The economic recovery during and after the Corona pandemic is an opportunity for decarbonisation

By: Fredrik Lundberg

By mid-2020 many countries are going through the worst economic contraction since the 1930s. Some economists believe it will be essentially V-shaped: first a steep fall, then a steep return to normal. Others believe a large number of businesses and some industries are broken and can’t be fixed.

The more persistent the pandemic, and the longer we have to wait for a vaccine that can restore us to relative normality, the bigger the risk of a 1930s-style long and deep depression. The 1929 Wall Street Crash led to Hitler and the Second World War. It did not end until about 1944 (in the US), when the economy geared up to full capacity due to strong demand led by arms production.

The much smaller 2008 recession did not lead to a major war, but it did again lead to a wave of right-wing nationalism.

Whether through wisdom or just for short term self-preservation, most governments on Earth are now handing out unprecedented amounts of money. They hope that they will save businesses with growth potential, and not to hopeless cases. It is a difficult task.

Will cruise ship tourism, commuting to work, eating out or even hair-cutting return to 2019 levels in 2021? 2025? Ever?

Should it return, all of it? The longer the crisis lasts, the more people, including Ministers for Finance, will ask that question.

“Helicopter money” spread out immediately and at random is better than doing nothing, if the alternative is waiting for demand to shrink and deflation to freeze the economy.

Traditional anti-recession politics is to put money into loss-making businesses to save jobs and into all kinds of “infrastructure”, especially roads, or other construction work so as to create jobs.

But some expenses are more sustainable than others, financially and ecologically – especially with a slightly longer perspective.

In May, the EU Commission proposed an updated EU budget for 2021–2027 of €1100 billion and a dedicated EU recovery budget for 2021–2024 of €750 billion, which was later agreed upon. It claims to be green, but according to an analysis from Agora Energiewende, “the few budget elements that specifically address needed investment in the buildings, transport, power and industry sectors total only 80 billion euros”, which is clearly not anywhere near enough to put Europe on course for 1.5 degrees.

This 80 billion is not all, however, as member states have stimulus packages of their own. Neither is 80 billion the last word. It may become much more.

A closer analysis of the EU budget and package will have to wait, so here is just some general background on stimulus packages.

Support for cruise ships will save jobs and sustain purchasing power, but if there is not much market for cramming thousands of 70 year-olds on such journeys, it is a dead loss.

Investment in solar power creates jobs immediately. People employed there will spend their wages and turn vicious circles in the economy into virtuous circles. But it also will produce electricity for perhaps 30 years at low cost, and help to reduce carbon emissions, also at very low cost. The same goes for wind power, energy efficiency in buildings, and heat pumps.

As Jigar Shah, a renowned US clean energy entrepreneur and author put it:

“It’s critical for us to recognize that we are being looked to by everyone from prominent political campaigns to elected officials in your town to provide the necessary economic development to get us out of Covid.”

Some of the best climate measures are also good for economic recovery. AirClim polled NGOs in the Nordic and Baltic countries, as well as Germany, Poland and Russia, to find out what they see as the most promising climate measures. This resulted in a list of 150 measures1, from which a Top 10 list was created. Acid News tried to show in the “update” of the Top 10 in late 2019 that the proposed measures can be a very valuable tool for use in the National Determined Contributions (NDCs) to the Paris Agreement.

Several of these can also be put to good use not only to reduce emissions but also to create jobs immediately, stimulate the economy generally and to save money compared to other economic stimuli, now that politicians are ready to spend enormous amounts of cash.

How do those measures look now, when seen through a Covid recovery lens? Here is an attempt.

1. Taxing carbon

Carbon taxes are good for the transition from fossil fuels. They have no direct added value for recovery. Some jobs are lost in the fossil industries, but other jobs are gained in renewables and efficiency (see below), which may be more labour-intensive.

2. Support for renewable electricity

Definitely a win-win-win for the climate, immediate jobs and long-term payback. Denmark’s wind energy sector employs 33,000 people, many more than used to work in coal power.

3. Improved efficiency of buildings

Same as renewable electricity. A recent US study2 showed that USD 83.5 billion invested in efficiency measures could save USD 123 billion in fuel costs, create 660,000 jobs in 2020–2023, twice as many job-years over the whole investment, while reducing CO₂ emissions by 906 million tonnes. In a zero-interest world, this means an effective stimulus, and emission reductions at no cost.

4. Other efficiency improvements (e.g. EU labelling of fridges)

A nation that requires more efficient appliances will produce and export more of such appliances to other countries.

5. District heating efficiency

Improvements in district heating save money, improve air quality and create jobs. The scope is not enormous, but district heating should be well maintained where it exists. There should also be a market for district cooling, which has some advantages over individual cooling, such as better efficiency and less noise. District heating and cooling can both be used to absorb surplus electricity, and make way for a larger share of wind and solar.

If plans for new district heating or cooling already exist, they should be sped up. If such plans do not exist, the lead time may be too long to be of use for recovery.

6. Vehicle emission standards

For the near future, EU standards probably have the main short-term effect of promoting electric vehicles. Electric-only vehicles do not create many jobs, and meanwhile a lot of jobs are lost in the production of internal combustion vehicles. But to save the European car industry as a whole, the transformation cannot be postponed, as even more jobs would be lost then. Most car manufacturers have been extremely slow on the uptake. Giving in to them will not help the industry. Although it would help the oil industry, for no good reason.

7. Other measures to reduce traffic CO2 (taxes for vehicles and fuels)

As above. To save the automotive industry it will take a loud and clear message to make manufacturers understand what needs to be done.

Some measures will lead to earlier scrapping of gas guzzlers, which creates some new jobs, as does the installation of charging stations and hydrogen pumps.

Improving the recycling of products and materials can create a lot of new jobs.

8. Infrastructure planning

One high priority should be the building of new power lines and planning for them, especially to accelerate already existing plans. The same goes for railways. More long-term projects also create immediate jobs, e.g. for engineers and architects who can also be hit hard by an economic downturn.

Some infrastructure changes can be made quickly, as seen in Brussels and Paris during spring 2020, when many street lanes were converted for bicycles.

In view of recent development, many plans for highways, airports and harbours should be reviewed, as it looks unlikely that air travel, for example, will return to 2019 levels. Obviously not building an unnecessary airport terminal means fewer jobs than building it, but if the money is used on softer structures such as schools, more jobs are created.

9. Waste and recycling

Reducing and reusing waste is usually labour-intensive, so it ticks all the boxes.

10. Land use (afforestation, better agricultural practices, wetland reclamation)

Another a win-win-win. Land use management can create jobs in reforestation, gardening, ecological agriculture, and benefit biodiversity. Some of the jobs are highly qualified, but many can be performed by people on the margin of the labour market, with little training, immediately.

Much has happened since 2013, even before the Covid crisis, and a few other measures were added in the article of late 2019.

11. Emissions trade – working at last!

The ETS creates no jobs as such, but exactly like a CO₂ tax, it is transformative, saves money and probably creates more jobs than it destroys in the short term and definitely so in the medium and long terms. At least during the first several months of the Covid crisis, ETS prices have stayed in the €25–30 region, and if they were to drop much, the EU would not, and should not, accept that.

12. Climate laws and stricter targets

Much like the ETS and carbon taxes, they create no jobs, but add credibility to clean energy investment, which does create jobs.

13. Hydrogen

After many false starts over several decades, hydrogen has moved up the agenda in several countries at the same time, and is increasingly seen as a necessary part of decarbonisation, as a buffer for increasing wind and solar. Construction of electrolysers, storage and pipelines creates direct and indirect jobs, some of them soon.

14. HFC phase-out

The phase-out of climate-hostile refrigerants is a very cost-effective climate measure. It also creates jobs in a rather bumpy sector which needs to grow for the longer term. The people that either replace the refrigerant or install the new cooling devices are the same people that install heat pumps. An accelerated phase-out should save energy and money, because newer cooling equipment uses less electricity.

15. Electric food (and other innovations)

Most of the methods for saving the climate, saving money and creating jobs are well known. We should not primarily be looking for “breakthrough” technology, but some new ideas should be supported, as in the case of producing protein food or fodder from atmospheric nitrogen, water and CO₂. Some of them will work, some not. This will not lift us out of the corona recession, but it will create some jobs for a relatively modest amount of money.

Whether electric food will work or not, innovative approaches are needed for the global food industry, which is very unsustainable.

The above is a sketch of a future AirClim project. NGOs in the same 11 Northern European countries will be asked again to name the best 10 climate measures in their countries, with a view to further assessing their effectiveness in averting a slump, raising ambitions in NDCs and creating jobs in the green recovery.

 

Fredrik Lundberg

 

1. https://www.airclim.org/publications/10-best-climate-mitigation-measures...

2. https://www.aceee.org/sites/default/files/pdfs/stimulus_analysis_fs_8-4-...

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