Greenness of Stimulus Index

Across 17 major economies, announced economic stimulus packages will pump approximately US$3.5 trillion directly into sectors that have a large and lasting impact on nature. These flows present an opportunity to support these sectors through the current COVID-19 crisis, while 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.

In 14 of the 17 countries considered, potentially damaging flows outweigh those supporting nature. Of the more developed countries, the United States stands out as the largest scale risk. Australia, Italy and Japan 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.

Emerging economies dependent on environmentally-intensive sectors and without strong regulatory systems have perhaps the hardest task ahead. China, India and Mexico have announced measures that will have negative environmental impacts, while South Africa and Russia’s stimulus is largely reinforcing existing trends in environmentally-intensive sectors. Indonesia and Brazil are pushing response efforts likely to reinforce negative environmental outcomes largely resulting from high carbon industry and energy sectors and unsustainable agriculture practices. To manage through the crisis, while protecting and rebuilding nature, international support must be combined with environmental provisions hardwired into stimulus measures.

Packages in parts of Western Europe, South Korea and Canada offer more promise with at least a portion of spending likely to be nature-friendly. Germany’s ‘Package for the Future’ was the first to include widespread ‘green’ measures, which includes funding for ‘green’ infrastructure and R&D, particularly in the energy and transport sectors. South Korea has announced support for its ‘Green New Deal’, which will provide large financial support to a variety of ‘green’ projects over the next five years. France and the UK benefit from less environmentally intensive economies and their decisions to retain more stringent regulations and policies. However, specific funding for ‘green’ projects announced in the UK is relatively small compared with Germany and South Korea, and the UK’s positive score is largely driven by good underlying environmental performance. France has been particularly successful in attaching ‘green’ conditions to financial support, while Canada follows suit with several inherently green measures that go some way to counteracting the country’s negative underlying environmental performance.

The ‘Next Generation EU’ recovery package is the most environmentally friendly stimulus package to date. Of the €750 billion (US$830bn) package, 30% will be directed towards ‘green’ initiatives, including targeted measures to reduce dependence on fossil fuels, enhance energy efficiency, invest in preserving and restoring natural capital, among others. Furthermore, all recovery loans and grants to member states will be attached to ‘do no harm’ environmental safeguards.

Regardless of economic structure or past environmental performance, each country has the opportunity to steer its stimulus package to support nature and the climate. Looking across announcements to date, a clear set of tools are emerging that provide immediate and lasting economic benefits while also accelerating the transition to a more sustainable future. These fall into the following broad categories:

  • Corporate bailouts with green strings attached
  • Investment in nature-based solutions, sustainable agriculture, conservation and wildlife protection
  • Loans and grants for green investments
  • Subsidies or tax reductions for green products, and the removal of subsidies for polluters
  • Green R&D subsidies
  • Reinforcing environmental regulation, and avoiding deregulation

Our social and economic fate is inextricably linked to that of nature. 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 more than 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. Most governments have not chosen to use economic stimulus to enhance nature or tackle climate change. However, there is an opportunity to learn from those countries that have taken the lead, and 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.

New to this release

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:

  • The total quantity of measured stimulus has increased to $11.8 trillion.
  • The European Union has approved the ‘Next Generation EU’ recovery package, which includes substantial funding for ‘green’ initiatives.
  • Environment-specific announcements include Germany’s substantially green-oriented ‘Package for the Future’ and support for South Korea’s ‘Green New Deal’. France has achieved more success in attaching environmental conditions to bailouts granted to environmentally intensive industries, and the UK has announced some specific funding for ‘green’ projects.
  • However, continued support for environmentally-intensive industries in the form of unconditional bailouts and other measures has also been announced.

READ GREENNESS OF STIMULUS SUMMARY REPORT
Read Corporate Bailouts Report
Read International Financial Institutions Report
Read Green Employment and Growth Note

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