Wherever there’s a call for bold climate action, the skeptical rejoinder inevitably follows like an echo: “It’s too expensive.” But a new analysis shows that putting the world on track to achieve net-zero carbon emissions by 2050 would require investing just a small fraction of the sums that governments around the world have already planned to spend for coronavirus relief.
On one level, this is evidence that when governments consider a situation urgent, they find the money to address it. But in addition, it suggests that pandemic recovery and climate action might be one and the same.
Since the scope of the coronavirus crisis took shape this past spring, it’s been clear that the massive size of government recovery packages would strongly shape the post-pandemic economy. This stimulus spending could contribute to major progress in decarbonization—or lock in fossil fuels.
Indeed, some countries have said that they plan to allocate a portion of their coronavirus relief packages to “green recovery” policies, though they haven’t provided much detail. And of course, not all stimulus will go to green investments. Governments have to support the health care sector, for example, and provide relief for struggling households.
The new study puts some numbers on what would constitute a climate-friendly recovery package. Researchers analyzed data from the International Monetary Fund on coronavirus stimulus packages pledged by governments around the world. As of the end of August, 149 countries had announced they planned to spend a total of US$12.2 trillion.
They compared this with estimates from the Intergovernmental Panel on Climate Change of investment needed to reach the Paris Agreement’s goal of limiting climate change to 1.5 °C of warming. “Low-carbon investments over the next several years to put the world on track toward net zero carbon dioxide emissions by mid-century are dwarfed by COVID-19 stimulus,” the researchers write in a paper published in the journal Science.
The needed investments in low-carbon energy and energy efficiency amount to about US$ 1.4 trillion per year between 2020 and 2024. In other words, the yearly investment is roughly 10% of the total stimulus planned so far, and the 5-year total is equivalent to half the stimulus.
But the picture is even rosier than these numbers suggest, the researchers argue. The investment required to keep the world on its current (non-Paris-compatible, 3 °C of warming) pathway amounts to US$1.1 trillion per year. So shifting the world to the 1.5 °C pathway requires just US$300 billion per year on top of that—less than 3% of the planned stimulus funds, or 12% when considering the 5-year total of investment needed.
Plus, decarbonizing the energy system means that governments will have to divest from fossil fuels to the tune of US$280 billion per year. If these funds were redirected to green-energy investments instead, the overall increase in funding needed to achieve the Paris Agreement pathway would be only US$20 billion per year globally. “This represents a mere 0.2% of the total announced stimulus to date, or 1% over the 2020–2024 period,” the researchers note.
The picture does get a little more complicated when you look at specific countries and regions. The largest stimulus packages, both in absolute dollar amounts and as a percentage of GDP, are planned by the United States and the European Union. They also require relatively low sums relative to GDP to decarbonize. “Total stimulus exceeds average annual low-carbon energy investment needs by a factor of 20 in the United States and by over 30 in the EU,” say the researchers.
But in low- and middle-income countries, proposed coronavirus stimulus packages tend to be smaller, while the investments needed to decarbonize these countries’ energy systems are larger relative to GDP. This means that international support, investment in development banks, and other strategies will be key to shift the world as a whole onto a low-carbon path, the researchers say.
Source: Andrijevic M. et al. “COVID-19 recovery funds dwarf clean energy investment needs.” Science 2020.