COVID-19 economic recovery must prioritize green growth
As the world begins to rebound from the COVID-19 pandemic, policymakers find themselves facing a critical question: should they prioritize a speedy economic recovery or a green recovery?
Climate action plans require a greater commitment to limiting the rise of the globe’s temperature, capping it to 1.5 degrees Celsius to meet the goals of the Paris Agreement. Prioritizing a shift to renewable energy is paramount as countries move out of the pandemic. The drastic reduction in greenhouse gas emissions during COVID-19 lockdowns prove that it is possible to do so moving forward. However, some nations find it difficult to justify the price tag that comes with environmental initiatives after having already spent so much money on fighting the pandemic.
Leaders must remember that, although COVID-19 caused a 4.5 per cent decrease in global GDP in 2020, billions of dollars of economic losses are incurred annually as a result of weather-related disasters. These are only becoming more frequent as temperatures rise. In 2017, only two years after the Paris Agreement, natural disasters incurred economic losses of $337 billion USD. The intense droughts, forest fires, extreme rainfall, and hurricanes that accompany climate change threaten not only the environment but also the stability of the global economy.
Exemplified by radical changes in human behaviour in light of lockdowns, COVID-19 has taught the international community that reducing emissions is possible. According to the International Energy Agency, the pandemic caused a decline in carbon dioxide (CO2) emissions of nearly 2,000 million tonnes in 2020, the equivalent of all of the emissions of European Union countries. Travel bans caused a decline in emissions in the transportation sector, which alone accounted for over 50 per cent of the total drop in CO2 emitted.
However, this progress did not last long. By December 2020, China (the first major economy to emerge from pandemic lockdowns) saw a 7 per cent increase in emissions compared to December 2019. The COVID-19 recovery in India and Brazil also drove up demand for oil and coal. In general, CO2 emissions in emerging economies fell by far less than they did on average in developed countries. One possibility for this difference is that the gap between coal-based electricity and renewables is not closing in developing economies, while energy demand is on a constant rise.
Although coal-based electricity is an attractive option for developing countries due to its abundance and affordability, more eco-friendly alternatives are becoming increasingly accessible, allowing developing countries to divest from coal electricity. A great example of this is in India, where the government is implementing mechanisms for a green transition towards solar energy. By repurposing existing coal plants as solar power and battery sites, India is leveraging existing infrastructure to save on the costs of transitioning to green energy.
Renewables also demonstrate more resilience to shocks in the economy, which is important for the post-COVID-19 global economy. In contrast to the drastic collapse in oil and coal industries, renewables and electric vehicles remained “largely immune” to economic fluctuations during the pandemic, according to the International Energy Agency. However, an OECD analysis reports that small developers—who dominate the renewable energy sector—do face uncertainty regarding access to financing to maintain operations.
Developed economies are taking other innovative approaches to address this financing challenge. In an attempt to bring sustainable and environmentally-focused growth to the forefront of the British economy, the Bank of England will now consider the climate record of companies before purchasing their bonds. This mandate will, in effect, reward green businesses by decreasing their borrowing costs. Through a proactive approach that makes carbon neutrality and financial stability more compatible, this mandate both strengthens the British economy in the face of potential financial shocks imposed by climate volatility and encourages green innovation.
While there are many environmental pros to prioritizing a green recovery, many countries still find it difficult to get on board. Rebounding from the pandemic, governments are investing trillions in jumpstarting their economies. While a speedy recovery is undoubtedly desirable after incurring monumental losses, the skills required for work in renewable energy differ from those necessary for employment in polluting sectors, which could further exacerbate unemployment. In Canada, where the government initially proposed a green recovery, there are fears this might mean focusing on climate change rather than addressing high rates of unemployment. This is an even greater concern for developing countries, where access to education and industry entry barriers are already a challenge.
Despite the advantages of dedicating greater attention to a green recovery, governments appear to be prioritizing growth in the post-COVID-19 environment. A recent UN Framework Convention on Climate Change (UNCCC) declared that current climate action plans are not enough to meet the goals of the Paris Agreement.
The pandemic offered a great starting point to “build back greener and better,” according to UN Secretary-General Antonio Guterres. It is the responsibility of developed and developing economies alike to reach carbon neutrality by 2050. Although COVID-19 kickstarted the emissions reduction necessary to limit global warming, it’s still up to our leaders to continue putting green recovery at the top of their agendas.