That is according to the latest edition of the Greenness of Stimulus Index from think-tanks Vivid Economics and Finance for Biodiversity (F4B), published today (12 February). The updated edition includes all packages announced by Joe Biden since he took up office as US President earlier this year.
According to the Index, almost one-third ($4.6trn) of the stimulus provided to corporates by G20 governments and ten other major economies has been in sectors that could play a major role in the delivery of a more sustainable future, including agriculture, energy, transport, waste management and heavy industry. However, just $1.8trn of this funding has been either funnelled directly into low-carbon and nature improvement projects in these sectors or been provided with environmental conditions.
The Index reveals that, overall, spending on stimulus has been lower than that delivered after the 2008 crash. The proportion allocated to ‘green’ activities on a global scale has also been lower.
As well as tracking stimulus allocations on a global scale, the Index assesses whether governments’ approaches have become more or less green since the pandemic began.
The sharpest improvement on the previous edition of the Index (October 2020) was delivered by the US. Former President Trump signed for a $900m stimulus bill in December 2020, that included significant investment in low-carbon public transport and in renewable electricity. Biden then signed an Executive Order in January, signalling strong policy action on the horizon to minimise the negative environmental impacts of all major parts of the economy.
F4B and Vivid Economics are expecting that the US’s score on the Index will climb again in the coming months. A $1.9bn ‘American Rescue’ plan is progressing through Congress which, while broad, does contain some dedicated green funding. Biden is also proposing a $1.7trn Climate Plan for Clean Energy and Environmental Justice – which the Index producers claim is the largest package of its kind in history. A better score will be necessary if the US wishes to claim its stimulus has an overall net-positive environmental impact.
Canada also saw a significant uptick in its score. After announcing an intention to set a legally binding net-zero target for 2050, the Canadian Government announced a ‘Healthy Environment and Healthy Economy Plan’ in December 2020, promising significant new investment pots to renewable energy, low-carbon transport, climate-resilient infrastructure and low-carbon buildings.
The UK, meanwhile, increased its score to a lesser extent. It gained points for the commitments to stop fossil fuel financing overseas and for an increase in the number of towns and cities striving to reach net-zero before 2050. The Index’s next edition could be less favourable for the UK, given the Government’s decision this week to pull the majoriy of the funding from the £2bn Green Homes Grant, designed to improve the energy efficiency of domestic buildings.
A challenge in Asia
While 17 of the 30 countries assessed saw an increase in their Index scores, improvements were found to be steeper in the global West than in Asia.
China has committed to becoming carbon neutral by 2060 and set an interim ambition to cut carbon intensity by 65% by 2030, against a 2005 baseline. But the Index reveals that it has continued to focus its stimulus support on its large coal and industrial sectors, without environmental conditions. While it has plans to pour billions into solar and wind, the Index reveals that its overall approach will have net-negative environmental impacts.
Other Asian nations, including Japan and India, have directed a greater proportion of their stimulus funding towards specific low-carbon sectors like climate adaptation, renewable energy generation and energy storage. Yet both retained net-negative scores. F4B and Vivid Economics attribute this to “poor underlying environmental performance and ongoing support for coal”.
“Much more action is required before we can see a truly green post-Covid recovery, but we are encouraged by the leaps in progress in some countries, most notably the US and Canada,” Vivid Economics’ Jeffrey Beyer said.
“The new US administration has signalled a dramatic shift in how climate and nature can be embedded into economic recovery programmes. The US Executive Orders are a model for how regulatory change can create jobs, reduce emissions, and protect nature. But, as the Index shows, good policy is not enough – it must be accompanied by major public investment to catalyse a job-rich, green recovery.”
Sarah George