- Green recovery plans boost income, employment and GDP better than return-to-normal stimulus measures, new analysis finds.
- The results make a strong case for including green recovery measures in national responses to Covid-19.
New York / London, Oct. 19, 2020 – New analysis, commissioned by the We Mean Business coalition and conducted by Cambridge Econometrics, shows that green recovery plans boost income, employment and GDP better than return-to-normal stimulus measures, with the added benefit of reducing emissions.
In all geographies modelled (global, the EU, Germany, Poland, the UK, USA and India), green recovery plans were found to be more effective than return to normal stimulus approaches that reduce VAT rates and encourage households to resume spending
The analysis models a five point ‘green recovery plan’ and a ‘return-to-normal’ plan each at an equal cost to government. The green recovery plan includes a (smaller) reduction in VAT and:
• Public investment in energy efficiency
• Subsidies for wind and solar power
• Public investment in upgrading electricity grids
• Car scrappage schemes in which subsidies are only provided to electric vehicles
• Tree planting programmes
Both recovery plans provide immediate boosts to output and employment, but the impact is consistently larger in the green recovery plan.
Key findings include:
The green recovery plan in the EU would result in 2 million more jobs by 2024. Whilst a green US recovery would deliver nearly 1 million more jobs than a return-to-normal plan.
Globally, there would be 7% reduction in greenhouse gas emissions reduction by 2030 if the five point green recovery plan was implemented.
While not enough to be consistent with the Paris Agreement, the reductions delivered by a green recovery plan would provide a starting point for further policy.
Of the five green stimulus measures, car scrappage schemes to boost EV sales would drive the greatest jobs and GDP growth up to 2030.
For maximum impact green recovery plans need to be tailored to specific economies. For example, in Germany, a car scrappage scheme could boost the economy while simultaneously creating jobs. It could also reduce emissions by 12-14% if combined with measures to increase energy efficiency and the use of renewables.
Tree planting schemes are effective at creating jobs in countries with the available land, accounting for 10% of the additional GDP and 27% of the additional employment in India and half of the new jobs in Poland.
Maria Mendiluce, CEO of the We Mean Business coalition said: “This report confirms what many companies already know – investing in the zero-carbon future is the best way to ensure business success. 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.”
Eliot Whittington, Director, European Corporate Leaders Group (CLG Europe) said: “Covid-19 has exposed deep flaws in how we consider systemic risk. A simple return to a pre-pandemic business-as-usual would be a failure to understand what lies ahead and would store up further problems that we would be even less well suited to face. 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. 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 only viable way forward is a resilient, inclusive and climate neutral recovery plan.”
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About the We Mean Business coalition:
The We Mean Business coalition is a group of nonprofit organizations working with the world’s most influential businesses to take action on climate change. The global coalition brings together seven organizations: BSR, CDP, Ceres, The B Team, The Climate Group, CLG Europe and the World Business Council for Sustainable Development. Together we catalyze business action to drive policy ambition and accelerate the transition to a zero-carbon economy. Find out more at wemeanbusinesscoalition.org.
About Cambridge Econometrics
Cambridge Econometrics is a leading global economics consultancy whose mission is to provide clear and useful insights, based on rigorous and independent economic analysis. We help our clients, including the World Bank, European Commission and WWF, to address complex challenges facing society such as climate change and inequality. Our vision is to build a sustainable future by advancing economics that cares about people, communities, and the planet. In 2020 the company was named by the Financial Times as one of the UK’s Leading Management Consultancies. The company is headquartered in Cambridge UK and is a trading subsidiary of a charity, the Cambridge Trust for New Thinking in Economics. Find us here: www.camecon.com