The data from the Global Recovery Observatory show that nations are not building back better, at least not yet
Only $368 billion of the $14 trillion COVID recovery spending by 50 leading economies last year can be considered ‘green’, a new report found. It stated that most of the green investments were driven by a small group of high-income countries.
The report titled, ‘Are We Building Back Better? Evidence from 2020 and Pathways for Inclusive Green Recovery Spending’ was prepared by Oxford’s Economic Recovery Project and the UN Environment Programme (UNEP). It is an analysis of the characteristics of 2020 COVID-19 spending from the Global Recovery Observatory’s tracking of the 50 largest economies.
The Global Recovery Observatory is a live database of all COVID-19 related government spending in the 50 largest economies. It tracks and assesses the potential impacts of COVID-19 spending policies on the environment (climate, nature, and pollution) and socio-economy.
Failing to build back better?
According to the report, the nations’ commitments to build back sustainably, a year post the onset of the pandemic, does not align with its recovery spending. It revealed that in 2020, only 18% of recovery spending and 2.5% of total spending had positive green characteristics.
The report found that for the vast majority of countries, recovery spending has been relatively low and minimally green. Even investments in green recovery often get neutralised by spending in the opposite direction. For example, while approximately 16% of recovery spending may bring positive air pollution impacts, 16.4% may act to increase net air pollution.
Brian O’Callaghan, lead researcher at the Oxford University Economic Recovery Project and the report’s author, said, “Despite positive steps towards a sustainable COVID-19 recovery from a few leading nations, the world has so far fallen short of matching aspirations to build back better. But opportunities to spend wisely on recovery are not yet over. Governments can use this moment to secure long-term economic, social, and environmental prosperity.”
High-income nations top green spending list
The pandemic led to a contraction of the global economy by 3.5% in 2020, which is the largest single-year drop since World War II, according to the International Monetary Fund (IMF). The report said this has burdened low-income communities, which has led to an enhanced unequal capacity amongst nations in recovery spending.
The vast majority of green spending has come from a small set of leading high-income nations, the report stated. It added that high-interest rates and existing debt constraints have hindered the recovery efforts of many emerging markets and developing economies.
According to the report, Spain and Germany invested $66.1 billion in low carbon energy, for renewable energy, hydrogen and infrastructure projects. Similarly, high-income nations like France and the United Kingdom have also announced $56.3 billion for green building upgrades.
Urgent need to dampen growing spending inequality
The report advocated that green recovery will not only help to meet global environment targets, but also result in stronger economic growth.
Since a majority of green spending has come from a small set of leading high-income nations, the report suggested that substantial concessional finance from international partners will be needed to dampen the growing inequality.
It highlighted five major green investment opportunities – green energy, green transport, green building upgrades and energy efficiency, natural capital, and green research and development, to be prioritised in 2021.
The report emphasised that the actions taken post the pandemic will influence whether economies continue to depend on “unsustainable fossil-heavy growth”, or instead decouple growth from greenhouse gas emissions to avoid the worst of the climate crisis. This will also help nations under the Paris Agreement to meet their targets in the future, it added.