The coronavirus pandemic is a crisis like no other. Entire countries have been forced into lockdown and global markets are heading into free-fall. But as the UK and other nations take the first tentative steps to recovery, should world leaders use this opportunity to build a more resilient, low carbon economy that delivers a more sustainable future? John Barwise looks at some of the options.
Returning to “business as usual” seems unlikely, at least for the foreseeable future. The number one priority will still be to protect the most vulnerable, from the tragic consequences of COVID-19 and to support those already suffering from the financial impacts of the virus.
But the lockdown measures introduced several weeks ago are slowly being eased. Some schools and businesses are starting to reopen up and people are returning to work. Are these the signs of a slow return to normal, or has the lockdown brought about permanent changes to the way we work and how we live our lives?
Speaking at one of the daily COVID-19 press conferences, the Foreign Secretary, Dominic Raab, said the country needed a “new normal” and talked about formulating a "sustainable" strategy which "prevents lasting damage to jobs and livelihoods". "We will need to adjust to a new normal where we as a society adapt to safe new ways to work, to travel, to interact and to go about our daily lives," he said.
But what might a “new normal” look like?
The economy in a time of COVID-19 crisis
In March, the chancellor announced a £330 billion bailout to save the British economy from coronavirus crisis. The funding comes in the form of grants, loans and job retention schemes — all designed to keep businesses from going under as trading ceased.
So far, the package of measures is working. Many businesses are simply treading water at the moment, until trading picks up. Funding keeps them afloat and jobs are being retained. Yet, whatever stimulus packages are put in place, the reality is that the world is heading towards a global recession.
The international Monetary Fund forecasts the global economy to contract sharply by 3% overall in 2020, followed by a growth of 5.8% in 2021, assuming the pandemic fades in the second half of 2020 and containment efforts are relaxed to allow economic activity to normalise.
The chancellor, Rishi Sunak, said this would mean more hardship to come. Speaking to the Lords Select Committee, he said: "we are likely to face a severe recession, the likes of which we haven't seen and of course, that will have an impact on employment."
Data released by the Office of National Statistics (ONS) shows Government borrowing reached a record high of £62 billion in May. The loan package will help keep the economy going and support businesses through the crisis. It also includes restrictions to prevent funding being syphoned off to pay dividends and executives bonuses, unlike the bailout following the 2008 financial crisis. But should the Government “seize the moment” and use this opportunity to attach conditions that will stimulate business investment in a greener economy, as other countries are doing?
Green economic growth after the crisis
Despite the shot to medium-term shock to the national and global economy, and the apparent end to business as usual, there are signs that governments and businesses around the world are beginning to look more seriously at green economic growth as a longer term solution.
In its recent COVID-19 forecast, the World Bank said the crisis will have a major impact on global value chains and provides an opportunity to strengthen climate mitigation efforts by “tilting to green” those stimulus packages adopted by governments.
In Canada, for example, Prime Minister Justin Trudeau, announced a similar funding package to the UK to help companies that are struggling during the COVID-19 pandemic. The package includes restrictions like the UK, but companies will also be expected to publish annual reports on climate investments, detailing how they plan to reduce their environmental footprints, and how their operations support the country’s commitments made under the Paris climate agreement.
In Europe, the “Green 10” coalition of NGOs and over one million European citizens have called on the Commission to mobilise the European Green Deal investment fund to support a low-carbon economic recovery in the aftermath of the coronavirus.
MEPs have also approved a resolution calling for a €2 trillion recovery fund to rebuild Europe’s economy after the COVID-19 pandemic, with a new Green Deal and the European digital agenda at the heart of the EU’s next budget, to start in 2021. The Green Deal is an ambitious investment plan that aims to boost the circular economy, decarbonise the energy sector, improve building energy efficiency and roll out cleaner forms of public and private transport.
Here in the UK, the Committee on Climate Change (CCC), says the UK needs to focus on low-carbon work programmes to support the economy and get people back to work. In a recent letter to the Prime Minister and First Ministers in Scotland Wales and Northern Ireland, the Chair of CCC, Lord Deben outlines a number of “immediate steps” to build a climate-resilient economy following the coronavirus pandemic.
The measures include using climate investments to support economic recovery and jobs, which Deben argues will reduce emissions and manage the social, environmental and economic impacts of climate change. Many of the job opportunities are labour-intensive, spread across the UK and ready to roll out as part of a targeted and timely stimulus package, the CCC points out.
“The actions needed to tackle climate change are central to rebuilding our economy. The Government must prioritise actions that reduce climate risks and avoid measures that lock-in higher emissions,” Deben said.
CCC also makes the case for strengthening incentives to reduce emissions through tax changes, such as raising carbon prices for sectors of the economy which do not bear the full costs of emitting greenhouse gases. Low global oil prices provide an opportunity to increase carbon taxes without hurting consumers, the CCC points out.
A study by the London School of Economics (LSE) shows that carbon is under-priced in most sectors, and the market failure to factor the externalities of carbon into the process of goods and services is stalling the development of low-carbon solutions, particularly in sectors that are more difficult to decarbonise.
Clean air and climate change
The lockdown has caused a global reduction in industrial activity, with passenger and freight transport also falling sharply, slashing air pollution and greenhouse gas emissions over the last two months or so. In a BBC report, Matt McGrath puts the case that; “no war, no recession, no previous pandemic has had such a dramatic impact on emissions of CO2 over the past century as COVID-19 has in a few short months.”
Following the nation-wide lockdown on March 23 in the UK, NO₂ pollution in some cities fell by as much as 60% in some cities compared with the same period last year. Dr Tamsin Edwards, Climate Scientist at Kings College London says the reduction is having a profound and positive effect on public health and the environment, but adds that while cleaner air for a period of months will undoubtedly benefit people’s health, long-term change would be needed to eradicate diseases caused by vehicle pollution completely.
According to Edwards, car emissions (excluding HGVs, vans or buses) were responsible for a huge 14% of UK greenhouse gas emissions last year and; “up to 5% of our emissions (1 in 20 tonnes) could potentially be prevented if we were to replace those journeys with remote working or low emissions journeys, such as electric vehicles or rail.”
On aviation emissions, Edwards points out that while 1 in 7 people in the UK took three or more flights in 2018, only 20% of these are business-related, with potentially emissions savings of around 1.5%, if all business flights ceased and instead reverted to other forms of communication such as video conferencing.
“Replacing travel with videoconferencing, even permanently, even globally, will never be enough to reach net zero carbon emissions and keep global warming within the limits of the Paris Agreement. We also know, though, that each dent in the total helps: especially when those dents have ‘co-benefits’ to our quality of life and health,” Edwards commented.
Government transport policy is also changing. Grant Shapps, Transport secretary, recently announced a £2 billion cycling and walking package, with £250 million emergency spending already underway. This is mainly to avoid overcrowding on public transport, which can only operate under social distancing rules. But local councils are adopting permanent measures to encourage more cycling.
Mayor of London, Sadiq Khan, plans to convert some of the city’s busiest roads to pedestrian and cycle ways. Speaking to the BBC he said: "many Londoners have rediscovered the joys of walking and cycling during lockdown. By quickly and cheaply widening pavements, creating temporary cycle lanes and closing roads to through traffic we will enable millions more people to change the way they get around our city."
Manchester, Glasgow, Leicester, York and Brighton are among a growing number of local councils that have also seized the opportunity to create new space for walking or cycling while the roads have been largely free of cars and lorries. The move is intended to discourage people from using their cars, leading to healthier living in a cleaner, less polluted, urban environment.
The future after COVID-19
There are many positives to come out of the tragedy that is COVID-19 — cleaner air, fewer greenhouse gas emissions and, for many, a different way of working. But the temptation to dash back to “business as usual” still exists and may yet prove the winner, as industry and commerce try desperately to get back to work. Government funding and the relaxing of various environmental regulations will no doubt aide this “back to normal” approach.
But climate emergency is still the biggest threat to the economy and society in the long term and will be with us long after the coronavirus crisis has passed. The World Bank argues that the rush to restart the economy after the COVID-19 crisis is likely to cause a dangerous “pause in the drive to green” and could eclipse climate action for the foreseeable future.
A growing number of businesses, large and small recognise the dangers of a changing climate and are using this time to build resilience into their modus operandi. But they are also mindful of the potential opportunities that are emerging from a greener economy.
The Energy Transition Commission (ETC) has defined some key priorities that will help the global economy recover while building a healthier, more resilient, net-zero-emissions economy. Priorities include a massive investment in renewables, boosting greener construction and providing targeted support for innovative low-carbon activities. The ETC also argues that governments should “stand firm” on carbon taxes and regulations and not allow carbon prices to spiral down under market pressure.
Daniel Klier, Global Head of Sustainable Finance, HSBC, says banks should play a leadership role in building more sustainable, economic growth. “We believe the most effective way to stimulate the green economy is to significantly reduce the cost of funding environmentally sustainable projects, and to focus investment in areas that will have the greatest impact on the low-carbon transition, such as renewable power systems, green infrastructure, and innovative low-carbon activities,” Klier added.
Those views are echoed by the World Economic Forum (WEF). In its recent policy paper, WEF describes the coronavirus as a “wake-up call” and says governments should use the science to “design economies that will mitigate the threats of climate change, biodiversity loss, and pandemics.”
“We must start investing in what matters, by laying the foundation for a green, circular economy that is anchored in nature-based solutions and geared toward the public good,” the report says.
The science that WEF talks about is the cornerstone of the fourth revolution, characterised by the combined physical, biological and digital disciples that can empower governments and businesses to deliver innovative plans that protect the planet and provide a sustainable future for us all.
It is a matter of choice. Governments can continue “business as usual” knowing that, under current scenarios, global warming is likely to continue rising above the climate change tipping point, which would be disaster for everyone. Or, they can use their funding leverage to incentivise the most polluting industries through a low carbon transition which, when combined with additional investment in innovative low-carbon industries, might just be enough to stop us all falling off a cliff edge.
Last reviewed 1 June 2020