As attention turns to rebuilding from the economic wreckage of COVID-19 and the biggest shock to the global economic system since the Great Depression, two things are clear.
This is not a time for governments to retreat. Even voices usually clamouring for government to get out of the way now expect it to lead because recovery will require massive and sustained support.
And critically, this focus needs to be on the right kind of growth and jobs. Here, economic recovery must reckon with climate change because there can be no hiding from the fact that it remains the biggest threat to our future welfare and prosperity.
Indeed, the current pandemic is a harbinger of future climate disasters and the resilience we need to build into our systems to deal with the impacts of a changing climate. Importantly, this includes health systems as climate change foreshadows more health crises.
So, this is the moment to achieve a double dividend from recovery stimulus spending for both growth and jobs and climate action.
Recovery stimulus must not fuel acceleration toward potentially catastrophic climate change and the economic damage that would bring. Yet there is a real risk, as in times of crisis people cling to what they know.
There are plenty examples of status quo spending in recent weeks. They include a massive package for the US fossil fuel sector, China approving five new coal-fired power plants, India accelerating coal production, South Korea bailing out a coal power plant builder and Germany bailing out Lufthansa without carbon emissions reduction commitments. In Australia, our Recovery Commission is under fire for emphasising a gas-led recovery that seems oblivious to the shrinking role gas will play in our energy system as ever accelerating and cheaper renewable energy and storage technologies emerge.
These sorts of decisions will influence whether the world successfully addresses the threats of climate change. They will be our legacy to our kids, in a cruel twist paid for by them given the extraordinary debt we are incurring to spur recovery.
Consistent with our obligations under the Paris Agreement on climate change, there should be clear principles that recovery stimulus options do not lock-in higher emissions and greater climate risk.
Fortunately, there are signs of this thinking spreading around the world, abetted by one of the rare beneficial side-effects of the pandemic shutdowns – greater environmental awareness.
Several governments are committing to the double-dividend recovery. The European Union has led the way with a (e)750 billion stimulus package, with emphasis on advancing its Green Deal toward net-zero emissions.
It will invest heavily in areas like energy efficiency, turbocharging renewable energy, accelerating hydrogen technologies, rolling out clean transport and promoting the circular economy.
Key emerging markets that once would have only prioritised traditional carbon-intensive recovery stimulus are also now looking at low-emissions solutions. This includes China which emphasised “new infrastructure” in its recent US$500 billion stimulus package. India is supporting further rollout of its world leading renewable energy commitments, Indonesia has announced a major investment in solar energy and Japan and Korea are announcing climate transition spending.
As important, more businesses are recognising that climate change is core rather than peripheral, increasingly driven by the G20’s Taskforce on Climate Related Financial Disclosures (TCFD) where firms do climate risk and opportunity analysis. The Bank of England and the Australian Prudential Regulatory Authority have been encouraging this and signalling they will move to making it mandatory.
Business is calling for a double dividend recovery from the pandemic based on the powerful logic that as companies are now integrating climate change as core business strategy for growth, so should governments: not least for recovery. In two examples, the We Mean Business Coalition of around 1300 top global companies is calling for a double-divided recovery. In Australia, the Australian Industry Group is doing likewise.
Governments need to heed this because climate related investments in many cases will offer the best prospects for economic growth and jobs.
They provide options for major infrastructure investments which should be a bedrock of government stimulus for recovery, such as: clean energy and new transport systems, more sustainable homes and buildings and improved agricultural production, water and waste management.
They are often the best spur to jobs, for example clean energy investments create more jobs per dollar spent than fossil fuel investments. Many provide stronger growth trajectories through higher longer-term productivity from new ideas, technologies, services and efficiencies.
While there are encouraging signs, still too many governments are oscillating between supporting the status quo with its diminishing returns and supporting the strongest possible outcomes for jobs and growth while fulfilling commitments to the Paris Agreement.
The world needs the best possible route out of the pandemic and that needs to be climate smart because this presents the best prospects for recovery.
Patrick Suckling is a Senior Fellow at the Asia Society Policy Institute; Senior Partner at Pollination, a specialist climate investment and advisory firm; and was Australia’s Ambassador for the Environment.