid-19 has been brought under control at least for now, is one of the countries furthest along the road in stimulus planning. But while support for “new infrastructure projects” could see huge sums directed into areas like electric vehicle charging, the inclusion of coal projects on a list of provincial spending plans has prompted head-scratching. “China has managed to build more coal plants than it needs. Adding more of them will not burn coal, but money,” said Li Shuo, senior global policy advisor at Greenpeace East Asia.

Li notes that China had new coal projects in the pipeline even before the pandemic. He thinks the bigger problem with the mooted stimulus is the emphasis on infrastructure spending to make up for the decline of consumption, an approach he argues “will inevitably increase emissions, however you design it”. Instead, he calls for money to be spent on strengthening the social safety net, public healthcare and the service sector.

“We believe an economic revival package should focus on people and sustainable consumption. The most vulnerable communities hit by this crisis deserve help,” Li said.

These arguments resonate across the Pacific, where a growing number of US academics and activists are joining the call for a People’s Bailout, with a focus on using public funds to improve ordinary lives rather than simply prop up companies. Thea Riofrancos, assistant professor of political science at Providence College and another co-author of the open letter to Congress, is already worried the US emergency measures have set the wrong tone, describing last week’s bill as a “$4.5 trillion corporate bailout with very few strings attached”.

But she said there was still a long fight ahead “for the economy we want”, and that she was encouraged by engagement with their ideas from officials both in Congress and state legislatures. At least four stimulus packages are expected in the US in the coming months, but Riofrancos said the response would inevitably go beyond these.

“This is going to be a crisis rivalling the Great Depression and more global in scope,” she said. “So I think there will be untold numbers of stimulus measures in the future.”

“This is the moment to make bold demands.”