Economy and Trade

Building back better

There is plenty of time to reflect these days and consider if the future will resemble the past.

In policy terms, the coronavirus pandemic is a “critical juncture,” a shock that fundamentally jolts political, economic, and social institutions. During critical junctures, new ideas permeate mainstream conversations. Previously wild ideas are discussed by serious people in serious terms.

One such idea is a green recovery. A significant stimulus package will be necessary to restart the formal economy. How the money is spent will inevitably favour some sectors over others and create initial investments – or sunk costs – that may have lasting effects. With some ingenuity, can the post-COVID response create jobs and foster a green future?

A report published today leveraged the insights of economists and public policy scholars to address the question. Drawing on learnings from the 2008-2009 financial crisis and a survey of 250 experts, including central bank governors, the report suggests that the answer is yes. With the right mix of investments and policies, it is possible to build back better and greener. While we recover from this crisis, we can set the UK and Wales on a path that builds resilience to, and averts the worst of, the climate emergency. A greener future is also, the report stresses, good for the economy.

This research has helped inform a briefing from the COP26 Universities Network, of which I am part of. This document, aimed at policymakers, outlines a path to net-zero emissions economic recovery from COVID-19.

There are several “win-win” investments that can benefit the environment and the economy. Investing in low-carbon infrastructure, such as public transit, can also help reduce future emissions. Connecting our cities and towns together can, in the longer term, promote tourism and ease the frustrations of commuters.

Investment in green energy is a strong choice to create jobs and reduce greenhouse gases. In 2017, Wales set a target to 70% of the country’s electricity demand with renewables by 2030. Already, we have reached the 50% mark. The Institute of Welsh Affairs (IWA) suggests that a 100% renewable energy future is possible and would create 20,150 jobs annually.

We are already feeling the impacts of climate change as storms become more intense and events like flooding or snow storms invoke a “once in a lifetime” description (until the next one happens sooner than we hope). Nature can help. It can buffer us from storms, absorb flood waters, and soak up air pollutants and carbon dioxide. Creating green spaces, planting trees, and restoring wetlands can help absorb climate shocks and keep us safer and healthier.

Other, perhaps less obvious, investments can also be key to a greener, prosperous future. The internet is increasingly vital to the modern economy, making it possible to access suppliers and consumers and, as we’re discovering, work and learn from home. It is an area where Wales lags behind other nations and where investment could use a boost. Full fibre broadband (with speeds of 1 Gbps or more) covers fewer than 10% of UK homes, compared to 70% or more in Spain, Sweden and Portugal and almost 100% in South Korea and Japan. Accelerating the goal of nationwide, high-speed broadband connectivity by 2033 can help more of us work from home or access global supply chains to buy and sell goods and services.

These and other investments can become self-reinforcing over time, helping to build a future that is environmentally and economically more sustainable. With strong signals and initial investments from the governments, private investors often crowd in. Fossil fuel-intensive sectors, such as the airline industry, could be supported, if they demonstrate meaningful climate action, as Austria and Poland have already announced. Retraining and support packages can help ease the transition to a net zero economy over time. Companies and workers will increase their stake in the new status quo and work to protect and expand a climate-friendly economy.

Individuals also have a stake. Incentives for home retrofits are cost-effective and politically attractive. Small amounts can help homes become more energy efficient and support work in the construction and renovation sector. Home owners and renters have lower energy bills. The home renovation tax credit in Canada started as a short term programme, but became so popular that it is now a mainstay incentive in several provinces.

Like climate change itself, a green recovery has local and global implications. The world is looking this way for climate leadership. Wales is one of just 17 nations that declared a climate emergency, not including the EU’s November 2019 declaration for all member states. The UK is the host of the next UN climate summit, now delayed until summer 2021 in Glasgow. Built on domestic action, a global Sustainable Recovery Alliance could help coordinate and galvanise climate action as the world emerges, slowly, from the pandemic.

There is every possibility that future policy choices will revert to old ideas, propping up industries through traditional tools like fossil fuel subsidies. After the financial crisis, there were similar calls for a green recovery package, that went largely unheard. Old ideas and habits can have staying power. Companies, investors, and other special interests like investments that seem like a sure bet based on past performance.

Unlike 2009, there is strong evidence, backed by experience, that a net zero economy can contribute to an economic recovery. It remains to be seen if new ideas can continue to sway decision makers. If the pandemic has taught us anything, it is that society can change rapidly, and we quickly get used to entirely new habits and ways of life. Future changes will be smaller, but the huge forthcoming investments can ensure that they set Wales and the UK on a path to more sustainable “new normal.”

This article was originally published by the Western Mail (5 May 2020).

Dr Jennifer Allan, a lecturer in international relations at Cardiff University, is part of the COP26 Universities Network, a growing group of more than 30 UK-based universities working together to help deliver an ambitious outcome at the UN Climate Summit in Glasgow and beyond.

This post represents the views of the author and neither those of the Politics & Governance blog nor Cardiff University.


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