A climate-change conscious post-Covid-19 economic stimulus will deliver recovery faster – it did last time

Covid-19 has changed the rules of the way we live and do business forever. Central banks around the world are trying to limit damage to the global economy by adding $5 trillion in extra credit – but this alone is not the sufficient, say experts. So how should countries and economies rebuild?

We must learn from the response to the 2008 economic crash by looking at the countries that recovered faster than others to avoid a repetition of when global CO2 emissions from fossil fuel combustion and cement production grew 5.9 per cent in 2010, more than offsetting the 1.4 per cent decrease in the previous year due to recession.

Graphs: The impacts of past economic stimuli on CO2 emissions

Graph showing which countries spent more on the green economy in response to the 2008-2009 economic crisis

South Korea was one of the few countries to show positive growth early on in 2009-10. This is attributed to its investing in sustainable forms of transport and green infrastructure. For example it increased the subsidy on solar rooftops up to 50 per cent of their cost. As a result, economic recovery and job creation was twice the rate of other countries for the same amount of fiscal stimulus.

Graph showing how South Korea's economy we covered much faster than other OECD countries after the 2008 recession because of its investment in green economy

Glass showing how South Korea allocated 80% chemistry thousand and nine economic stimulus to the green economy, much more than other countries

South Korea and Ethiopia are amongst the countries planning to repeat this approach now. Ethiopia is planning a green economic recovery with resilience and digitisation as themes, according to Helen Mountford, the program director for the World Resources Institute (WRI)’s New Climate Economy project, who previously worked for the OECD (Organisation for Economic Co-operation and Development).

She was one of a number of expert WRI members from around the world offering their insights learned from previous crises and accompanying economic stimulus packages last Friday. They all highlighted the opportunities for job-creating, high-efficiency, low-carbon infrastructure and warned that stimulus packages should not prop up failing fossil fuel projects that utilize outdated economic models and past-century technologies.

Mountford said there are some reports already highlighting the rural job benefits of green investments.

China’s green shoots

China was the first country to be hit by the coronavirus pandemic and its focus now is on shifting to economic recovery. So far it is working:

Graph showing the evolution of China's confirmed Covid-19 cases and covers

Graph showing the effects of the Covid pandemic on China's manufacturing index

Graph showing China's economic recovery doing it since the pandemic

During the pandemic online education and working increased dramatically. “We are looking to continue this and increased investment in new infrastructure such as ultra high voltage grid connection to facilitate renewable energy, intercity transport and electric vehicle charging stations, 5G, artificial intelligence and the industrial Internet,” said Li Fang, Chief Representative, WRI China.

“New investment should be to bring long-term benefits. We are learning from the past when after 2008 recovery carbon emissions increased faster than ever and we don’t want this to happen again.” Li Fang was previously the Deputy Director General of the Foreign Economic Cooperation Office of the Chinese Ministry of Ecology and Environment, and Assistant Secretary General of the China Council for International Cooperation on Environment and Development.

She said China is looking at five work streams for the recovery:

  1. Food, water and energy

  2. Urban climate adaptation

  3. The circular economy

  4. New transport infrastructure

  5. Energy storage.

Priorities for China's post-pandemic reconstruction

She said all this must be in the context of a healthy supply chain and biodiversity. “Global governance is crucial and the food supply chain is critical as it joins most of the above together.”

The US reconstruction bill

In the United States, Trump and Pelosi have asked for $2 trillion more of investments including in major infrastructure. The next reconstruction bill is being put together now. What will it contain?

Dan Lashof, director of the US branch of the WRI, is campaigning for renewable energy and grid upgrades and reviving wind and solar power. This worked last time around:

Bar chart showing how the American 2009 recovery and reinvestment act surely investment in the green economy paid off with job years supported

“The sectors used to employ 350,000 people and was fast growing,” he said. “The pre-existing tax credits can be used again (these were cancelled by President Trump). The grid can be upgraded in a smart way, and electric cars and their charging infrastructure, and transit buses can be backed, lowering operating costs. This would put thousands of electricians back to work.

“Additionally, upgrading buildings with energy efficiency and climate resilience would employ a huge number. Installing weatherisation for low income households, and retrofitting hospitals and schools to lower their costs with more efficient equipment would also create tens of thousands of jobs.

“Planting trees would create 150,000 jobs, targeting agricultural land. 500 million trees would contribute significantly to the global target of 1 trillion trees planted,” he added.

Africa must look to its landscape

In Africa, according to Wanjira Mathai, vice president and regional director of WRI Africa, food is the most critically threatened supply chain. “We must keep prices as flat as possible. In the future local supply chains will need to be encouraged especially for countries that currently rely on food imports. Although ports are closed at the moment, food products are allowed in. Farmers are especially vulnerable and must be supported and we can do this with new ways of ensuring that our landscapes continues to serve the population as they have for tens of thousands of years in the past, by building resilience around water, soil and energy.”

Lawrence MacDonald, WRI’s vice president for communications, said that cities and urban areas are the frontlines in the struggle against the pandemic. “It is those on a low income that are suffering the most. We must use the opportunity to let cities become more equitable, resilient and low carbon.”

He added that “existing fault lines in our systems have been exposed. In many cities in developing countries a total of one billion people cannot self-isolate, there is no healthcare, no water, poor transport and social distancing is impossible.”

Fixing the fragility

The pandemic shows the fragility of all jobs that underpin urban economies in these countries, including informal workers who have no social support so either have to work or starve.

Worldwide, there is an enormous opportunity now to build back better and recover inclusivity with greater resilience to future shocks.

“We need to shore up the economies with safety nets, investing resilience infrastructure, housing and health in high-risk areas and target financial support for the most vulnerable communities,” said MacDonald.

Manish Bapna, WRI’s executive vice president, who previously was at the World Bank, summed up by saying, “Climate is highly relevant to many of the physical bailouts that governments have made lately and will make. Conditions should be put on these. Monetary policy must be made climate relevant.

“A new social contract is needed, since vulnerable people and vulnerable countries are the hardest hit. And we need to sustain the commitment to development aid and climate bonds with a effective collective action. We need the world to come together.”

Author David Thorpe is director of the One Planet Centre and author of One Planet Cities & runs an online course for public servants, a Post-Graduate Certificate in One Planet Governance.