Trillions of dollars in pandemic stimulus packages have had a net negative impact on the environment, with over a quarter of the money going to carbon-intensive sectors including fossil fuels and heavy industry, new research shows.
Of the $17.2 trillion so far spent on economic recovery measures globally, some $4.8 trillion will harm nature, biodiversity and the climate, while only $1.8 trillion will make a positive contribution, according to a new analysis of pandemic recovery spending.
In an assessment of 30 major economies, research firm Vivid Economics and the U.K.-based Finance for Biodiversity Initiative found that 20 had done more environmental harm than good through their stimulus spending, though 17 countries had seen an improvement in their spending patterns over the last year. In general, European nations scored highly in the assessment, with Denmark coming top overall, spending $44 billion on Covid stimulus packages, most of which helped support environment-positive measures.
In the largest nations—the U.S., China and India—the lion’s share of pandemic stimulus money went to measures that would have a net-negative environmental impact, including subsidies for environmentally harmful activities such as drilling and mining for fossil fuels, road building, tax reductions for environmentally harmful products, and deregulation of environmental standards.
The report comes as Democrats in the U.S. continue to push through a severely compromised $3.5 trillion infrastructure bill that largely abandons support for measures to both combat and prepare for climate change.
Meanwhile, the EU has unveiled its latest plan to cut carbon emissions 55% by 2030, in a raft of climate measures the bloc claims are its most ambitious ever—though not everyone is impressed.
The Greenness of Stimulus Index indicates that, overall, countries are failing to adequately respond to the acute threats of climate change and biodiversity loss.
Jeffrey Beyer, the report’s lead author and an economist at Vivid Economics, told me the findings concerned him for several reasons.
“We have witnessed the largest global mobilisation of public money that we are likely to see in our lifetimes, but the GSI shows that we have not fundamentally changed the trajectories of our economies towards something that is climate-compatible and nature-positive,” Beyer said.
Even in those countries that scored well overall, the impact of spending on nature had been shown to be often more harmful than helpful.
“Public money should be used for public good, not to more deeply entrench our environmental problems,” he said, adding that the findings further indicate “a general failure to treat climate change and biodiversity loss as the emergencies that they are.”
Beyer noted that much of the stimulus cash had gone towards vital measures to keep people in work and to keep economies running, but that even in the “rescue” phase, authorities had missed opportunities to attach environmental conditions to business bailouts.
But it was in the second stage—pandemic recovery—where many governments had really dropped the ball on the environment.
“The goal here is to stimulate the economy through investment, and ideally, orient it towards a low carbon development pathway,” Beyer explained. “Investment measures, like tax breaks for industrial resource efficiency, grants and loans for energy efficiency retrofits, and investment in enabling infrastructure like power grids and electric vehicle charging points, help mobilise private sector money towards environmentally positive investments.”
Some nations, including Canada, Denmark and the U.K., had in fact instituted some of these measures. But the report singled out Russia, Turkey, Singapore, the Philippines and Indonesia for their support of environmentally harmful sectors “without a view to a low-carbon transition.”
Rather than pumping further money into closed-ended, polluting measures such as road transport and fossil fuel infrastructure, countries had an opportunity to invest in “triple-wins” for the economy, society and the environment, Beyer said.
“ So many measures generate win-win-wins, from all kinds of perspectives. Measures that reduce pollution improve human health and ecosystems; restoration of natural spaces provide climate resilience and habitats,” he said. “But what we found to be an especially large triple-win is investments in nature-based solutions.”
Beyer said that his firm’s analysis of 10 EU countries’ recovery plans showed that investment in measures such as agroforestry, ecosystem restoration and urban greening resulted in more jobs, economic activity and emissions reductions than typical stimulus packages—even those that included apparently green investments in solar and wind power. For example, a “relatively modest” investment of $4.4 billion into nature-based solutions in Bulgaria, France, Italy and Poland was estimated to have created some 140,000 jobs and $8.3 billion in economic activity over 15 years.
These findings align with last month’s groundbreaking report from the UN which emphasized that the interlinked global biodiversity and climate crises must be tackled in conjunction if the international community is to have any hope of resolving either.
Other studies this year, including a key report from the Oxford Biodiversity Network, have further bolstered the case for nature-based solutions being the most cost-effective and efficient methods for both mitigating climate change and for adapting to its impacts.
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