The Green Stimulus Index – Measuring the impact of economic stimulus in regards to climate change, sustainability and the environment


The Green Stimulus Index – Measuring the impact of economic stimulus in regards to climate change, sustainability and the environment

In the last few months, the world has experienced a series of challenges and a number of significant government financial interventions in response to the pandemic. The economic stimulus packages announced include a number of varying supportive mechanisms. The existing packages range from anywhere between $95 billion to $2.2 trillion with South Korea being the smallest and the United States the largest.

Governments have remained focused on the implications of the pandemic on people, with financial support being allocated to households and individuals working on the frontline. Securing employment and allocating other benefits to people has been the priority, as well as offering financial support to businesses.

Reports suggest that approximately the $840 billion announced within the stimulus plans, 11% of this total allocation will be directed towards sectors with high impacts on the environment, whether this is climate change, biodiversity or local pollution. Studies highlight that this figure will inevitably increase as stimulus efforts extend to support long-term recovery. Environmental and climate representatives are urging governments to ensure funding support in response to the crisis is provided without further risk to the future of public health, job security, economic stability and environmental sustainability. The pandemic has shown our connection to the natural planet and governments worldwide now have the opportunity and power to ensure emergency measures create a more sustainable and resilient future.

The latest Green Stimulus Index measures 11 major economies to generate an understanding of their stimulus packages based on the scale of money allocated to environmental sectors and their efforts to drive funding towards sustainability. To date, research suggests that most of the stimulus funding will be directed towards existing industries, with little attempt to look to the future and support long-term stability and sustainability.

There are still considerable opportunities for governments to implement proactive measures to ensure any funding enhances sustainability and resilience. In nations lacking climate and environmental policies, these plans are likely to drive unsustainable developments contributing to environmental issues, higher emissions and loss of nature. Many nations have entered into this pandemic with a large segment of their industries contributing considerably to greenhouse gas emissions, air pollution and biodiversity loss. A similar number of countries also lack the stable policies required to support the transition to a clean, sustainable and more resilient outlook. As a consequence, existing stimulus plans for these sectors could potentially reinforce the existing trend and continue to drive certain industries forwards that show little support for a sustainable future.

Recent findings show that many response measures show little support for environmental and sustainable policies. The latest analysis highlights the US and China as two notable nations with a lack of focus on clean energy and sustainability. The US, in particular, has few targeted measures to encourage the shift towards sustainability. Their existing policy mix means that stimulus funds are directed more towards reinforcing traditional markets, environmental deregulation and support for the aviation industry. China has invested heavily in clean energy and the expansion of their electric vehicle subsidy scheme is promising, but further subsidies for fossil fuel vehicles and a reduction in permit requirements for coal mining could be very damaging to other clean energy developments.

The US is of particular importance due to the nation managing the most stimulus money available towards environmentally-related markets. Studies suggest the impact alone in the US is the equivalent of the stimulus plans covering multiple nations.

Other nations are yet to show any clear signs of adjusting their stance towards conventional industries and accelerating their support towards sustainability. For example, Japan and Australia are yet to implement any clear measures to ensure their stimulus plans do not undermine the sustainability and resilience of their markets. Elsewhere, Canada and South Korea have launched a range of mixed targeted plans. Studies for Europe suggest a relatively neutral approach with some key particulars worth highlighting:

The study indicates Germany as one of the most negative in the region due to the environmental intensiveness of the economy and little clarity on how it intends to ensure stimulus supports sustainability and resilience. In a similar case, Italy has yet to introduce any clear targeted measures to allow stimulus plans to support sustainable practices. In contrast, Spain has introduced a number of measures incorporating environmental conditionality for loans to large companies, which could enable further stimulus supports towards a sustainable transition.

The report suggests that both France and the UK benefit from slightly less environmentally-intensive industries and relatively positive policy measures. However, the support towards the bailout of the aviation industry, without any clear environmental conditionality could threaten this. The current index suggests that the existing stimulus funding towards environmentally-related sectors remains relatively neutral but the study believes that as more information is revealed on the use of these stimulus funds and new measures come into place that the index value may start to increase.

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