The theme for World Environment Day 2020, ‘Time for Nature’, could not be any more fitting for our current circumstances. The coronavirus pandemic has highlighted the amount of damage human activity can have on the planet. CO2 emissions are predicted to fall by 4-8% this year, mainly due to a dramatic decline in road and air travel. However, when restrictions are eventually eased, emissions are expected to jump back up, much like they did after the financial crisis in 2009.
To ensure the climate crisis does not threaten human existence, we need to limit average global warming to 1.5C. This means rapid cuts in carbon emissions. Glen Peters, research director in Norway’s CICERO, predicts that similar levels of emission cuts need to happen every year to reach net-zero emissions by 2050. It is high time we think of systemic solutions to construct a new, more sustainable norm. The European Union’s Coronavirus Recovery Plan, unveiled on 27 May, is one of the first to place environmental sustainability at its heart, at least in principle.
The European Union’s Coronavirus Recovery Plan is one of the first to place environmental sustainability at its heart
The green recovery package covers an assortment of ‘green’ initiatives, such as €91bn allocated to fund renovations and retrofitting, €60-80bn to encourage electric vehicle sales and to install charging points for electric vehicles, investments in renewable energy with hydrogen as a particular focus receiving as much as €30bn, and strengthening the Just Transition Fund by increasing its budget to €40bn. The Fund is meant to alleviate the pandemic’s socio-economic impacts in regions most adversely affected by re-skilling workers, supporting SMEs, and diversifying economic activity. Poland, Romania, and Germany, EU’s biggest coal users, are to receive the largest proportion of this fund.
In order to fund the new plans, the European Commission aims to raise money from financial markets, to be distributed as grants. New taxes and levies, proposed to cover interest payments, can also potentially target environmentally damaging industries. For instance, the EU Emission Trading Scheme (ETS), which allows companies to trade permits on CO2 emissions, can yield around €10bn a year. The ability to profit off permit trading provides companies with a financial incentive to reduce carbon emissions. However, instability in carbon prices limits the scheme’s efficacy in encouraging firms to invest long-term in cleaner production technologies. The new plan, therefore, potentially enables a greater push for a transition towards a green economy. Allocating funds for investments in energy efficiency, renewable energy, and clean transport pave the way for a green future.
Allocating funds for investments in energy efficiency, renewable energy, and clean transport pave the way for a green future
A lingering worry is whether climate-friendly investments are detrimental to short-term economic recovery. Subsidies with ‘green strings’ attached are argued to put more pressure on already-strained industries. Fatih Birol, IEA’s executive director, cautioned that a debate between providing jobs and climate-targeted policies may arise during recovery. However, a survey of senior economists by Carbon Brief uncovered that green stimulus policies such as clean infrastructure investment, spending for renovations such as improved insulation, and investment in education and training have both the biggest positive climate impact and the largest long-run multipliers. This survey shows that economic recovery and climate action are not contradictory goals. Comparatively, in order to ensure sustained economic recovery, states should look into long-term investments in green initiatives. This would mitigate issues with fluctuating fossil fuel prices, which historically caused many economic shocks.
The plan must obtain unanimous approval from 27 member states and the European Parliament to go ahead. This could potentially deepen rifts between Northern and Southern member states. The ‘Frugal Four’: Austria, Denmark, Sweden, and the Netherlands oppose the use of loans obtained by the Commission to be given out as grants to struggling Southern countries, fearing irresponsible spending. However, Northern states may be compelled to agree to these arrangements given Southern states’ success in framing the debate to question pan-European solidarity and equity in economic development.
Even if an agreement is reached, would the plan have a significant impact on green recovery? One criticism is that the plan’s lack of detail on what constitutes ‘green’ investment makes it fairly simple for companies to bypass requirements for environmental responsibility to obtain stimulus money.
The tragic consequences of the virus may be a wake-up call for policymakers and businesses to not go back to ‘business-as-usual’ after uncovering severe flaws in the system
Furthermore, phrases like ‘clean’ hydrogen are unclear as they may refer to hydrogen produced by either renewable energy or fossil fuels, particularly natural gas. While natural gas is less polluting than coal, emitting approximately 50% less CO2 when burned in power plants, methane leakages in natural gas infrastructure are commonplace. Methane traps heat in the atmosphere much more effectively than CO2, an MIT research paper reports. A climate-neutral recovery plan cannot contain caveats such as the support of harmful industries just because they are the ‘lesser evil’.
EU’s Green New Deal, if it does go ahead, may set the precedent for other state and local governments to look into similar policy measures. Business leaders in the UK have called for similar green coronavirus recovery plans, with ‘green strings’ attached to corporate bailouts. More locally, the West Midlands Combined Authority has approved an economic recovery plan focusing on ‘green and inclusive growth’. The tragic consequences of the virus may be a wake-up call for policymakers and businesses to not go back to ‘business-as-usual’ after uncovering severe flaws in the system.