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Freshfields Sustainability

| 6 minutes read

Does a sustainable recovery align with the economic imperative? A look at recovery packages around the world.

Does a sustainable recovery align with the economic imperative?

As many countries around the world are starting to shift from crisis mode to recovery mode, a question that is being asked by many is ‘what kind of recovery do we want?’. Clearly we need to help repair the damage from many months of economic stagnation, but as I explained in an earlier blog, there are different schools of thought as to how we get there.  Some argue that the economy needs to recover as quickly as possible even if that means reducing our commitment to a sustainable future, while others believe that the recovery is the perfect opportunity to support those industries that will ensure a more sustainable prosperity.

Governments around the world are developing recovery packages as a matter of urgency, and which direction they chose will have a significant impact on our ability to meet global and national sustainability goals. In this blog I will argue that a sustainable recovery is not only best for planet and people, but that it also is most likely to rebuild the economic health of our nations.

What is a sustainable recovery?

Until recently, policymakers were keen to emphasise the environmental nature of sustainability, with particular emphasis on climate change, biodiversity and resource scarcity. However, the last few months have shown us that the social dimension of sustainability, the ‘S’ in ESG, is critical to a healthy economy. As I wrote previously, the pandemic has highlighted that if we undermine the needs of some of the most critical actors in society (healthcare workers, teachers, waste collectors and delivery drivers to name a few), we are all affected. And the Black Lives Matter movement which has rightfully been so vocal over the past few weeks brought home the point that a society can only be deemed successful if it provides equal rights and opportunities for all.

In short, we need both a green and a just recovery.

A green recovery

Drawing on an excellent article from the World Economic Forum, some of the characteristics of a green recovery include:

  • Decarbonisation: Improve our energy efficiency, shift the energy mix from fossil fuels to renewables and invest in programmes that take carbon out of the atmosphere and improve biodiversity.
  • Better buildings:  improve insulation, replace windows, reduce air leakage, improve heating (and cooling) systems, and switch fuels from coal, gas and oil towards renewable energies such as wind and solar.
  • Better access to healthy food: Easier and cheaper access to healthy diets to support our immune systems.
  • Smart mobility: Improve public transport infrastructure to reduce pollution and congestion, improve bicycle infrastructure and support car sharing
  • Greening our cities: Implementing planning that supports the creation of green spaces in cities and make cities more resilient and self-sufficient.
  • Infrastructure: Developing more resilient infrastructure to better adapt to the impacts of climate change

A just recovery

As I wrote about in a previous blog, with the pandemic affecting people from poorer and minority backgrounds disproportionately, it is clear that the recovery needs to strengthen the resilience of these demographic and ethnic groups. A recent McKinsey report put it very clearly:

Our local, national, and global community will eventually move past the COVID-19 crisis, but we don’t have to simply survive it. We call on all stakeholders to commit to equity in our collective actions over the near and long term.

The report offers a very detailed range of solutions which it summarises as follows:

  • Companies can make decisions that reflect and reinforce equity as a value.
  • State and local actions can help ensure that federal interventions find their way to black citizens, businesses, and institutions.
  • The social sector can deploy capital quickly and test innovative solutions to seemingly intractable problems.

A sustainable recovery can help the economy.

The University of Oxford’s Smith Institute surveyed over 200 leading economists representing 53 countries to understand whether COVID-19 fiscal recovery packages can accelerate or delay progress on climate change. The research, co-authored among others by Nicholas Stern and Nobel Prize laureate Joseph Stiglitz, assessed possible COVID-19 economic recovery packages and shows the potential for strong alignment between the economy and the environment.  The evidence suggests that green projects create more jobs, deliver higher short-term returns per dollar spent and lead to increased long-term cost savings, by comparison with traditional fiscal stimulus.

Based on their analysis they have identified five policies with high potential on both economic multiplier and climate impact metrics:

  • Clean physical infrastructure investment in the form of renewable energy assets, storage (including hydrogen), grid modernisation and CCS (Carbon capture and storage) technology
  • Building efficiency spending for renovations and retrofits including improved insulation, heating, and domestic energy storage systems
  • Investment in education and training to address immediate unemployment from COVID-19 and structural shifts from decarbonisation             
  • Natural capital investment for ecosystem resilience and regeneration including restoration of carbon-rich habitats and climate-friendly agriculture, and
  • Clean R&D spending.

Are planned recovery packages sustainable?

Now we have established what a green and just recovery might look like and identify that it can be good for the economy, the only question th6y packages?

The answer is … it depends. Europe is leading the way, in terms of overall ambition with some strong plans from Asia. Some examples include:

Germany’s €130Bn package of tax and spending measures includes

  • A €300 one-off payment for every child in the country
  • A €50bn fund to address climate change, innovation and digital technology
  • The state financial incentive to buy an electric car has been doubled to €6,000.

The UK’s New Deal for Britain though less ambitious than others in seeking to move beyond fossil fuels has got a number of measures in place to achieve a clean, green recovery including the following:

  • Making funding available to promote electric car developments, in addition to the over £1bn provided to support the rollout of ultra-low emission vehicles in the UK via support for a super-fast charging network for electric vehicles
  • Invest in R&D for zero emissions air transport and other new clean technologies
  • Reforesting by planting 75,000 acres of trees
  • From a social perspective there will be enhanced infrastructure support for public healthcare and education as well as a strong focus on building to address the UK’s housing crisis.

The European Commission’s proposed €750Bn recovery package has three strands: Digitisation, the European Green Deal and a Fair and Inclusive Recovery for all. This includes ambitious proposals to deliver a green and just recovery:

  • A massive renovation wave of our buildings and infrastructure and a more circular economy, bringing local jobs;
  • Rolling out renewable energy projects, especially wind, solar and kick-starting a clean hydrogen economy in Europe;
  • Cleaner transport and logistics, including the installation of one million charging points for electric vehicles and a boost for rail travel and clean mobility in our cities and regions;
  • Strengthening the Just Transition Fund to support re-skilling, helping businesses create new economic opportunities;
  • The short-term European Unemployment Reinsurance Scheme (SURE) will provide €100 billion to support workers and businesses;
  • A Skills Agenda for Europe and a Digital Education Action Plan will ensure digital skills for all EU citizens;
  • Fair minimum wages and binding pay transparency measures will help vulnerable workers, particularly women;
  • The European Commission is stepping up the fight against tax evasion and this will help Member States generate revenue.

It is likely some of these will be watered down during negotiations with member states, but the intent is clear.

There is also support for a green recovery from Asia:

  • South Korea’s $110Bn Green New Deal is the most ambitious in the region, including investments in renewables, phasing out domestic and overseas coal financing by public sector institutions and the introduction of a carbon tax.
  • Indonesia is developing a billion-dollar solar power plan which will generate 1GW of peak power and will also create up to 22,000 jobs while saving the government billions in electricity subsidies. But the country will also seek to expand its coal power capacity.
  • China’s $559Bn package includes a push for low-carbon transport such as high-speed rail, electric and fuel cell vehicles, new infrastructure supporting digitalisation, EV charging infrastructure and ultra-high electricity transmission.  However, there are concerns that it may go back on some of its climate pledges as the package also includes a contingency for number of new coal-fired power plants.

And while the US administration has been very silent on talk of a green recovery, even quietly scrapping environmental protection measures during the pandemic, they have agreed to take part in this year’s only international summit on climate change organised by the International Energy Agency. Furthermore, these issues may well play an important role in the US presidential elections as the democratic party has just launched a new policy roadmap tying the environment to racial justice. For instance, the roadmap calls for companies, and by extension consumers, to pay for emitting carbon dioxide into the atmosphere, but in a way that gives money back to low- and moderate-income households.

These are still early days, and there remains huge question marks about our ability to emerge fully from the pandemic in the foreseeable future, but these are some positive signs that most political leaders are understanding that a green and just recovery is also what is needed for our economies.

Let’s hope they walk the talk.


covid-19, covid relief, sustainability, green recovery, just recovery, climate change