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Green Recovery Post COVID-19: The Impact of Economic Stimulus On The Environment

Green Recovery Post COVID-19: The Impact of Economic Stimulus On The Environment

The impacts of COVID-19 continue to be far-reaching. Governments have implemented various economic stimulus packages to remedy the human and economic impact of the pandemic, but often neglect to consider the ramifications of such responses on the environment. However, with appropriate actions and consideration for the environment, there is potential for a ‘green recovery’ and for the global community to grow even stronger post-COVID-19.

As the global community continues to grapple with the impacts of COVID-19 – economic or social – governments have taken it upon themselves to mitigate these consequences. These responses have come in the form of stimulus payments and relief packages, which aim to provide financial assistance to consumer households and financial relief to businesses.

The Australian government has committed a total of AUD$ 291 billion since the beginning of the pandemic in direct economic support, which provides relief for low-and middle-income earners and also to businesses and employers experiencing economic hardship. Similarly, the Hong Kong government introduced stimulus measures totalling HKD$120 billion for this financial year, with the goal being to help businesses and households cope with the challenges sustained by the COVID-19 pandemic.

Yet, many of these economic stimulus packages have failed to consider another key stakeholder – the environment. ‘Greenness of Stimulus Index’, a study completed by the think tanks Vivid Economics and Finance for Biodiversity, reveals that a limited fraction of money from COVID-19 stimulus packages are directed to industries with a net positive impact on the climate and environment. Only 12% of the COVID-19 stimulus packages belonging to the world’s largest 30 economies are being directed into sectors that are eliminating greenhouse gas emissions or improving nature and biodiversity; whereas almost 33% are being directed into carbon-intensive sectors. These values are based on the Greenness of Stimulus Index (GSI) – developed by Vivid Economics and Finance for Biodiversity – which examines the stimulus funding of global major economies and how much of this funding is driven into channels that promote environmental action and the green potential of new stimulus measures.

Other studies have also shown similar findings – little of the COVID-19 economic stimulus programmes actually benefit the environment. A study from WWF’s Arctic Programme found that a large sum of the USD$3.5 trillion from Arctic countries’ COVID-19 fiscal stimulus programs is being used to encourage investments in the oil and gas industry. This includes large economies like Russia, Norway, the United States, Iceland, Finland, Canada, Sweden, and the Kingdom of Denmark. Sweden’s COVID-19 stimulus is the only programme that has a net positive Arctic environmental impact, and they also go above and beyond by proving the greatest potential to create green jobs in the region for long-term growth and development.

You might also like: Europe’s Post-COVID-19 Green Recovery Plans Should Serve as Inspiration to Others

How Can Governments Utilise COVID-19 Economic Stimulus Programmes to Actualise Their Sustainability Agenda?

Many have called upon economic stimulus packages to be successful in driving the recovery of the global economy. Consumers are spending more, and businesses are recuperating from losses. Now, as the recovery of the global economy is progressing, activism from voices like the International Energy Agency (IEA) have called for a ‘green recovery’- a recovery that cuts back on CO2 emissions while also boosting the economy. This is the change that many hope to see, and as noted by Dan Aylward-Mills, head of growth and development at Vivid Economics: “the scale of funding being mobilised gives us a chance to rewrite how economies influence our natural environment. As we move from rescue to recovery, we need to take that chance.”

These economic stimulus packages have the potential to create a positive environmental impact. The Greenness of Stimulus Index study finds that the greenness of stimulus has improved over time, especially in developed countries. Although governments have created stimulus packages to address the immediate aftermath of the COVID-19 pandemic, such massive funding also enables the potential to address long-term recovery and the potential for environmental sustainability. Specifically, clean energy and low carbon development are sectors of industry that show tremendous growth potential. Therefore, despite the intent of these stimulus packages to provide short-term relief to households and businesses, the COVID-19 stimulus response can promote substantial long-term improvements in terms of sustainability and resilience.

 Other ways that governments can utilise their COVID-19 stimulus packages to address climate risks include using recovery funds to incentivise corporations to better address their own climate risk exposure. Corporations have relatively large climate impacts and are also largely exposed to climate risks. Therefore, corporations should take appropriate measures to mitigate climate risks while also implementing internal action to reduce their own climate footprint. Support and action from corporations provide an outlet for governments to actualise their commitments to climate and environmental action.

The COVID-19 pandemic has brought about some unexpected environmental benefits, like improved air and environmental quality, and natural regenerative activity from flora and fauna. These occurrences – reduction in emissions and natural regeneration—are only short-term and may not continue post-COVID-19 without proactive global engagement in climate recovery. Governments, with the actions and support from the global community, have the ability to combat the COVID-19 pandemic while also promoting positive long-term climate and environmental action.


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