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Coronavirus: Governments’ recovery plans should take ‘green route,’ study says

Coronavirus outbreak: Trudeau commits $750 million to reduce methane emissions
Speaking outside Rideau Cottage on Friday, Canadian Prime Minster Justin Trudeau announced his government would be spending $750 million to reduce methane emissions.

The most cost-effective way for governments to jumpstart their pandemic-battered economies would be to invest in “green” stimulus policies that also serve to achieve long-term climate change goals, according to a new study published Tuesday by economists in the U.S. and the U.K.

For Canada, whose government has made a number of climate-friendly promises and set ambitious targets to reduce greenhouse gas emissions, one expert says the COVID-19 recovery will provide a chance for decision-makers to “pivot” to meet long-term environmental goals.

“It’s a wake-up call that as governments invest in the economic recovery, they need to be thinking about the level of systemic change that we’re aiming for it,” said Kathryn Harrison, professor of political science at the University of British Columbia, who has read the report by authors Cameron Hepburn, Brian O’Callaghan, Nicholas Stern, Joseph Stiglitz and Dimitri Zenghelis.

Coronavirus outbreak: Trudeau says COVID-19 can’t cause us to forget climate change, the ‘other’ global crisis
Coronavirus outbreak: Trudeau says COVID-19 can’t cause us to forget climate change, the ‘other’ global crisis

For the study, the authors examined more than 700 economic stimulus policies launched during or since the 2008 financial crisis by G20 nations and surveyed 231 experts from 53 countries, including economists and officials from finance ministries and central banks.

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The study, set to be published in the Oxford Review of Economic Policy, focused on the reduction of greenhouse gas emission (GHG) as “the key environmentally beneficial criteria.” Hepburn, the report’s lead author, warned that the GHG reductions triggered by the novel coronavirus pandemic “could be short-lived.”

The study points out that preliminary estimates show emissions might fall about eight per cent, globally, this year. While that’s on track to be the largest drop in a single year on record, experts interpret the estimates differently.

Harrison said the anticipated drop in GHG emissions this year would have to continue every year forward to meet the Paris Agreement goal to limit global warming to 1.5 C — something Canada should take note of as “one of the countries that needs to make the biggest change.”

READ MORE: ‘Catastrophic’ — Canada set to miss 2030 emissions target by 15%, UN report says

“It’s a bit of a cautionary tale because if you think of it, this scale of change in our lives that we’ve experienced is huge, and yet greenhouse gas emissions haven’t fallen that dramatically,” she said, noting she believes emissions remain high because most are from “systemic things,” such heating homes, powering the industrial sector and transporting of goods.

The federal Liberals made an election promise last fall to get Canada to net-zero carbon emissions by 2050 and vowed to introduce “legally binding” targets to get them there. Due to the COVID-19 pandemic, the government has delayed the release of its 2020 budget, which the federal finance minister had already said would prioritize climate change.

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In the study, the authors argued that the COVID-19 crisis “could mark a turning point in progress on climate change” and warned that progress “will depend significantly on policy choices in the coming six months.”

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Experts didn’t express that same “do-or-die” urgency, but Harrison noted that the post-pandemic recovery period offers a “unique opportunity” for Canada to pivot to from “business as usual.”

The positive environmental impact of COVID-19
The positive environmental impact of COVID-19

Dave Sawyer, chief economist at the Canadian Institute for Climate Choices, cautioned that the six-month timeline might not be a realistic benchmark for cash-crunched governments.

“These are big, expensive investments that take time and that zero is a long term goal,” said Sawyer, whose organization has received federal funding but “retains full control” over its work.

“Yes, we can use this as an opportunity to reposition ourselves,” he said. “Are we going to fix the problem in the next six months? [Do] governments have the resources to do that, especially when they’re subsidizing people to get them through the problem?”
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Study recommends five policy investments

During the public health crisis so far, governments, including Canada’s, have been laser-focused on getting massive amounts of emergency financial aid flowing to support struggling workers and businesses. But soon, officials will move from these “rescue” plans to “recovery packages” that will “reshape the economy for the longer-term,” the authors said.

For when governments are at that stage, the study recommended they take a “green route” and invest in five policy items that, reportedly above all others, offer both “high” economic returns and a “positive” climate impact.

The policy items outlined include: physical infrastructure for clean energy production, including such solar or wind; retrofits to improve building efficiency; projects to restore or preserve ecosystems; research into clean technologies; and education and training to address pandemic-related unemployment and “structural unemployment from decarbonisation.”

Nitrogen dioxide emissions levels drop across China
Nitrogen dioxide emissions levels drop across China

When compared to traditional fiscal relief measures, the authors found these projects “create more jobs, deliver higher short-term returns per dollar spend and lead to increased long-term cost savings, by comparison with traditional fiscal stimulus.”

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Harrison described these recommendations as all the more “striking,” given who they came from.

“The folks that they were surveying were not environmentalists and even environmental economists. They were surveying government finance economists and central bank officials,” she said

“[The authors] did the study in a way that respondents could say, ‘This is fast and it will have great economic benefits, but is bad for the climate.’ What’s striking is that [the respondents] didn’t.”

“The projects that they saw as having economic multiplier effects also had climate benefits and were rated overall more favourable.”

READ MORE: Investing in climate goals could play key role in coronavirus economic recovery

In Canada, the federal government has already signalled that climate and clean energy investments could factor into its recovery plans.

Struggling economies will need programs that can be implemented “quickly” and that have “large multiplier effects” — meaning the initial government spending will “foster further spending in the economy,” said Jean-Thomas Bernard, who teaches economics at the University of Ottawa.

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Bernard cited the government’s recently announced $1.7-billion initiative to clean up orphan wells in the western provinces to keep people working during the COVID-19 pandemic as an example of a program that can be rolled out relatively fast. Canada also already has experience with building retrofit programs, he added.

Funding to clean up Saskatchewan’s orphan wells a ‘positive first-step’ says Premier Moe
Funding to clean up Saskatchewan’s orphan wells a ‘positive first-step’ says Premier Moe

Moving forward, Sawyer said he expects to see Ottawa explore “interesting ways” to support or “scale up” ongoing initiatives, referencing the Trudeau government’ loan program to help oil and gas companies meet new federal standards that require a reduction in methane emissions, announced alongside the orphan wells program.

Challenges ahead

But how governments go about designing those policies is “important” and the uncertainty around the pandemic’s timeline poses a challenge.

The study’s authors argued that recovery policies should have “flexibility” given “it is unclear how long the pandemic will last and whether there will be second or third waves.”

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“Poorly designed recovery policy is likely to be ineffective in delivering economic, climate, and social outcomes, regardless of theoretical potential,” the report said.

READ MORE: Trudeau pledges $252M for agriculture industry hard-hit by COVID-19

Pressures from struggling businesses and sectors in Canada will be added considerations for the government during the recovery period, Harrison said.

Alberta energy companies losing billions in downturn
Alberta energy companies losing billions in downturn

Sawyer cautioned that taking a “green lens” on every aspect of Canada’s recovery package may not be the best approach for all struggling sectors.

“We purposely put certain bits of the economy into a coma. And is the infrastructure technology spending the solution to get those to help those sectors out? Maybe not entirely,” he said.

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“You’ve got to look at what the problem is and then figure out where you’re spending is.”

 With files from Amanda Connolly and Mike De Souza