Greenness of Stimulus Index

The coronavirus shows us that our social and economic fate is inextricably linked to that of the natural world. Governments have the opportunity and responsibility to ensure short-term emergency measures lead to a better more resilient future.

Nature has suffered a pandemic-like crisis for over a century. Human activity has accelerated the rate at which plant and animal species are becoming extinct by a factor of over 100, and paved the way for a growing climate crisis. To date, the global economic response to the COVID-19 crisis is set to reinforce this trend. However, there is an opportunity to act decisively now to prevent irreversible damage to nature and dramatically lower future costs of protecting the planet. In solving one crisis, we cannot ignore another.

Across 16 major economies, announced economic stimulus packages will pump approximately USD 2.2 trillion directly into sectors that have a large and lasting negative impact on nature. These flows present an opportunity to support these sectors through the current COVID-19 crisis, while also increasing their sustainability and resilience in the face of the parallel climate and biodiversity crises.

So far, government responses have largely failed to harness this opportunity, disregarding the broader sustainability and resilience impacts of their actions. The Green Stimulus Index, produced by Vivid Economics in partnership with Finance for Biodiversity (F4B), shines a light on how much money is flowing where and what this means for nature.

In 13 of the 16 countries considered, potentially damaging flows outweigh those supporting nature. Of the more developed countries, the US stands out as the largest scale risk, with USD 439 billion providing unrestricted support to sectors proven to be environmentally harmful in the past amidst several rollbacks on environmental regulation. Russia and China are also particularly bad, with the latter providing new subsidies for automotives and easing of permits for coal mining. South Korea, Canada, Australia, Japan and Germany join them on the negative side owing largely to the existing negative impacts of their environmentally-intensive sectors, and their lack of decisive action to ensure stimulus supports a more sustainable transition.

Developing economies dependent on environmentally-intensive sectors and without strong regulatory systems have perhaps the hardest task ahead. Indonesia, Mexico and Brazil are pushing response efforts likely to reinforce brown trajectories dominated by highly carbon intensive industry and energy sectors and unsustainable agriculture practices. Part of their economic stimulus packages include deregulation of the logging industry, unconditional subsidies to fossil fuel consumers, among others. To manage through the crisis, while protecting and rebuilding nature, international support must be combined with environmental provisions hardwired into their stimulus measures.

Packages in parts of Western Europe offer more promise with at least a portion of spending in France and the UK likely to be nature-friendly. France and the UK benefit from less environmentally-intensive economies and their decisions to retain more stringent regulations and policies. At the same time, they have also steered some stimulus measures to drive nature-friendly outcomes.

Among the current stimulus measures, the most critical for green conditionality are corporate bailouts, and international rescue packages. These are examined in greater detail in separate policy notes.

  • Corporate bailoutsGovernments should view bailouts as public investments that deliver public benefits. While these bailouts must clearly deliver immediate benefits in terms of stability of public services, employment and supply chains, they should also secure a transition to sustainable and resilient growth in the medium term. Bailouts can achieve this by reinforcing environmental regulations, by conditioning public support on implementing specific environmental improvements to operations and procurement, and by committing to high-integrity environmental offsets, enhanced nature-related financial disclosures, and increased supply chain transparency. The recent agreements with Austrian Airlines and Air France demonstrate how governments and corporations can meet on common ground.
  • International financial institutions Unprecedented fiscal crises in developing countries are driving large international rescue packages with the potential to support more sustainable and resilient growth. As these governments grapple with high debt, commodity prices volatility and capital flight, economic instability will spillover into nature. International financial flows – including loans, debt relief and liquidity support – can be channelled to vulnerable sectors to both rescue faltering economies and ensure long term balance of payments by supporting their fragile transition to sustainable and resilient growth. In fact, a focus on ensuring adequate environmental conditions in only a few sectors – especially agriculture and tourism – can achieve enormous positive results for people and nature.

New to this release (updated 14/05/2020)

This update of the index incorporates new information that has become available since the previous release. The latest announcements on stimulus flows, deregulation and environmental policies have been incorporated into the analysis, with the following highlights:

  • Brazil, Indonesia, Mexico, Russia and India have been added to the index.
  • Many countries increased the size of their total stimulus through the introduction of new packages and expansion of existing measures. Most notably, these include the United States ($2.2 trillion to $2.9 trillion USD), United Kingdom ($490 billion to $530 billion), France ($380 billion to $469 billion) and South Korea (95 billion to $197 billion).
  • The quantity of stimulus that we identify as environmentally relevant increased considerably from $840 billion to $2.2 trillion. This is partly due to new announcements of support for businesses but also a slight broadening of our categorisation of environmentally relevant sectors.
  • Among others, new environment specific announcements include the attachment of ‘green’ strings to the Air France bailout, a bailout of a coal power plant builder in South Korea, and measures by the government in China to restrict the wildlife trade. Please refer to the Country notes in Annex II for more information.

Read Stimulus Green Index Summary Report (access the first release here)

Read Corporate Bailouts Report

Read International Financial Institutions Report

Client

Finance for Biodiversity Initiative (F4B), funded by the MAVA Foundation

Sectors:

Finance

Capabilities:

Ecosystems & Natural Capital
Sustainable development
Trade, Investment & Competitiveness

Regions:

East Asia & Pacific
Europe
North America
UK