Global economic crises have historically presented a critical opening for government investment in the climate. In 2009, for example, the Obama administration set the stage for today’s booming clean energy market by pumping $90 billion in recovery funds into the sector.
So when the Covid-19 pandemic hit, many economists called on world leaders to “build back better” by prioritizing green initiatives in their stimulus spending, which has amounted to at least $10 trillion globally. The hope was to lock in some of the deep carbon emission reductions brought on by the global slowdown—with the added benefit that green government spending can get more bang for the buck than traditional stimulus measures.
So far, it looks like some of the world’s biggest polluters are missing the opportunity.
A letter released on July 9 by a coalition of leading climate diplomats and economists, including former UN Secretary General Ban Ki-moon, warns that “most stimulus packages have not incorporated climate resilience into their recovery plans.” As governments max out their ability to spend, they write, the window may be closing.
The letter came after an online summit hosted by the International Energy Agency that included cabinet-level representatives from dozens of countries, including US energy secretary Dan Brouillette and his Chinese counterpart Zhang Jianhua. Last month, the IEA recommended governments collectively spend $1 trillion annually for the next three years on things like renewable energy systems, vehicle and building efficiency code enforcement, and R&D on technologies like hydrogen fuel. But in some countries, the reality is very different.
“Unfortunately, while some major economies are devoting support for low-carbon resources, it’s really outweighed by support for fossil fuels,” said Joel Jaeger, a researcher at the World Resources Institute who has been tracking Covid-19 recovery packages.
Fossil fuels have been major beneficiaries of stimulus money in the US. Federal data released on Monday showed that 5,600 fossil fuel companies have taken at least $3 billion in paycheck protection loans. Last month’s $3 trillion stimulus package included $60 billion for airlines, even as they successfully fought to water down international emissions regulations, as well as billions more for trucking, industrial agriculture, and other climate-polluting industries.
According to a June analysis by UK-based Vivid Economics, since the pandemic the US has spent at least $479 billion “providing unrestricted support to sectors proven to be environmentally harmful in the past.” The analysis notes that the stimulus funding also includes $100 million for biofuels. But Noah Kaufman, a climate economist at Columbia University, cautioned that any amount of “spending is a limited tool, if you don’t have policies in place to directly regulate CO2 emissions.”
On that front, the Trump administration has used the pandemic as an opportunity to pursue a steady drumbeat of regulatory rollbacks, including waiving environmental impact reviews for infrastructure projects and opening vast new swaths of the Alaskan Arctic to oil drilling.
On the surface, China seems to be doing everything right with its stimulus spending. It aims to bolster its economy with $1.4 trillion spent by 2025 on AI and cutting-edge infrastructure, much of which will go to tech giants like Huawei and Alibaba but also to support electric vehicles and low-carbon mass transit.
But meanwhile, the country is doubling down on coal. After falling 25% during the height of lockdown, China’s emissions surged back above pre-pandemic levels by May, driven primarily by increased activity at coal-fired power plants. That trend is likely to accelerate as the country ramps up permitting of new plants.
Despite the pandemic, this year China issued more coal plant permits than the previous two years combined, Jaeger said, even though “they’re not even using the ones they have to the full extent.” The country’s coal fleet is already dominated by plants less than 10 years old, with decades of operational life ahead; any new plants (including those the country is financing in Africa and elsewhere) would be a long-lasting source of emissions. China is also aiming to ramp up its oil and gas production this year.
Europe has been the exception to the global trend. In early June the European Commission rolled out a $850 billion green recovery package that includes, among other measures, $45 billion to support a “just transition” away from fossil fuels for local economies that depend on them.
This week, the commission followed with a plan to ramp up the bloc’s production of hydrogen fuel six-fold by 2024. Individual countries have their own initiatives: Several have offered subsidies for vehicle purchases on the condition that they are low- or zero-carbon; France made a similar requirement for airlines. On Wednesday, the UK unveiled its own $3.7 billion green infrastructure package.
Rest of the world
The story elsewhere around the world is mixed.
India’s recovery plan includes $6.6 billion for coal infrastructure, and allows for fast-tracking forest-clearing mining projects. But the country’s spending on renewables is on track to outpace coal by five-fold by 2030, to nearly $300 billion. Brazil also extended unconditional support to airlines, and has continued to roll back protections against deforestation in the Amazon. South Korea extended a $2 billion bailout to its biggest coal plant company. On the other hand, Japan announced on July 9 that it will end public support for coal plants abroad, and Nigeria used the record-breaking drop in oil prices as an excuse to eliminate fossil fuel subsidies.
The global economy still has years of uphill slog ahead, and more opportunities to make its response more climate friendly, said David Sandalow, a senior energy official in the Clinton administration and senior researcher at Columbia University.
“The immediate measures were needed to save the economy from collapse,” he said. “I hope as we move beyond disaster recovery, the medium-term measures will involve more attention to green energy priorities.”