Coherent Identifier About this item: 20.500.12592/cpb8bm

The COVID-19 Crisis and the Road to Recovery : Green or Brown (English)

16 November 2021

Summary

With a critical decade ahead for keeping global warming under 1.5-2 degree C degrees, the fiscal stimulus responses to COVID-19 have presented, and continue to present, a critical opportunity for governments to 'build back better'. Combining a theoretical framework for classifying fiscal responses with data from the Oxford-based Global Recovery Observatory (GRO), this paper analyses the policies launched in response to COVID-19 and evaluates their consistency with the world's low-carbon transition. The paper contributes to the analytical framework developed in Hepburn et al. (2020) by (i) applying the analysis to a much larger sample of countries (85 compared with 50 in UNEP (2021)), which now includes more emerging market and developing economies (EMDEs) from March 2020 to May 2021; and (ii) adopting a broader and more granular approach to examining rescue and recovery stimulus packages by introducing a new category of spending policies: 'light brown' (or 'legacy') policies. By the end of May 2021, global announced spending reached the extraordinary amount of US$19.8 trillion, with the 24 high-income economies in the sample accounting for more than three quarters of this amount. About 85 percent of global spending was aimed at 'rescuing' the global economy, and can be classified, almost entirely, as 'legacy' or 'light brown' spending, aimed at supporting families, businesses and activities that would not have survived otherwise. Recovery spending represented only 15 per cent of total stimulus. It included a relatively high share of green spending (19.4 percent) but an even larger share of brown activities (20.4 percent). Even the countries with significant green spending have allocated an equivalent amount or more to brown investment, thus 'neutralizing' the overall positive impact on emissions. It also appears that 'greener' countries have allocated more spending to green measures, possibly widening the gap between them and countries with weaker environmental performance. Finally, COVID-19's impact on the energy transition is mixed, ambiguous, and still to be determined. Overall, the COVID-19 crisis seems to have increased the distance between a group of high-income countries on course to accelerate their low-carbon energy transition, developing countries facing financial challenges to renewable energy deployment, and fossil fuel-dependent countries whose policies have further committed them to high-carbon development.

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Disclosure Date
2021/11/17
Disclosure Status
Disclosed
Doc Name
The COVID-19 Crisis and the Road to Recovery : Green or Brown?
Product Line
Advisory Services & Analytics
Rel Proj ID
1W-Fiscal Policies For Sustainable Recovery -- P175475
Total Volume(s)
1
Unit Owning
EFI-MTI-Macro/Fiscal-Tax (EMFTX),EFI-MTI-Macro/Fiscal-Tax
Version Type
Final
Volume No
1