Investing in Climate Change

Can a Green Recovery Repair the Economy and Spur Climate Action?

When the coronavirus pandemic subsides and we shift our attention to economic recovery, what will the “new normal” look like? Proponents of climate action argue that a green recovery is not only essential to slow global heating, but it could also be the engine of our economic revival.

In the US, 22 million people filed for unemployment from mid-March to mid-April. Many of those jobs will slowly return as businesses begin to reopen, but some smaller businesses may not survive. Some of the hardest hit industries, such as travel and tourism, brick-and-mortar retail, and oil and gas, will take years to recover or could be permanently altered, depending on future corporate and consumer behavior. If reductions in long-distance travel and increases in online shopping and telecommuting last for the long term, demand and jobs in these industries may never return to 2019 levels.

All this means that some significant portion of the global workforce could face long-term unemployment and may need to seek work in other fields. Proponents say a green recovery could provide those jobs.

Green Recovery: A New Model of Prosperity?

In Europe, an alliance of 180 politicians, business leaders, members of the European Parliament, and environmental activists have called for the European Union to increase green investment to develop “a new model of prosperity.”

“The transition to a climate-neutral economy, the protection of biodiversity, and the transformation of agri-food systems have the potential to rapidly deliver jobs and growth, improve the way of life of all citizens worldwide, and to contribute to building more resilient societies,” their open letter reads.

A similar, more detailed proposal has been drafted by climate and social policy experts in the US, who have proposed a “Green Stimulus” of at least $2 trillion. Among the proposal’s aims are the creation of green jobs, improved standards of living, an acceleration of the transition off fossil fuels, and a stronger and more resilient economy in the face of pandemic, recession, and the climate emergency. The group calls for the stimulus to be automatically renewed annually at 4% of gross domestic product until “the economy is fully decarbonized and the unemployment rate is below 3.5%.”

Written as an open letter to the US Congress, the proposal offers recommendations across eight areas, including but not limited to housing and buildings, transportation, manufacturing, energy, food systems, and green infrastructure.

How far the US and other governments go to incorporate climate action into the recovery could largely depend on what the public demands.

The Fossil Fuel Tipping Point

At the same time, oil prices have been historically low: on April 20, US oil plunged into negative territory for the first time in history. Some analysts believe that 2019 (not 2023, as was previously predicted) will go down in history as the year demand for fossil fuels reached its peak. If this is not enough motivation for the financial industry to accelerate its transition away from financing fossil fuel projects and toward more climate-friendly investments, then perhaps the clear message sent by a government-led effort to stimulate a green economy could supply the missing piece.

Indeed, at least one oil and gas giant is sending a strong message of its own. The French energy company Total will have to cut capital spending across its operations by more than 20% this year—everywhere, that is, except for its “new energies” unit, which includes solar, wind, and batteries. That division will be shielded from spending cuts.

How far the US and other governments go to incorporate climate action into the recovery could largely depend on what the public demands. Before COVID-19, polls showed that most Americans liked the goals of the Green New Deal, even if they did not want to spend trillions of federal dollars to pay for it.

However, these polls were before the U.S. grappled with the economic impacts of COVID-19, which caused the worst recession and unemployment rate since the Great Depression. One way or another, this crisis will cost the U.S. trillions of dollars. Only time will tell how public opinion in the U.S. evolves around the Green Stimulus.