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Governments around the globe are missing their chance to reduce
greenhouse gas (GHG) emissions at the same time as fighting the
impact of the COVID-19 pandemic and righting inequity with
unprecedented stimulus funding, according to a study released 10
March.
The study, Are We Building Back Better?
Evidence from 2020 and Pathways for Inclusive Green Recovery
Spending, calls for more sustainability in
government investment and a greater focus on inequality in efforts
to stimulate growth following the damage caused by the pandemic.
The report is based on data collected by Oxford University's
Economic Recovery Project and the UN Environment Programme
(UNEP).
Overall rescue and recovery spending to combat the health crisis
totaled $14.6 trillion, but only 18.1% or $341 billion was green
recovery spending that could help reduce GHG emissions, according
to the report's lead author, Brian O'Callaghan, lead researcher at
the Economic Recovery Project.
Not only that, most of the green spending came from a small
number of European countries, so the percentage figure was even
worse for much of the world.
The per person spending showed a substantial divide between
developed and developing economies, according to the report, with
the former coming in at $20,800 and the latter $680.
The data, collated by the Global Recovery Observatory, tracked
the fiscal rescue and recovery spending of the world's 50 largest
economies.
Breaking down the $14.6 trillion figure further, some $11.1
trillion went toward rescue spending, $1.9 trillion to recovery
spending, and $1.6 trillion was termed "unclear spending."
Of the $341 billion in green spending, $86.1 billion was
allocated to transportation through electric vehicle transfers and
subsidies, investments in public transport, cycling, and walking
infrastructure. Some $66.1 billion was invested in low carbon
energy, much of that Spanish and German subsidies for renewable
energy projects plus hydrogen and infrastructure investments.
A further $56.3 billion went toward natural capital or
nature-based solutions such as ecosystem regeneration initiatives
and reforestation, much of it in the US and China, while $35.2
billion was committed to green building upgrades to increase energy
efficiency, mostly through retrofits, with France and the UK at the
forefront in this arena.
Unconditional support disappoints
One of the most disappointing surprises of assessing the
spending data, was how much funding had been directed toward
airlines, with handouts totaling tens of billions of dollars, and
yet very little came with environmental conditions, O'Callaghan
said during a press briefing on the report.
That criticism found support from an unlikely source in a
separate UNEP-sponsored briefing — Nobel Prize-winning
economist Joseph Stiglitz. The Columbia University professor said
he was typically a strident critic of funding conditions, but, in
the case of the pandemic and the need for green spending, was
waving his objections. Especially, he said, as governments have
never handed out such massive sums as the $14.6 trillion the
observatory tracked.
There were other disappointments too beyond that and how little
funding was allocated to the overall green economy, observers said.
Joy Aeree Kim, UNEP economic research unit programme officer, said
a major disappointment for her was countries failing to spend
enough on training workers for the future, specifically for jobs in
the green economy.
Still, there is no one right number that applies to every
country given the differences in the money that is available and
where countries are on what O'Callaghan termed "the green
curve."
But, what is clear, said Cameron Hepburn, professor of
environmental economics at Oxford University, is that there should
be no "brown spending," and if money was spent in this area, then
the data made available through the observatory would allow
citizens to "go to town naming and shaming."
A choice
Governments have a choice, according to O'Callaghan and Hepburn,
offering plaudits to some countries' efforts, including those of
Germany.
The German government looked closely at its choice, according to
Svenja Schulze, the country's environment, nature conservation and
nuclear safety minister, who took part in the UNEP briefing.
Germany could have chosen a traditional stimulus or a sustainable
spending plan that would speed up societal and environmental
transformation in line with the country's Paris Agreement promises.
She pointed to backing for green hydrogen and the electric battery
industry as examples of the path the government chose.
Her fellow speaker at the virtual briefing, Stiglitz, said the
pandemic was an interlude that highlighted global economic,
climate, and societal fragility. It focused attention on what had
been needed previously and was needed now, he said.
"If we don't have a green recovery, we are depriving future
generations of their entitlement," he added.
And if funds were spent on connecting poor people with jobs,
then economies would be stronger, he said, adding that the
distributive consequences of the spending must be "front and
center."
"It doesn't matter if you believe in climate change or not, the
economic argument is sufficient," O'Callaghan, who was present for
both briefings, said.
"Green spending can bring big economic returns," O'Callaghan
said.
The intent of the observatory was to keep governments
accountable and to bring transparency to their spending, which
O'Callaghan said would maximize prosperity. It would, he said,
allow governments an opportunity to see what their neighbors were
doing and what strategies they themselves might institute.
Existing budgets must be revisited too, said UNEP's Kim, with
efforts made to investigate what opportunities are being missed.
This was especially true because recovery spending accounted for
such a small proportion of overall budgets, she added.
The world has missed opportunities, Hepburn added, but it is not
too late.
The world is at a very important point in its history, an
opportunity to lift humanity's ambitions, with a window open for
transformative spending as a result of a "once in a lifetime
opportunity," said Steven Stone, UNEP economic research unit
programme officer, adding that "every dollar counts, every euro
counts, every yen counts."
Build forward
Stone's stance was backed up by the woman who controls the purse
strings for much of the funding that developing nations might
access to play catch up on their green recovery funding:
International Monetary Fund Managing Director Kristalina
Georgieva.
And on the day that President Joe Biden's mammoth $1.9 trillion
pandemic recovery package received the last green light it needed
from the US House of Representatives, Georgieva had a different
take to Biden's well-known "Build Back Better" motto. Her maxim,
she said, was "Build Forward."
It was, however, Georgieva said, a path that could not walked
along without a carbon tax.
Carbon prices are part of a triumvirate of requirements as
humanity responds to the devastation caused by the pandemic, she
said, with the remaining duo being green spending and a just energy
transition. If carbon prices are introduced incorrectly, she added,
then the poor of the world will bear the brunt of such inadequate
planning. Carbon prices and a just transition have to be linked,
she said.
Carbon prices should have been introduced decades ago, said
Georgieva, but now is a better time than a later alternative. The
carbon price, she said, is currently around the $2/mt mark (though
higher in some countries), but it should be in the region of $75/mt
and should rise from that point.
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