With crisis comes opportunity: economic sustainability and the argument for going green

By on 27/09/2020
Photo courtesy Pixabay

Governments around the world have had no choice but to roll out vast stimulus packages in a bid to keep economies afloat during the coronavirus crisis. At a recent GGF webinar, an international panel of five experts argued that governments that invest in green technologies and decarbonisation will be better protected from future economic shocks – and that now is the opportune time to shift focus. Catherine Early reports

As governments have pumped trillions of dollars into economies to counter the urgent economic shock from the fallout of COVID-19, politicians, environment and health campaigners and economists have called for governments to use stimulus funds to decarbonise economies and to boost jobs.

As viewers of a Global Government Forum webinar held earlier this month – and comprising panellists from the German government, the UN, think tanks and knowledge partner Deloitte – heard, some have already begun.

Germany announced a €130bn (US$152bn) package for 2020-21 in June. Dr Steffen Jenner, policy advisor in the energy and climate policy unit of the German Federal Ministry of Finance said this comprised both a short-term stabilisation package to prevent economic collapse and a “future package” to back a longer-term recovery and decarbonisation.

Dr Steffen Jenner

Measures for the future package were selected based on three main principles, Jenner said.  

“Acceleration” measures will pull forward decarbonisation investments that the government was already planning for the next ten or 20 years, such as financing for hydrogen production infrastructure and public charging points for electric mobility, Jenner explained. 

“Scaling up” measures will take existing policies that have been successful, such as energy efficiency in buildings and incentives for buying electric vehicles, and increase funding and expand eligibility.

And a third “prevention” basket will counter impacts from COVID-19 that threaten to undermine achievements that have already been made in climate policy, for example, an increase in the price of electricity that would have damaged the competitiveness of renewable energies compared with fossil fuels.

Behaviour change

However, in spite of good work being done in various countries, green stimulus plans are not yet widespread. Government responses have so far tended to intensify patterns of behaviour that existed prior to the pandemic again, according to research by Energy Policy Tracker in partnership with think tank the Overseas Development Institute (ODI).

Sir Suma Chakrabarti, chair of the ODI, explained: “Jurisdictions that already had strong commitments to a transition to clean energy are now backing that shift with investment and recovery packages, while those that already heavily subsidise the production and consumption of fossil fuels have largely added support to those. The pandemic hasn’t changed behaviour markedly across the piece at all.”

Not so green: research shows that government fiscal responses have so far tended to intensify patterns of behaviour that existed prior to the pandemic. (Photo courtesy Pixabay).

G20 countries had committed around US$380bn (€326bn) to stimulus packages by the end of August, but around half of this investment supported fossil fuel use, with only a small proportion spent on green policies, according to Dr Laura Altinger, Europe and Asia regional team lead for nature, climate and energy in the United Nations Development Programme (UNDP).  

“There’s much more to be done to learn from those mistakes that we have from the last crisis where much of the stimulus was not green,” she said.

Hindered by process

Webinar viewers heard how decision-making processes within government can serve to hinder policymakers’ ability to think differently, or to enable the types of measures that are required for a green recovery.

For example, the UK’s Green Book, which is viewed as an international gold standard on cost-benefit analysis techniques, is founded on the premise that accurate costs and benefits of any policy can be measured, according to Dr George Dibb, head of industrial strategy and policy engagement at the University College London Institute for Innovation and Public Purpose.

Dr George Dibb

However, some information that would be needed to assess measures for a green recovery, such as energy prices, are typically very hard to predict, he said. Green Book cost benefit processes also view the role of the state and policymakers only in terms of preventing the private sector from doing something, rather than seeing their potential for setting a direction that creates innovation, Dibb added.  

“We need a much more dynamic form of economic evaluation and understanding of how our economy can be tipped from where we are today, to a much greener and sustainable future,” he said.

Silos within government and a lack of cross-departmental thinking are also a barrier to the creation of policies to support a green recovery, several panellists agreed. Dan Markham, national leader of the asset and economic advisory practice of Deloitte in Canada, noted that insufficient communication and coordination between departments is common in governments, and that in countries like Canada with federal, provincial and local government, vertical integration needed to be improved as well.

Dan Markham

“I think that most governments are sitting on a treasure trove of data and assets that they either don’t know exist or could make better use of, and I think there’s a real job to be done there across government to use the data that is collected, and to put it in the hands of people, irrespective of what department they’re for,” he said.

Dibb added that the way most governments today are set up – as a series of large, vertical departments – presented “serious organisational problems” in terms of actually answering big systemic economic or societal challenges such as climate change.

“Finding effective ways of breaking down those silos within government and creating teams that can draw on expertise and knowledge across government, and then present and leverage policy initiatives to answer them, is absolutely critical in terms of systems and behaviours of policymakers to effectively talk about climate change,” he said.

The UN’s Altinger agreed that both vertical and horizontal integration across government is important and that the need, in particular, is to involve economic policymakers, because the impact of climate change is central to economies.

She noted a trend for some countries to bring the whole climate portfolio into the Ministry of Economy or its equivalent, which had led to greater understanding of the wider challenges around climate change and sustainability by those responsible for making decisions on public budgets.

The ODI’s Chakrabarti suggested that the cross-cutting nature of climate change could best be dealt with by a cabinet-level secretary of state working across departments. In the UK for example, this role could be given to the chancellor, because a lot of the policy for a green recovery could be enabled through the tax and spend system, he said.

He added that civil servants should also be more proactive in finding allies in government by identifying why the green recovery should matter to politicians personally and politically, and make a case for how enabling it will enhance their careers.

The German government’s Jenner, meanwhile, said that the green recovery, and the clean energy transition in general, was increasingly becoming an issue of morals, technology, communication, political science and engineering, as well as being about the economy.

“Interdisciplinary cooperation and civil servants coming from all different academic backgrounds are really helpful in order to understand and put together a recovery programme,” he said.

Elements of success

Green shoots: Germany announced a €130bn (US$152bn) package for 2020-21 in June, part of which is dedicated to decarbonisation. (Photo by Singkham via Pexels).

The UNDP has identified target areas that governments should consider when designing stimulus programmes. All countries that have signed up to the Paris Agreement on climate change have drawn up strategies on how they will reduce emissions in line with the international target to decarbonise by 2050, and these should be made more ambitious, Altinger said.

Dr Laura Altinger

She added that governments should also focus on policy discussions on reforming fossil fuel subsidies and introducing taxes on the use of carbon to create an environment that supports green investment. And that new national climate finance platforms should be designed to implement green stimulus measures and capitalise on private sector finance, while the financial sector and central banks should be reoriented to ensure that those who are most affected by the clean transition are compensated for any losses.  

Speakers recognised the importance of ensuring that the transition is fair, as social unrest prior to the pandemic, as well as what has happened since, has been linked to the growing backlash against inequality in many countries.

Markham pointed out that Canada is a good example of where this would need to be thought through. “We’ve got a very robust oil and gas sector – how do you move into green recovery without disadvantaging a certain sector? In some cases in a country the size of Canada, if you disadvantage one sector you’re actually abandoning the whole region.

“All of this simply underscores one thing – you have to look at this holistically. Germany is a great example of that. You have to move at multiple speeds and address different parts of the economy at different times,” he said.

Chakrabarti, who ended his second term as president of the European Bank for Reconstruction and Development (EBRD) earlier this year, explained how the bank transformed itself into a leader among multilateral development banks on green investments.

Several internal changes made this possible, including to the methodology by which investments are assessed so that a project’s environmental credentials are central to financing being approved. The bank also set a target for 40% of all its investments to be in the clean economy by 2020, and that the remaining 60%, while not focused on decarbonisation, would not undermine it, Chakrabarti explained.  

Sir Suma Chakrabarti

These changes incentivised staff to make it clear that those who pushed this agenda would progress within the institution, and to develop financial products specifically for the clean economy which the bank then used to demonstrate the return on investment to private sector clients.

“The results were extraordinary, we doubled green finance within seven years,” Chakrabarti said, adding that 46% of EBRD investments in 2019 were in the clean economy, exceeding its 2020 target. This type of reboot is possible in national governments too, by having a mandate focused on the environment and backing that up with incentives, structures and skills, he said.

Chakrabarti spoke of a conversation he had recently with Gordon Brown, who was UK prime minister at the time of the 2008-09 global financial crisis. “He lamented that when the financial crisis hit, not enough was done to build in green elements into the stimulus packages that governments were putting through. We just mustn’t miss this opportunity again, it’s really important to try to address it in every single country and actually get on top of this agenda.”

This report covers GGF’s 10 September webinar ‘Reset your economy: building a green stimulus package’. You can download the presentation slides here and watch the whole session below:

About Catherine Early

Catherine is a journalist and editor specialising in government policy and regulation. She writes predominantly about environmental issues and has held permanent roles at the Environmentalist (now known as Transform), the ENDS Report, Planning magazine and Windpower Monthly, and has also written for the Guardian, the Ecologist and China Dialogue. She was a finalist in the Guardian’s International Development Journalism competition 2009, and was part of the team that won PPA Business Magazine of the Year 2011 for Windpower Monthly. She also won an outstanding content award at Haymarket Media Group’s employee awards for data-led stories in Planning magazine. She holds a 2:1 honours degree in English language and literature from Birmingham University.

Leave a Reply

Your email address will not be published. Required fields are marked *