Green economic stimulus packages can bend emissions curve post COVID-19

Covid testing, Madagascar

A new analysis by the Climate Action Tracker suggests that governments can take advantage of strong future economic and climate change performance if they adopt green stimulus packages in response to the COVID-19 pandemic.

Conversely, if governments don’t roll out low carbon development strategies and policies – or roll back existing climate policies – in response to the coming economic crisis, emissions could rebound and even overshoot previously projected levels by 2030, despite lower economic growth in the period to 2030.

The COVID-19 pandemic presents the world with an unprecedented policy challenge: not only will it have a severe impact on the global economy likely to exceed that of both the 2008-09 Global Financial Crisis and the Great Depression, it will take place against the backdrop of the ongoing climate crisis.

In a briefing for governments attending the Petersberg Climate Dialogue on 27-28 April, the Climate Action Tracker (CAT) modelled two post COVID-19 economic pathways, combined them with five possible stimulus response scenarios, and calculated the resulting emissions trajectories.

“Our results show that green economic stimulus packages would have a fundamental effect on reducing emissions in 2030,” said Bill Hare of Climate Analytics, “but in the worst-case scenario, which involves the kind of fossil fuel rebound we saw after the 2008 global financial crisis, economic stimulus will be obtained at the expense of already-achieved climate policies.”

Economic impact from COVID-19 pandemic

The CAT also calculates that the economic damage caused by the pandemic looks likely to cause global CO2 emissions from fossil fuels and industry to fall in 2020 in the range of 4-11% and possibly again in 2021 by 1% above to 9% below 2019 levels.

For the analysis, the CAT modelled two economic pathways: an “optimistic recovery” where economic growth rates eventually return to those projected before COVID-19, and a “pessimistic recovery” where growth rates take much longer to recover and don’t return to those levels. It then combined these with five COVID-19 response scenarios: fossil fuel rebound, post-COVID-19 current policies, weak green stimulus, moderate green stimulus and strong green stimulus.

“The economic consequences of COVID-19 alone will do little to bend the emissions curve downwards: they would mainly delay an increase,” said Prof Niklas Höhne of NewClimate Institute.

Choices on stimulus measures

“Governments now have the option of developing green economic stimulus packages that focus on low-carbon energy system development and infrastructure, and energy efficiency that result in significantly lower greenhouse gas emissions by 2030, with major health and other benefits, including economic and employment.”

The report also sets out detailed sector-level solutions with promising examples of what a green stimulus package could look like, but also identifies examples of actions to avoid.

“If governments divert resources tagged for climate change to address the pandemic, economic recovery from COVID-19 will only plunge the world further into the climate crisis,” he warned.

“This report shows that the future is for governments to choose,” said Bill Hare.

“COVID-19 recovery presents both opportunities and threats to enhancing our resilience to climate change. The promotion of employment-generating building and infrastructure projects as a key pillar of COVID-19 recovery planning provides a chance to rethink our critical infrastructure, raise standards and develop innovation solutions. However, this requires bold action and bold thinking,” said Hare.

Unless affirmative and positive action is taken by Governments to ensure that the stimulus and response measures they put in place focus on low-and zero carbon development there is a risk of a winding back of policies and hence emissions being even higher in 2030 than would otherwise have been the case.

Read the full report: ‘A government roadmap for addressing the climate and post COVID-19 economic crises

Photo: World Bank / Henitsoa Rafalia

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