Every week, Policy Shift will share a selection of recent articles and publications focused on public policy and innovation. This week's theme deals with policy response proposals working towards an ecological economic recovery following the ongoing Covid-19 crisis.
A column (in English) about the scaling-up of synergies with the European Green Deal
By economists Irene Monasterolo (Institute for Ecological Economics, Vienna University of Economics) and Ulrich Volz (Centre for Sustainable Finance, University of London), this column urges EU Member States not to choose between financing the Covid-19 crisis response and undertaking investments to finance the European Green Deal.
Their column shows that in spite of the rapid fiscal response needed to support European economics in times of crisis, and in the context of several proposals being put on the table to tackle the crisis (ECB’s Pandemic Emergency Purchase Programme; issuance of Covid bonds by the European Stability Mechanism…), the Covid-19 crisis also requires substantial investments to build resilience to future pandemics and avoid compounding risks associated with climate change. They show that today’s crisis responses will bear long-term fiscal ramifications. This includes important debt sustainability problems that could arise in the future,thereby preventing any ambitious climate action with implications on socio-economic and financial stability. In order to respond, they propose financing the current emergency “in a sustainable and inclusive way”, by expanding the scale and scope of the Green Deal and by a coordinated issuance of Covid bonds and Green Deal bonds. Such policy action would install a common debt instrument; prevent a trade-off between tackling the Covid crisis and climate change; and promote a deeper integration of EU institutions and Member States with responsible shared management.
An article (in French and in English) about a green recovery following the Covid-19 crisis
By World Bank economists Stéphane Hallegatte and Stephen Hammer, this article summarizes the short-term and long-term issues policymakers have to deal with regarding the Covid-19 crisis by dividing up action into two main phases. First of all, they explain the importance of supporting the healthcare system, vulnerable households and economic sectors most affected by quarantine measures. In that regard, they insist on the need for redistribution measures via social protection systems and safety nets. The article gives the example of “adaptive safety nets” used in vulnerable countries by the World Bank (i.e. Sahel Adaptive Social Protection Program; Adaptive Safety Nets for Rural Africa…), as well as subsidized loans or public guarantees. Second of all, financial and economic recovery will need stimulus measures, with a central role played by the state with lasting impact on economies: that is why the article underlines the need to include the sustainable development goals within recovery plans, notably the decarbonation of the world economy and its long-term benefits on the environment and poverty reduction. Such recovery plans will build on existing climate change adaptation plans in three key dimensions: energy efficiency; protection and restoration of ecosystems; and sustainable cities and transportation.
An economic policy paper (in French) about the link between Covid-19 and climate action perspectives
By environmental economist Christian de Perthuis (Dauphine University), this paper argues that in just a few weeks, the Covid-19 crisis has shaken the prospects for climate action around the world. The containment measures in place in order to stem the spread of the virus have caused a drop in production of a magnitude unknown in times of peace (a drop of GHG emissions of around 5 Gt - around 10 times the drop observed in 2009), which could turn 2019 into the year of the peak in global emissions. Despite the rebound effect that will appear at the end of containment, such a decline will not be made up for the following year. In the longer term, the paper argues that the pandemic will need to catalyze economic and societal transformations that will give new tools to post-Covid-19 societies to act against climate risk. Depending on their content, plans to restart activity at the end of containment may accelerate or slow down these structural transformations.
A report (in English) about a proposal for a public financing plan of an additional 7€ billion/year for a low-carbon recovery in France
By the Institute of Climate Economics (I4CE), this report shows that an economic recovery plan will be needed in the near future in order to ensure that the current health and human crisis is not coupled with a lasting economic depression. The public financing plan proposed in the report draws lessons from the French 2008 stimulus package of 26€ billion – of which only a small part was devoted to low-carbon activities. It underlines that public authorities should take into account the ease of implementation of some measures (i.e. renovation work; installation of renewable energies…), in addition to the inclusion of financial market participants as accelerators and facilitators, as well as the inclusion of local and regional authorities. The plan therefore builds on the French low-carbon development strategy (Stratégie Nationale Bas-Carbone) and proposes 30 measures, targeting seven key sectors. It is expected to trigger an estimated additional 19€ billion of public and private investment annually.
A commentary (in English) about the attachment of green conditions to state aid in order to ensure a green recovery
By Bruegel economist Dirk Schoenmaker, this article draws on the contrast between the Covid crisis’ sharp negative impact on the economic and social fronts, and its rather short-term positive impact on environmental performance. It underlines that by attaching green conditions when granting state aids and guarantees during the Covid crisis, governments can accelerate the implementation of the Green Deal in the European Union – especially since the European Commission has temporarily lifted state-aid control rules during the pandemic crisis in order to ensure the economic viability of companies. In high-carbon and material footprints sectors (transportation, manufacturing, construction, energy), D. Schoenmaker underlines that green state aid rules could help them adapt to a new low-carbon and circular environment.
By NGOs Oxfam and the Friends of the Earth, an ambitious proposal in order to ensure both dignity and environmental sustainability in a post-Covid world: https://www.oxfamfrance.org/wp-content/uploads/2020/04/Rapport_Oxfam_Le_prix_de_la_dignite_Covid19_090420.pdf
By the media China Dialogue, an article on the green stimulus that underlines the uncertainties associated with a post-pandemic crisis world and the difficulties it raises to ensure a green stimulus https://www.chinadialogue.net/article/show/single/en/11939-Why-are-experts-calling-for-a-green-stimulus-
By a group of NGOs – among which the WWF – a letter to the presidents of EU institutions on a green recovery plan in the European Union (green conditionality of the distribution of stimulus funds and bail-outs; launch of large scale sustainable initiatives; renewed sustainable finance strategy; ambitious targets and commitments to address the loss of biodiversity)
And as a bonus this week, two links to ongoing public consultations at the European level:
1. Consultation for a renewed sustainable finance strategy in the European Union (open until July 15th, 2020) on this page.
Building on the 2018 Action Plan on financing sustainable growth, this renewed sustainable finance strategy will provide a roadmap with new actions to increase private investment in sustainable projects and activities to support the different actions set out in the European Green Deal and to manage and integrate climate and environmental risks into our financial system. The initiative will also provide additional enabling frameworks for the European Green Deal Investment Plan.
2. Consultation on the European Climate Pact (open until May 27th, 2020) on this page.
The European Commission’s European Green Deal is the new growth strategy for an EU economy that is sustainable, cleaner, safer and healthier. The engagement of the public is critical to instill a new climate culture, awareness and motivation for climate action, bringing together citizens, industry, civil society and authorities at all levels. To achieve this, the European Commission will launch a “Climate Pact” in the 3rd quarter of 2020.