Seventeen major economies, including the United States, Europe, and China, have committed trillions in stimulus funds to revive their hard-hit economies. Yet those stimulus responses vary widely regarding “green” concerns—that is, the extent to which they include measures that address environmental issues.
Europe Targets a Green Stimulus
To climate advocates, these massive funding programs offer a unique chance to back renewable energy, electric vehicles, and other projects aimed at lowering carbon emissions. According to Vivid Economics and the Finance for Biodiversity Initiative’s Green Stimulus Index, “Each country has the opportunity to steer their stimulus package to . . . provide lasting and immediate economic benefits, while also accelerating the transition to a more sustainable future.”
So far, the European Union is leading the way in including green recovery measures in its stimulus response. In July, EU leaders negotiated a €750 billion ($886 billion) package for pandemic recovery stimulus. Those programs must reserve 30% of spending for climate-oriented projects, and all funding must align with the Paris Agreement and the European Green Deal’s “do no harm” provision.
Individual countries in Europe are also taking their own steps. As part of its €130 billion ($154 billion) stimulus response, Germany announced in June that all gas stations would have to offer electric vehicle charging services, along with allotting €2.5 billion ($3 billion) for battery cell production and charging infrastructure. The package also added taxes on large sports utility vehicles and subsidies for electric vehicles. Similarly, in May French president Emmanuel Macron announced an €8 billion ($9.5 billion) plan to bail out the country’s car industry, including a boost for electric vehicle production.
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As part of their plans to provide aid to struggling aviation companies, Switzerland and Austria have also attached environmental mandates to airline bailouts. For example, the Swiss parliament mandated that carriers meet environmental targets as part of an almost 1.9 billion Swiss franc ($2.1 billion) bailout package.
For its part, Italy unveiled a plan to fund 110% of renovation costs for homeowners trying to make their homes more energy efficient. The plan includes such measures as the installation of new heating and cooling systems, as well as electric car charging ports. Britain is also taking steps to support green building renovations.
Critics say many of these moves are too tepid, however. They point to what they see as measures that “include significant deregulation, subsidies or tax cuts to activities likely to worsen environmental outcomes, including large bailouts to the aviation sector,” according to the Green Stimulus Index. They also cite significant program cuts. For example, the Just Transition Fund, aimed at helping EU countries reduce their dependence on fossil fuels, was allotted €17.5 billion ($20.7 billion), less than half of an earlier proposal.
US and China Take the “Brown” Approach
At the same time, other major economies are taking a different approach, placing emphasis on addressing critical, immediate needs for economic stimulus rather than longer-term issues. They have introduced stimulus packages focused on providing liquidity and boosting aid to businesses and providing benefits to households and unemployed workers, with little or no attention paid to green measures.
Most significantly, China and the US, the world’s two biggest carbon-emitting economies, are pursuing decidedly “brown” stimulus responses. China has approved plans for five new coal plants, the fastest growth rate in capacity since 2015. It also is expected to emphasize energy-intensive infrastructure and heavy industry, though in April its government announced it would continue to subsidize electric vehicle production.
Despite calls for a green recovery in the US, the March $2 trillion stimulus package included few measures targeting the environment. For example, while it provided roughly $60 billion for airline companies, the final package omitted a requirement that the industry halve its greenhouse gas emissions over the next 30 years. In addition, the Trump administration has provided relief to coal, oil, and gas companies. It has also continued pre-pandemic efforts to undermine environmental regulations. For example, in July, government officials announced an overhaul of the National Environmental Policy Act, including cutting the requirement to estimate projects’ impacts on global warming, among other steps.
India also is largely eschewing climate-friendly measures. A large proportion of its $266 billion program is directed at supporting environmentally intensive industries.
Ultimately, environmental advocates fear that a focus on immediate needs could slow progress toward reaching the Paris Agreement’s emissions-reduction goals, resulting in a further escalation of climate change–related effects. “This trend is worrisome because policy decisions being made now about how to save economies will determine how much CO2 enters the atmosphere over the coming decade,” said University of California researcher Ryan Hanna. Yet by directing spending to green projects that also promote employment and business growth, governments may be able to use stimulus funds to achieve both short- and long-term goals.