The UK government has overlooked green initiatives as it acted to tackle the pandemic, spending “miniscule” amounts of the vast stimulus packages on such initiatives, Colin Dryburgh, investment manager at Kames Capital, says.
In response to the COVID-19 pandemic there has been an $11 trillion global fiscal stimulus according to the Institute of International Finance, but less than 1% of this has gone towards projects classed as “green”.
Looking around the world, the European Commission’s €750bn recovery fund proposal sets aside 25% of all funding for climate action and is highlighted as being greener than any individual country fiscal package.
“Germany is to direct €50bn to electric and hybrid vehicles, renewable energy, public transport and to reducing green surcharges on consumers’ power bills”, says Dryburgh.
“But while €50bn is sizable enough to grab headlines, it represents a small fraction of Germany’s overall stimulus package.”
In the UK, Dryburgh said the situation was even worse. “The UK’s £3bn green jobs recovery package is miniscule in comparison. Significantly higher levels of green-related spending would make good economic sense – as well as have a positive environmental impact.”
Dryburgh believes more is needed to stop green ambitions becoming an afterthought for governments looking to stabilise economies during the pandemic.
“There is historical precedent of policy makers being much more ambitious in terms of green stimulus. In 2008 South Korea dedicated 80% of its fiscal stimulus towards green projects. This included spending on river and forest restoration, rail transportation, energy efficiency and fuel-efficient vehicles. Partly as a result of these measures, the increase in Korea’s unemployment rate during 2009 was amongst the lowest of OECD countries.
“South Korea’s Democratic Party won a landslide victory in April this year and gained a strong mandate to deliver an EU-style Green New Deal as outlined in its manifesto. South Korea is the first country in East Asia to pledge to reach net zero emissions by 2050. Its plans include large-scale renewable energy investment, the introduction of a carbon tax and support for workers to transition to green jobs.
“The economic consequences of COVID-19 will see government spending surge to unprecedented levels. There’s no shortage of suggested feasible sustainable initiatives, therefore no excuse to target anything but a more ‘sustainable’ recovery.”
The International Energy Agency (IEA) in collaboration with the International Monetary Fund (IMF) published a ‘Sustainable Recovery Plan’ that considers long-term growth, future-proofed jobs and sustainable development goals (SDGs).
It identifies cost-effective actions in six key sectors: buildings, electricity, emerging low‐carbon technologies, fuels, industry and transport.
Dryburgh says: “The authors suggest that by 2023 their plan would lead to annual energy‐related greenhouse gas emissions being 4.5 billion tonnes lower than they would be otherwise, as well as GDP being 3.5% higher and nine million more jobs being created.
“The largest amount of new jobs would be in retrofitting buildings and other measures to improve their energy efficiency, and in the electricity sector, particularly in grids and renewables.”
“Spending on energy efficiency measures – particularly building efficiency measures – is highly cost effective – in terms of both CO2 reduction and job creation.”