ODI Logo ODI

Trending

What we do

Search

Newsletter

Sign up to our newsletter.

Follow ODI

Statement: The data is in — governments must green their Covid-19 recovery to keep global temperature rise to 1.5°C

Image credit:Peter H/Pixabay

Leading research organisations tracking global recovery spending call on world leaders to redirect all unspent and future COVID-19 stimulus away from carbon-intensive activities toward nature- and climate-positive investments.

Since the start of the COVID-19 pandemic, our recovery trackers have collected worldwide data on thousands of policies adopted in response to COVID-19 along with their environmental impacts. Our findings are clear: more effort is needed to secure a just and green recovery globally.  

Ahead of COP 26, enhanced action is critical to get on track with the 1.5°C temperature limit of the Paris Agreement. We call on leaders to redirect their unprecedented pandemic recovery response and all future public spending toward a resilient, nature-positive, and climate-safe economy.           

Governments need to rapidly increase public spending and set targets for a green recovery.

Governments have allocated between USD 16–17.2 trillion of stimulus in response to the COVID-19 pandemic, representing the largest-ever peacetime mobilisation of public money. Our data has shown a progressive but slow shift toward greener policies since March 2020 as response evolved from emergency rescue measures to strategic recovery packages. Canada, the European Union (EU), the United States, and India are among the countries that made the greatest strides. According to our estimates, green recovery spending now represents 10%–20% of recovery spending globally. But this is still insufficient to drive the urgent shift toward low-carbon and resilient economies. 

Public and private spending to support clean energy from 2021 to 2023 represents only 35% of the investment needed to have a chance of reaching net-zero emissions by 2050. To shift course, it is therefore critical that governments increase public spending on clean energy, low-carbon transport, sustainable agriculture, waste management, and enhanced nature and biodiversity protection.

They can do so by setting clear spending targets for a green recovery. The EU set the tone by requiring a 37% climate target in member states’ recovery packages and requiring all spending to “do no significant harm.” In turn, this target pushed member states to green their recovery plans over time.  Such tools and minimum eligibility requirements could become central to guide future investment decisions and strengthen climate action. 

As governments increase their green stimulus spending, they should use a range of tools that can accelerate a green recovery, including skills retraining, just transition mechanisms, and research and development. These policies can create decent green jobs, drive innovation, and lead to long-term sustainable development. To build just and fair societies, it is crucial to consider the social impacts that recovery policies can have on livelihoods, inequality, and quality of life.

Governments should commit to a fossil free recovery and a “do-no-harm” principle.

Data across our recovery trackers shows that a large volume of stimulus continues to support a carbon-intensive economy. Fossil fuel- activities still represent around 40% of total public spending in the energy-intensive sectors. To align with 1.5°C-compatible energy scenarios, public finance must no longer support fossil fuel production. Green strings, which apply climate conditionalities to economic stimulus, should be systematically attached to policies that support industries with a detrimental environmental impact. 

Governments can deploy a range of policy options including using green budgeting approaches, promoting climate and nature-related financial disclosures, and developing green taxonomies to determine which types of activities should not be considered as “green” or “clean.” These tools are also a good way to operationalise the “do-no-harm principle” and increase the transparency of environmentally related recovery policies. 

Governments should better integrate nature and biodiversity in their recovery plans. 

We estimate that only 1% of recovery spending is dedicated to protecting nature and biodiversity. Yet nature-based solutions make especially strong stimulus measures, generating outsized employment, economic activity, and emission reductions in the short and long terms. The impact of public spending on nature and biodiversity must be systematically measured and improved to support long-term economic health, enhance resilience, and mitigate climate shocks in a way that respects communities.

Low- and middle-income countries should receive support to build back better.

Finally, our data shows that, largely due to a smaller fiscal space and rising levels of debt, recovery spending per capita is almost 20 times higher in advanced economies than in emerging markets and developing economies and 200 times higher than in low-income economies. Enhanced international cooperation, technical assistance, and capacity building are required to enable a more equitable and just green recovery worldwide. Public finance—including from multilateral development banks and exceeding the yearly USD 100 billion climate finance goal—will be an essential tool to channel this support. 

As the world slowly fights its way out of the pandemic, governments should not shift their economies back to a pre-pandemic business as usual. Doing so would not only undermine the successes achieved so far but would lock the world in a high-carbon pathway for decades. Instead, we call on governments to shift course, immediately increasing the percentage of funding that supports a truly green recovery worldwide, ensuring a green transition is accelerated in the post-pandemic period.

Full list of signatories:

Energy Policy Tracker, led by the International Institute for Sustainable Development, Columbia University Center on Global Energy Policy, Institute for Global Environmental Strategies (IGES), ODI, Oil Change International, Stockholm Environment Institute, WiseEuropa, Finnish Innovation Fund (Sitra), Legambiente ONLUS, Strathmore Energy Research Centre, Sustainable Economics and Finance Association, Institute for Climate Economics (I4CE), REN21, and 14 other partner organisations

Global Recovery Observatory, led by the Smith School of Enterprise and the Environment with support from the Green Fiscal Policy Network

Greenness of Stimulus Index, led by the Finance for Biodiversity Initiative

Green Recovery Tracker, led by E3G and the Wuppertal Institute for Climate, Environment and Energy

Explore similar content

Default thumbnail 2021-08

Trade

Estimated reading time: 10 minutes