A widely-reported study by economists at Oxford University seeks to identify fiscal policies which will best lead the world to post-Covid economic recovery, while also leading to a net-zero economy. Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change? was published on May 4 as a Working Paper by the Smith School of Enterprise and the Environment at Oxford University, (forthcoming as an article in the Oxford Review of Economic Policy). Lead authors Cameron Hepburn and Brian O’Callaghan are joined by economic heavy-weights such as Nicholas Stern and Joseph Stiglitz, among others. The paper states: “The climate emergency is like the COVID-19 emergency, just in slow motion and much graver. Both involve market failures, externalities, international cooperation, complex science, questions of system resilience, political leadership, and action that hinges on public support. Decisive state interventions are also required to stabilise the climate, by tipping energy and industrial systems towards newer, cleaner, and ultimately cheaper modes of production that become impossible to outcompete.”
The authors identified over 700 fiscal stimulus policies used since the 2008 financial crisis – both climate-friendly and not – and distilled these down to 25 archetypal policies. They then surveyed the reactions of 231 senior economists and financial experts from over 50 countries to these archetypal policies, and identified the five “with high potential on both economic multiplier and climate impact metrics: clean physical infrastructure, building efficiency retrofits, investment in education and training, natural capital investment, and clean R&D. In lower- and middle income countries (LMICs) rural support spending is of particular value while clean R&D is less important.”
An informal summary of this report, written by the two lead authors, appears as “Leading economists: Green coronavirus recovery also better for economy” at Carbon Brief (May 5). Other coverage includes “Green Stimulus can repair global economy and climate, study says” (The Guardian, May 5);
Also on May 4, the Smith School released a companion Working Paper “A net-zero emissions economic recovery from COVID-19” which discusses the differences between the 2008 financial crisis and the economic damage of the Covid-19 pandemic. It builds on the paper by Hepburn et al., and makes 10 specific recommendations for a U.K. green stimulus package, with strategies clustered around:
- Large-scale investment (including Transforming energy generation, storage and distribution; transforming industrial energy usage, especially in the energy-intensive industrial sectors (steel, cement, ceramics, chemicals, pulp and paper) ; high-speed broadband internet connectivity to embed working from home practices ; investment in nature-based solutions for disaster resiliency.
- Accelerate investment in high-sustainability impact technologies
- Incentivize individual-level change – in transportation, home energy efficiency, and job training for green economy jobs
- Make Bailouts conditional on a legal commitment and a pathway and timeline to net-zero emissions, particularly for fossil fuel intensive industries such as airlines.
The paper concludes with proposals for institutional structures to implement these policies, including a Climate Change Emergency Committee and a Net Zero Delivery Body in the U.K. , and perhaps most remarkably, proposes an international Sustainable Recovery Alliance (SRA) to be launched at COP 26. The purpose: to act “As a flexible “coalition of the willing” outside of the UNFCCC architecture, the group would promote a shared vision of a sustainable recovery.”
And on May 6, the existing U.K. Committee on Climate Change issued a press release announcing its Letter to the Prime Minister, setting out six key principles to for a green recovery from the COVID-19 pandemic. The principles call for fairness to be embedded as a core principle, a shift to new behaviours such as cycling and working from home, the possibility of raising carbon taxes, and, “Support for carbon-intensive sectors should be contingent on them taking real and lasting action on climate change, and all new investments need to be resilient to future climate risks.”