Analysis published by We Mean Business coalition recommends policymakers reject traditional stimulus programmes that focus on VAT reductions and boosting household spending in favour of targeted support for green technologies and solutions
In the latest addition to the library of studies that has underscored the benefits of a 'green recovery' to the coronavirus pandemic, economists have today published a new research detailing how stimulus packages that invest in low carbon technologies and infrastructure will generate more income, jobs, and GDP than traditional recovery measures.
Economies around the world stand to benefit if governments opt to invest in energy efficiency improvements, tree planting, and electricity grid upgrades, while supporting an acceleration in the roll out of wind and solar power capacity and introducing car scrappage schemes that boost sales of electric vehicles, according to a report published this morning by the We Mean Business Coalition.
After modelling a 'green recovery' plan against a 'return-to-normal' plan across the UK, Germany, Poland, US, India, and globally, researchers from Cambridge Econometrics concluded the impact of a green recovery strategy would be "consistently larger" than that delivered through a standard stimulus package.
"This report confirms what many companies already know - investing in the zero carbon future is the best way to ensure business success," said Maria Mendiluce, chief executive of the We Mean Business coalition. "For governments, spending and tailoring policies in a way that boosts green technologies and innovation brings benefits to businesses, economies and people as well as cutting emissions. To invest in any other way would be to set the world on course for economic and environmental disaster at a time when we need to build resilience."
The report predicts that a green recovery plan would result in two million more jobs in the EU and one million more jobs in the US compared to traditional measures that tend to focus on reducing VAT and stimulating household spending.
It highlights that this trend is also visible in the UK, although notes that the difference between the two scenarios is less pronounced than in other regions due to the fact that "VAT reductions are particularly effective in the UK's service-orientated economy".
Overall, the report predicts that a seven per cent reduction in greenhouse gas emissions could be achieved if policymakers around the world opted for a green recovery to the pandemic.
Of the different environmental policies explored in the report, car scrappage schemes that incentivise EV sales is identified as having the largest overall impacts on GDP and employment. However, the research argues that all of the proposed green recovery policies it analysed would have a positive effect.
Eliot Whittington, director of European Corporate Leaders Group (CLG Europe), stressed that a resilient, climate neutral recovery plan was "the only viable way forward".
"We now have an urgent need to build resilience to shocks to our economies and societies like the pandemic - and climate change stands out as just such a threat," he said. "The evidence in this report clearly shows a green recovery, which lets us stabilise and regrow economies while working to face up to the climate change challenge is not only possible, it is essential."
The report follows the launch of multi-billion Euro green recovery packages from the German and French governments. Meanwhile, the UK government is said to be preparing its own 10 point green recovery plan, which is expected to be unveiled later this autumn, and Democrat Presidential candidate Joe Biden has signalled he would make low carbon infrastructure a critical component of his recovery plans if elected.
However, green businesses are increasingly concerned that many countries are moving to stimulate the development of a new wave of high carbon infrastructure alongside increased support for clean technologies in their economic recovery plans. At the same time scientists have warned that governments must seize the opportunity to accelerate emissions reduction efforts and ensure the cornavirus crisis marks a peak in global emissions or else risk the temperature goals contained in the Paris Agreement moving out of reach.
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