Green Stimulus Index An assessment of the orientation of COVID-19 stimulus in relation to climate change, biodiversity and other environmental ...
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Green Stimulus Index An assessment of the orientation of COVID-19 stimulus in relation to climate change, biodiversity and other environmental impacts
Green Stimulus Index The Green Stimulus Index (GSI) assesses the effectiveness of the COVID-19 stimulus efforts in ensuring an economic recovery that takes advantage of sustainable growth opportunities, and builds resilience through the protection of the climate and biodiversity. It provides a method to gauge the current impact of the COVID-19 responses, to track countries’ progress over time, and to identify and recommend measures for improving the effectiveness of those responses. This assessment is updated regularly – please use the latest version. This note is part of a series looking at economic responses to COVID-19. Other notes relate to corporate bailouts, international assistance flows into developing countries and job-creat- ing fiscal stimulus. This work was undertaken by Vivid Economics as part of the Finance for Biodiversity (F4B) initiative. Spokesperson is Mateo Salazar Contact email: mateo.salazar@vivideconomics.com
Executive
summary
Across 17 major economies, announced economic Packages in parts of Western Europe, Canada and
stimulus packages will pump approximately US$ South Korea and Canada offer more promise with
3.5 trillion directly into sectors that have a large at least a portion of spending likely to be
and lasting impact on nature. These flows present nature-friendly. Germany has announced the
an opportunity to support these sectors through largest total of specific ‘green’ support’s ‘Package
the current COVID-19 crisis, while increasing their for the Future’ was the first to include widespread
sustainability and resilience in the face of the ‘green’ measures, which includes funding for
parallel climate and biodiversity crises. So far, ‘green’ infrastructure and R&D, particularly in the
government responses have largely failed to energy and transport sectors. South Korea has
harness this opportunity, disregarding the broader announced support for its ‘Green New Deal’, which
sustainability and resilience impacts of their actions. includes similar measures to the German package-
which will provide large financial support to a
In 14 of the 17 countries considered, potentially variety of ‘green’ projects over the next five years,
damaging flows outweigh those supporting but is on a much smaller scale at this stage. France
nature. Of the more developed countries, the and the UK benefit from less environmentally
United States stands out as the largest scale risk. intensive economies and their decisions to retain
Australia, Italy and Japan join them on the nega- more stringent regulations and policies. However,
tive side, owing largely to the existing negative specific funding for ‘green’ projects announced in
impacts of their environmentally-intensive sectors, the UK is relatively compared with Germany and
and their lack of decisive action to ensure stimulus South Korea, and the UK’s positive score is largely
supports a more sustainable transition. driven by good underlying environmental perfor-
mance. as yet the UK’s package has limited
Emerging economies dependent on environmen-
specific ‘green’ measures. France has been partic-
tally-intensive sectors and without strong regula-
ularly successful in attaching ‘green’ conditions to
tory systems have perhaps the hardest task ahead.
financial support, while Canada follows suit with
China, India and Mexico have announced measures
several inherently green measures that go some
that will have negative environmental impacts,
way to counteracting the country’s negative
while South Africa and Russia’s stimulus is largely
underlying environmental performance.
reinforcing existing trends in environmentally-in-
tensive sectors. Indonesia and Brazil are pushing The ‘Next Generation EU’ recovery package is set
response efforts likely to reinforce negative to be the most environmentally friendly stimulus
environmental outcomes largely resulting from package to date. Initial proposals suggest substan-
high carbon industry and energy sectors and tial and sustained positive impacts for the climate
unsustainable agriculture practices. To manage and nature with a host of specifically targeted
through the crisis, while protecting and rebuilding measures including policies to reduce dependence
nature, international support must be combined on fossil fuels, enhance energy efficiency, invest in
with environmental provisions hardwired into preserving and restoring natural capital, among
stimulus measures. others. However, as the package is yet to be
approved by the European Parliament, the
Commission’s index score remains provisional.
Green
Stimulus 3
Index
Green Stimulus Index
80
60
40
20
0
UK
Germany France
Spain European
-20 Italy Japan Commission
Australia
-40 Brazil Canada
South
Korea
South
-60
USA Russia Mexico Africa
India
Indonesia
-80
China
-100
Positive Contribution Negative Contribution Index
Source: Vivid Economics using a variety of sources, consult Annex II for the entire list of sources
Note: The European Commission score is calculated assuming that the proposed ‘Next Generation EU’ recovery package
and related environmental measures are implemented in full. Its score is provisional. Updated on July 14, 2020.
Green
Stimulus 4
Index
Regardless of economic structure or past environmental performance, each country has the opportuni-
ty to steer its stimulus package to support nature and the climate. Looking across announcements to
date, a clear set of tools are emerging that provide immediate and lasting economic benefits while also
accelerating the transition to a more sustainable future. These fall into the following broad categories:
Corporate Investment in nature-based Loans and Subsidies or tax reduc-
bailouts with solutions, sustainable grants for tions for green products,
green strings agriculture, conservation green and the removal of subsi-
attached and wildlife protection investments dies for polluters
Reinforcing
Green R&D environmental
subsidies regulation, and
avoiding deregulation
Our social and economic fate is inextricably To date, the global economic response to the
linked to that of nature. Governments have COVID-19 crisis is set to reinforce this trend.
the opportunity and responsibility to ensure Most governments have not chosen to use
short-term emergency measures lead to a better economic stimulus to enhance nature or tackle
more resilient future. Nature has suffered a climate change. However, there is an opportunity
pandemic-like crisis for over a century. Human to learn from those countries that have taken the
activity has accelerated the rate at which plant lead, and act decisively now to prevent irreversible
and animal species are becoming extinct by damage to nature and dramatically lower future
a factor of more than 100, and paved the way costs of protecting the planet. In solving one
for a growing climate crisis. crisis, we cannot ignore another.
New to
this release
This update of the index incorporates new information that has become available since the
previous release. The latest announcements on stimulus flows, deregulation and environmental
policies have been incorporated into the analysis, with the following highlights:
The total quantity However, continued support for
of measured stimulus environmentally-intensive industries
has increased to in the form of unconditional bailouts and
$11.6 trillion. other measures has also been announced.
Environment-specific announcements include Germany’s substantially green-oriented ‘Package for
the Future’ and support for South Korea’s ‘Green New Deal’. France has achieved more success in
attaching environmental conditions to bailouts granted to environmentally intensive industries,
and the UK has announced some specific funding for ‘green’ projects
Green
Stimulus 5
Index
Announced
Stimulus Packages
Over the past months the world has witnessed unprecedented government financial interventions in
response to COVID-19. Economic stimulus packages announced to date include a range of fiscal mecha-
nisms including bailouts and loans. For the countries that we have analysed, current stimulus packages
vary from $26 billion to $2.98 trillion, with Mexico as the smallest and the United States as the largest.
Figure 1 Announced COVID response fiscal
stimulus package by country
3000
Total Fiscal Stimulus (US$ billions)
2.500
Last Update: July 14, 2020
2.000
1.500
1.000
500
0
SA
n
on
y
K
na
ly
ce
a
a
a
il
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ia
a
a
a
o
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an
re
di
ad
si
si
ic
pa
ai
ic
U
al
Ita
ra
an
hi
si
us
ne
fr
U
Sp
ex
In
Ko
tr
m
an
Ja
is
B
C
A
Fr
R
us
do
M
er
m
C
h
h
A
G
om
ut
In
ut
So
So
C
n
pea
ro
Eu
Source: Vivid Economics using IMF COVID response tracker and Oxford Coronavirus Government response tracker.
Note: Dark blue represents developed and light blue represents developing countries. Assumes the proposed
‘Next Generation EU’ recovery package is implemented in full. Updated on July 14, 2020.
Governments have rightly put people first and This proportion will likely increase as stimulus
focused on the immediate implications of the efforts deepen for long-term recovery. This
crisis – with money channelled directly to house- critical funding should allow countries to respond
holds and those on the frontline. Specifically they to the COVID crisis without risking public health,
have to sought to secure employment, provide job security, fiscal stability and environmental
unemployment and cash benefits to workers and sustainability. Economic stimulus provided to
households, and supply liquidity to businesses sectors with an environmental impact may be
across the economy. directed towards clean energy and low carbon
development. It is worth noting that transport
At the same time, roughly US$3.5 trillion in and industry are two sectors that have been hit
announced stimulus, 30% of the total, will flow hard by the crisis, are receiving substantial
into environmentally-intensive sectors – whether government support, and also have a large
on climate change, biodiversity or local pollution1. environmental impact.
1
In defining the amount of stimulus flowing through to sectors with a high environmental impact, the index has removed any measures which are purely
devised to provide income support to workers (e.g. furlough or paycheck protection programmes). In some cases, insufficient information was available.
Green
Stimulus 6
Index
Figure 2 Sum of global fiscal stimulus policies
of countries considered in our analysis
US$3.5
trillion Environmentally
relevant
Non-environmentally
US$8.3 relevant
trillion
Agriculture, industry, manu-
facturing waste, energy and
transportation are the sec-
tors considered to have envi-
ronmental relevance. This
categorisation is based on
previous evidence of impact
and direct relationship to en-
vironmental and natural out-
comes, including emissions.
Green
Stimulus 7
Index
The sectoral breakdown of environmentally relevant stimulus shows that industry gets the most support
from governments, followed by transport and energy. This breakdown has remained relatively constant
over time and reflect the relative sizes and crisis impact.
Figure 3 Breakdown of environmentally
relevant stimulus (total = US$3.5 trillion)
Australia Canada France Germany South Korea
Spain United Kingdom United States Italy Japan
European Commission New Zeland Brazil China India
Indonesia Russia South Africa Mexico
Note: For developing countries, support for energy and waste is included within industry.
Source: Vivid Economics
Green
Stimulus 8
Index
The Green
Stimulus
Index
The Green Stimulus Index examines 17 economies2 and the European Commission to assess the
environmental orientation of their stimulus funding based on:
the scale of funds the existing the efforts which
flowing into green orienta- steer stimulus toward
environmentally tion of those (or away from) pro-
intensive sectors sectors, and environmental recovery.
To date, much of this stimulus funding is set to Where targeted efforts have occurred to specifi-
flow into existing sectors with no attempt to look cally steer funding, they have more often
forward and support their medium and long-term removed incentives toward sustainability,
sustainability and resilience. There remains although a few have added green incentives.
significant scope for governments to more pro-ac- The most notable examples of COVID response
tively ensure this. measures that target environmentally intensive
sectors include significant deregulation, subsidies
In countries with inadequate existing climate and or tax cuts to activities likely to worsen environ-
biodiversity policies, these flows are likely to mental outcomes, including large bailouts for the
reinforce unsustainable trajectories of high aviation sector. Relatively few efforts have been
emissions and loss of nature. All countries have made to support some improvements in environ-
entered this crisis with large sectors of their mental sustainability.
economies still contributing significantly to
greenhouse gas emissions, air and water pollution,
and loss of biodiversity. Many countries also lack
concrete policies to facilitate a green transition in
those sectors. As a result, current stimulus into
those sectors risks reinforcing a status quo that is
significantly tilted toward negative environmental
outcomes, amplifying risks to citizens’ welfare and
the natural world in the near and long term.
2
Our analysis includes ten developed countries and seven developing countries, plus the European Commission.
Green
Stimulus 9
Index
Figure 4 Green Stimulus Index, scaled (-100, 100)
80
60
40
20
Greenness Index
0
UK
Germany France
Spain European
-20 Italy Japan Commission
Australia
-40 Brazil Canada
South
Korea
South
-60
USA Russia Mexico Africa
India
Indonesia
-80
China
-100
Positive Contribution Negative Contribution Index
CHN IDN USA RUS IND MEX ZAF BRA AUS CAN ITA JAP SPA KOR GER UK FRA EC
Agriculture
Energy
Industry
Transport
Waste
Agriculture
Energy
Industry
Transport
Waste
Source: Vivid Economics using a variety of sources, consult Annex II for the entire list of sources
Note: The European Commission score is calculated assuming that the proposed ‘Next Generation EU’ recovery
package and related environmental measures are implemented in full. Its score is provisional. Updated on July 14, 2020.
Green
Stimulus 10
IndexThe negative score in the US is worrying, as it is China too is particularly concerning, given the size
also the country with the largest stimulus package. of its economy and the negative signal it might
The result here is driven by a combination of poor send across developing Asia and the wider Belt
underlying (pre-COVID) policies as well as specific and Road countries. China has a relatively environ-
measures which further undermine a shift to mentally intensive sector base and poor underlying
sustainability. The US has a current policy mix that policy environment, which means its stimulus
means stimulus funds will be generally more tilted efforts will largely reinforce a negative trajectory
toward reinforcing a harmful trajectory, and this has unless concerted effort is made to avoid this. As a
been made much worse by specific stimulus response to COVID, the government relaxed
measures including environmental deregulation in environmental reporting in key industries like
energy, industry, manufacturing, transportation and transportation and industry, streamlined permits
agriculture, and the bailout of the aviation industry for coal mining and extended subsidies for fossil
without green conditions. fuel vehicles. It is worth mentioning that the
government is also expanding an EV subsidy
scheme, which the index scores positively even
though power mostly comes from coal. The
government decided to ban wildlife trading for
specific animal species, which gives it a significant
positive boost to the index score.
Figure 5 GSI score and total size of fiscal stimulus
60
European Commission
40
France
Green Stimulus Index
20 UK
Germany
South Korea
0
Spain 500 1000 1500 2000 2500 3000 3500
Japan
-20 Canada Italy
Australia
Brazil
-40
South Africa
Mexico
India
-60 Russia USA
Indonesia China
-80
Total Stimulus (US$ Billion)
Source: Vivid Economics using IMF Policy Tracker and other sources
Note: Updated July 14, 2020
Green
Stimulus 11
IndexIndonesia and Brazil have demonstrated lenient India’s US$266 billion package appears most
environmental policies combined with large-scale likely to support the current trajectory of its
industries with heavy use of land and forest manufacturing and energy industries. Despite
eco-system impacts. These countries are heavy the announcement of funding for afforestation
agriculture producers, and without strict environ- and some support for solar power, a large propor-
mental policies and enforcement, these sectors tion of India’s stimulus is directed at supporting
remain on a trajectory of high emissions intensity environmentally-intensive industries. A reduction
and large biodiversity destruction. Brazil has often in the stringency of monitoring and approval of
encountered major issues in enforcing forest and environmentally harmful projects risks raising
land use policies. This situation has aggravated the impact of India’s polluting industries.
during the COVID response through a Presidential
decree relaxing land use permits and enforcement. With a more pro-climate baseline across sectors,
Indonesia had loosened permitting restrictions on Italy, Australia, Japan, and Spain also lean nega-
timber producers to stimulate economic activity, tive but to a lesser extent than developing
but this has since been reversed, resulting in an countries with weaker institutional commitment.
improved index score. Indonesia has, however, They benefit from having somewhat better
passed a law that deregulates the mining industry underlying (pre-COVID) policies and environmen-
and provides substantial funds to support tal performance, but are channelling funds into a
state-owned oil and gas, electricity and airlines. mix of sectors, with significant risks of reinforcing
Such policies risk undermining previous commit- existing negative trajectories. They are yet to take
ments to reduce greenhouse gas emissions, measures that ensure stimulus will not undermine
preserve nature and strengthen natural capital, the sustainability and resilience of their econo-
while providing very limited (if any) benefits in mies, with Australia also waiving fees for some
terms of immediate emergency economic stimulus. environmentally harmful sectors and both Italy
and Spain financing unconditional airline bailouts.
Russia, Mexico and South Africa are heavy fossil
fuel energy producers, and their response to However, the overall outlook is improving slightly,
COVID has reinforced their negative environmen- especially in developed countries. Most promi-
tal orientation. Russia relies heavily on the oil and nently, France, Germany, South Korea and Canada
gas sector for exports and overall economic have achieved substantial improvements in their
output, and its response to COVID has supported index score. While most countries are yet to take
that sector further. Since the economic slowdown, the opportunity to use their stimulus packages to
the government has propped up oil prices domes- kick start green trajectories, some countries have
tically and continued to subsidise the energy and placed significant emphasis on ‘greening’ their
industrial sector without green conditions or stimulus packages, resulting in the largest changes
targeted investments in low carbon developments in index scores since the first release of the Green
or programs. Because Russia’s economic activity is Stimulus Index in April.
dominated by environmentally intensive sectors
and it has not made an attempt to tighten fiscal
flows to these sectors, the country’s performance
is low in our index. Mexico has announced consid-
erable funding for its energy sector, with uncondi-
tional support directed towards the refining
industry. Worryingly, South Africa has announced
a number of measures to support its polluting
energy sector, including the reduced use of
renewable energy in response to the drop in
energy demand, as well as a deferral of carbon tax
payments and relaxation of environmental regula-
tions. Mexico has provided little in terms of
conventional stimulus, instead providing additional
support for existing polluting energy and trans-
port infrastructure projects.
Green
Stimulus 12
IndexFigure 6 Current and first release (24th April) GSI scores
60
40
20
Green Stimulus Index
SPA EC
0
CHN IDN USA RUS IND MEX ZAF BRA AUS CAN ITA JAP KOR GER GBR FRA
-20
-40
-60
-80
Last Update: July 14, 2020
Source: Vivid Economics using a variety of sources
Note: Since the GSI first release, the methodology for calculating a country’s underlying environmental impact has been
refined. This chart applies this updated methodology to calculate the current and initial GSI scores. Updated 14 July, 2020
Green
Stimulus 13
IndexBoth France and Canada have successfully The European Commission’s own stimulus pack-
attached ‘green’ conditions to bailouts of environ- age has the most promising prospective environ-
mentally intensive industries. French government mental impact but receives a tentative score as
support for airlines, aviation and car manufactur- the package is yet to be approved. The proposed
ing has been conditional on environmental US$837 billion (€750 billion) ‘Next Generation EU’
requirements. This success, alongside other recovery package is expected to include a host of
measures to support the green transition, results ‘green’ measures aimed at supporting the ‘Europe-
in France achieving the best index score of the an Green Deal’. Specific measures include those to
countries analysed. Canada has also successfully improve the sustainability of agriculture, funding
attached green conditions to support provided by for renewable energy and support for electric
the Canadian Large Employer Emergency Financ- vehicle sales and infrastructure. Financial support
ing Facility, which is dependent on increased to member states is also expected to be accompa-
commitments to climate-related financial transpar- nied by ‘do no harm’ environmental conditions. If
ency. Otherwise, the Canadian stimulus package implemented in full, these environmental initiatives
includes a mix of positive and negative measures, will have a large positive environmental impact, as
resulting in a small negative index score. indicated by the EU’s index score.
Germany and South Korea are leading the way in However, much more is required in order to
providing specific support for ‘green’ projects, kick-start a truly ‘green’ recovery. Aside from the
while the United Kingdom is yet to deliver wide- European Commission’s proposed package and
spread ‘green’ policies. Germany’s latest stimulus recently announced support for the Korean ‘New
package includes a ‘Package for the Future’ worth Deal’, specific ‘green’ measures comprise only a
around US$45 billion, which includes a variety of small proportion of total stimulus. Even Germany’s
measures to support the ‘green’ transition, particu- US$45 billion ‘Package for the Future’ only
larly in the energy and transport sectors. This accounts for around 3% of its total fiscal stimulus.
counteracts the large unconditional bailout of Governments are expected to announce substan-
Lufthansa and other airlines, resulting in a positive tial recovery packages in the coming months,
index score. South Korea has just announced which will present a critical opportunity for the
substantial funding for ‘green’ projects through its inclusion of green stimulus.
‘New Deal’, which includes initiatives to support
electric and hydrogen vehicles, renewable energy
and energy efficiency over the next five years as
part of its ‘New Deal’. The US$48 billion in ‘green’
funding is 16% of total Korean stimulus, the largest
proportion of all countries included in the Green
Stimulus Index and prompts a significant improve-
ment in the country’s index score. The UK has
introduced some positive environmental policies
but these are small in comparison to those
announced in South Korea and Germany. Its
positive index score is based largely on good
underlying environmental performance.
Green
Stimulus 14
IndexArchetype
green measures
Hundreds of policies have been announced worldwide, but only some deliver both environmental and
economic benefits. Below is a toolkit of measures that governments can use to shape the future
environmental impact of their economies for the better (more details are provided in Annex 1).
Corporate bailouts with green strings Subsidies or tax reductions for green prod-
attached: some governments view bailouts as ucts: Tax reductions or rebates are available
public investments that deliver public bene- most broadly across countries in the transport
fits. While these bailouts must clearly deliver sector, targeted at electric vehicle adoption,
immediate benefits in terms of stability of offering consumers refunds or subsidising the
public services, employment and supply cost of adoption upfront by expanding
chains, they can also secure a transition to cash-for-clunker programs and ratcheting up
sustainable and resilient growth. Bailouts can or extending the period of funds available for
achieve this by making public support contin- rebates on EVs. Additional subsidies available
gent upon implementing specific environmen- in the transport sector for electric bicycles,
tal improvements to operations and procure- regular bicycles, and public transit passes. In
ment, and by committing to high-integrity the energy sector, rebates or subsidies are
environmental offsets, enhanced nature-relat- made available to households that install solar
ed financial disclosures, and increased supply panels or choose to purchase electricity from
chain transparency. The recent agreements a renewable energy provider, including tariff
with Austrian Airlines and Air France demon- adjustments, coverage of capital cost, or
strate how governments and corporations can income-qualifying eligibility for residential
meet on common ground. solar. For industry, products which meet
voluntary performance standards are eligible
Investment in nature based solutions and for tax rebates, including home appliances
sustainable agriculture: Land use investments and lighting.
– such as afforestation on degraded land,
sustainable agricultural practices, wildfire Green R&D subsidies: Government spending
prevention infrastructure, efficient water across sectors focuses heavily on R&D
irrigation systems – are ideally suited to tackle subsidies for the transportation and energy
the ongoing crisis because they can be sectors where funds have been created for
deployed in a timely fashion, are transitional, the purpose of innovation in electric vehicle
provide stimulus to particularly vulnerable development and deployment, electric
populations and are resilient to future batteries, hydrogen vehicles, and low-carbon
lockdowns. fuel alternatives. Government grants to
research institutions or private R&D firms for
Loans and grants for green investments: energy include investments in solar, wind,
Direct investment in the form of loans or storage, and hydrogen technologies. R&D
grants towards renewable energy including subsidies to industry and agriculture include
solar, wind, biofuels and hydrogen in the grant funding for the development of low-wa-
energy sector; energy efficient retrofits in the ter use and drought resistance crops, as well
construction sector; active transport infra- as carbon capture and storage (CCS) and
structure or electric vehicle infrastructure in energy efficiency technologies in chemicals,
the transport sector. cement, and steel.
Reinforcing environmental regulation and avoiding deregulation: Although not a traditional
stimulus measure, regulation and deregulation have been a focus area for the COVID response.
Environmental deregulation has been used a stimulus measure in some countries, which have
argued they relieve regulatory burdens to businesses. However, others have reinforced environ-
mental regulation by for example introducing wildlife trading bans and proposing to expand the
coverage of Emissions Trading Schemes to other sectors.
The country notes in Annex 2 include a tracker of the positive and negative
archetype policies that each country has implemented so far. These both highlight
the key driver of a country’s index score as well as identifying gaps in current Green
measures that can be used to pave the way forward for future stimulus measures. Stimulus 15
IndexAnnex I
Methodology
The index is constructed by combining the flow of B is a scaled indicator from -1 to 1 which rates
stimulus into key sectors with an indicator of each countries by level of overall greenness from most
sector’s environmental impact. The impact indica- pro-environmental at 1 to least environmental at -1.
tor assigns a greenness value (positive or negative) . The B value differentiates between underlying
to each sector for every country based on method- sector context (b1) and specific environmental
ology discussed below. The overall Greenness measures (b2). b1 refers to our baseline evaluation
Index is an indicator of the total fiscal spending in of each country using ‘off the shelf’ environmental
response to COVID categorised as either a positive indicators. This captures the a country’s underly-
or negative impact on the environment. The final ing environmental performance. This includes an
index for each country is an average of sectoral evaluation of its rating on multiple environmental
impact, normalised to a scale of -1 to 1. The sectors performance indicators, and the overall country’s
included as relevant due to their historical impact climate target progression. b2 is a consideration of
on climate and environment include agriculture, any COVID response-specific data we have found
energy, industry, waste and transport. that either supports or undermines the baseline
value. It takes a negative value if stimulus support
An estimated 30% of overall global stimulus boosts harmful activities without regard to
funding will have a relevant impact on the environmental targets or deregulates to roll back
environment.3 Despite some targeted stimulus environmental conditions. It takes a positive value
measures to support environmental improvements, if stimulus support advances pro-environmental
overall flows into the sectors of interest remain programmes or includes conditions on environ-
harmful given historic performance of these mental performance.
sectors. To date, a relatively small magnitude of
stimulus measures contain clear pro-environmental Each environment-specific policy is categorised
conditions. A majority of fiscal stimulus measures against positive and negative archetype interven-
currently passed and likely to flow to environmen- tions. Table 1 and Table 2 describe these policy
tally intensive sectors do not have an explicit focus archetypes respectively.
on climate change and environmental goals.
Two components of the stimulus were analysed
including the size of the fiscal flow (F value) to
each environmentally intensive sector and the
overall impact of that stimulus on climate and
environment (B value).
3
This figure comes from totalling all fiscal spending by countries in our analysis and categorising the flows by sector. This value is the percentage of
estimated and actual flows going into the above environmentally-relevant sectors across all countries in our analysis. Our estimate is above recently
published work, including Hepburn et. Al’s estimate of 8% of total funding having either a positive or negative environmental impact. [Hepburn, C.
O’Callaghan, B., Stern, N., Stiglitz, J., Zenghelis, D. (2020). Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?
Oxford Smith School of Enterprise and the Environment, Working Paper No. 20-02 ISSN 2732-4214]. We believe our figure is larger given our analysis is only
of recovery stimulus and not long term fiscal measures that may be introduced in the medium and long term. We categorise all stimulus into agriculture,
energy, industry, transport and waste.
4
Key indicators used for the construction of baseline performance are the Climate Action Tracker (https://climateactiontracker.org/countries/), Environmen-
tal Performance Index (https://epi.yale.edu/), Germanwatch Climate Change Performance Index (https://germanwatch.org/en/CCPI) and progress towards
achieving Sustainable Development Goals (https://s3.amazonaws.com/sustainabledevelopment.report/2019/2019_sustainable_development_report.pdf)
Green
Stimulus 16
IndexTable 1 Summary of positive policy archetypes
Sector Archetype Description
Bailouts with green strings Requiring limits to emissions and waste in return for
attached direct funding.
Nature based solutions Afforestation programmes, restoration of wetlands,
Agriculture or forest management investments.
Loan and grants for green Direct loans or tax rebates and subsidies for low-wa-
investments ter irrigation systems.
Wildlife Trade Ban Making the sale of endangered animals illegal.
Bailouts with green strings Direct loans and guarantees towards energy provid-
attached ers (renewables, nuclear) or oil and gas and coal
with commitments for improvement on emissions or
energy efficiency.
Loan and grants for green Direct investment in the form of loans or grants
investments towards renewable energy including solar, wind,
Energy biofuels and hydrogen.
Green R&D subsidies Grants for research institutes, academic institutes,
and private firms to develop new renewable energy
technologies and systems.
Subsidies or tax reductions Extending tax rebates to households for solar,
for green products making green energy products including utilities
with renewable targets available at a subsidised cost.
Bailouts with green strings Conditions on firms relating to emissions, pollution,
attached supply chain requirements, or compliance with
voluntary agreements or reporting standards.
Loan and grants for green Low carbon or low emissions public infrastructure
investments including CCS projects for industry, energy efficiency
programs for existing buildings, investment in
hydrogen economy and electrification of industry.
Green R&D subsidies Direct grants or loans available to research institu-
tions, academic institutions, and private firms to
Industry develop low-carbon industrial technologies such as
CCS, hydrogen, and electrification.
Subsidies or tax reductions Taxes for the use of primary materials in supply
for green products chain, subsidies offered to firms who undertake
compliance in supply chain.
Green
Stimulus 17
IndexTable 1 Summary of positive policy archetypes (cont.)
Sector Archetype Description
Bailouts with green strings Conditional bailouts to air carriers, car manufactur-
attached ers, or shipping for emissions reduction pledges or
commitment to biofuel or renewable fuel standards
in exchange for loans.
Loan and grants for green Building public infrastructure projects including
investments cycleways, low-carbon rail or transit, public walk-
ways, and railroads with consideration towards
Transport climate mitigation and adaptation.
Green R&D subsidies Loans or research grants available to academic
institutions, research centres, think tanks and private
firms to develop electric vehicles, hydrogen vehicles,
and low-carbon fuel alternatives for shipping,
aviation and vehicle transport.
Subsidies or tax reductions Tax rebates available to consumers for EVs, subsidies
for green products for low carbon transportation including light rail,
developing HOV lanes or low-emission zones fees.
Bailouts with green strings Directing grants or loans to firms which open
attached incinerate waste without provisions for more sustain-
able waste management strategies.
Loan and grants for green Direct investment in recycling, Municipal Solid Waste,
investments waste-to-energy, or methane recapture on existing
facilities or new waste management facilities.
Green R&D subsidies Loans or grants for academic institutions, research
centres, think tanks, or private firms for the develop-
Waste ment of advanced waste management include
waste-to-energy and methane recapture technologies.
Subsidies or tax reductions Tax reductions or rebates for recycling, composting
for green products including buy-back programs or subsidisation of
environmental producer responsibility (EPR) programs.
Source: Vivid Economics
Note: Definition includes examples but may include additional and alternative programs.
Green
Stimulus 18
IndexTable 2 Summary of negative policy archetypes
Sector Archetype Description
Subsidies or waived fees for Waiving, reducing, or directly subsidizing fees
environmentally harmful associated with point and non-point source pollution
activities in agriculture, logging, and timber. Removal of
conservation or preservation laws around forest
management and access.
Deregulation of environmen- Removing, repealing, increasing the quantity of
tal standards pollutants allowed or extending the compliance
Agriculture period for pollution, emissions, or land use in agricul-
ture and forestry sectors.
Environmentally related Loans, guarantees or grants provided to agricultural
bailout without green strings producers including farmers, fishers and cattle ranchers
that do not require improvement in sustainable practices.
Subsidies or tax reductions Introducing subsidies on high emissions agricultural
for environmentally harmful products including cattle and sheep, reducing existing
products carbon taxes or environmental taxes on high-impact
agriculture and harvested wood products.
Subsidies or waived fees for Subsidising utilities, producers, or developers of oil
environmentally harmful and gas or coal production plants, covering the cost
activities of pollution taxes including carbon taxes, delaying
the development or deployment of emissions taxes
for energy producers.
Environmentally harmful Direct investment in coal or oil and gas sector, or
infrastructure investments loans, grants and guarantees made available to
private firms exclusively to build oil and gas or coal
production plants.
Energy
Deregulation of environmen- Removal or elimination of carbon trading schemes,
tal standards increasing the cap on emissions or pollution trading
schemes, decreasing the number of firms required to
participate in emissions trading schemes, removing
mandates for environmental reporting or disclosure,
suspending enforcement of environmental regulation.
Environmentally related Extending loans, grants, guarantees, or other financ-
bailout without green strings ing capacity to oil and gas or coal producers without
conditions on emissions intensity, emissions output,
or energy mix.
Subsidies or tax reductions Subsidisation for consumers or producers of oil and gas
for environmentally harmful and coal including diesel, home electricity, and utilities
products and reducing existing fuel taxes or carbon taxes.
Subsidies or waived fees for Waiving permitting and environmentally-related fees for
environmentally harmful activities mining, construction or other heavy industrial sectors.
Environmentally harmful Direct government investment or procurement of
infrastructure investments high emissions public infrastructure including
Industry factories, data centres, and non-energy efficient
building stock or heating systems
Deregulation of environmen- Removal of reporting or mandatory disclosure of
tal standards environmental impact by industrial firms, suspension
of enforcement of environmental laws and regula-
tions, removal of permit or use requirements for
industry, fast-tracking of environmentally intensive
industrial project development by removing environ-
mental assessmentsTable 2 Summary of negative policy archetypes (cont.)
Sector Archetype Description
Environmentally related Direct unconditional support through grants, loans,
bailout without green strings guarantees, or other financial mechanisms to
high-emissions industrial sectors without require-
Industry ments for efficiency, energy use, or reporting
improvements.
Subsidies or tax reductions Reducing taxes on environmentally intensive prod-
for environmentally harmful ucts including manufactured goods and chemicals
products which have a high environmental impact.
Subsidies or waived fees for Direct subsidisation of combustion engines made
environmentally harmful available to consumers or producers, removal or
activities reduction of the fees related to tailpipe emissions or
fuel taxes.
Environmentally harmful Direct government investment into infrastructure
infrastructure investments supporting polluting transport, such as airports or
car transport infrastructure.
Transport
Deregulation of environmen- Removal of regulations governing the transport
tal standards sector, such as for ships and aviation and largely
relating to emissions.
Environmentally related Direct unconditional support through grants, loans,
bailout without green strings guarantees, or other financial mechanisms to high
emissions transport providers, such as airlines.
Subsidies or tax reductions Reducing taxes on the sale of high-polluting prod-
for environmentally harmful ucts such as automobiles, with no preferential
products treatment of ‘green’ alternatives such as electric
vehicles.
Subsidies or waived fees for The removal of fees relating to the environmentally
environmentally harmful harmful disposal or treatment of waste.
activities
Waste Environmentally harmful Investments into waste infrastructure that does not
infrastructure investments improve the environmental impact of waste disposal
or treatment.
Deregulation of environmen- Removal of regulations governing the disposal
tal standards and/or treatment of waste.
Environmentally related Extending bailouts to waste industries which openly
bailout without green strings incinerate or do not use methane recapture, or other
advanced waste management systems without
requirements for meeting environmental reporting
standards.
Source: Vivid Economics
Note: Definition includes examples but may include additional and alternative programs.
Green
Stimulus 20
IndexThe b2 score is calculated based on the environmental impact of the policy archetype and a specific
assessment of the policy, based on its severity and coverage:
Severity
Each measure is rated on severity from 1 to 5, with one as the least severe and five as the most severe.
The impacts on the environment may be severe in either positive or negative trajectories. Severity
depends on three components: the irreversibility of environmental damage or gain, the concentration or
diffusion of impact on environmental and natural systems, and the level of lock-in to either positive or
negative development resulting from the policy.
An example of a severe negative policy (5) An example of a somewhat severe green policy (3) is
is direct investment in new coal or oil/gas a subsidy for electric vehicles. The avoided emissions
technologies. These projects directly emit by using EV reduces the amount of irreversible
carbon into the atmosphere causing emissions in the atmosphere. Using electricity instead
irreversible damage. Pollution from these of oil and gas avoids direct air pollution and land use
projects disperses into the air becoming a for oil and gas or coal. EV uptake encourages
global externality. Coal and oil and gas increased adoption through positive externalities
assets lock-in countries to harmful trajecto- associated with a network of ownership, encouraging
ries and risk becoming stranded assets. more uptake and subsequently a ‘green’ lock in effect.
An example of a less severe negative policy (1) is a temporary fee suspension for environmentally
harmful activities and recouping those fees afterwards.
Coverage
Each measure is rated on the level of coverage from 1 to 5, with one as the least amount of coverage and
five as the highest coverage. Coverage of a policy is determined by level of directness, the number of
subsectors or individual firms in a sector that will be impacted, and the temporal coverage (how far into
the future will this positive or negative policy exist).
An example of a high coverage An example of a moderate coverage
negative policy (5) is the suspension green policy (3) is a ban on wildlife trade.
of all environmental regulations on A ban on the wildlife trade is a permanent
industry. Removing the monitoring, change in policy and is likely to have
enforcement and compliance of positive impacts on the species directly
environmental standards would traded and indirectly on other species
extend coverage to all firms in the who live in or the share the habitat. The
sector, having both direct effects and wildlife ban will likely not affect all parts
indirect effects. of the agriculture and forestry sector.
An example of a low coverage green policy (1) is a climate-related financial disclosure
requirement for firms generating a certain quantity of revenue. Requiring firms that have
revenue over $100 million or another equivalent excludes many small and medium-sized
firms, resulting in a policy with incomplete sectoral coverage.
Green
Stimulus 21
IndexAnnex II
Country notes
These notes describe the underlying numbers that are driving the index score for each country.
The notes and the index will be updated as more information on the recovery packages becomes available:
1.1 United States
The US has passed a US$2.98 trillion spending package.
Composition of stimulus: The US stimulus package includes substantial healthcare and welfare measures,
payroll protection and direct support for businesses. Specific funding for environmentally relevant sectors
includes $60 billion directly to airlines and cargo carriers in the aviation sector. Another $25 billion has
been allocated to the transportation sector, including transportation infrastructure, shipping, and trucking,
and $23.5 billion has been allocated to support the agriculture sector. Alongside the announced direct
measures, sectoral breakdown of stimulus is possible using the data on the businesses that are receiving
loans, of which a substantial proportion have been allocated to industrial producers.
Insufficient underlying environmental performance, widespread deregulation of environmental standards
and large unconditional airline bailouts drive the negative US index score.
Table 3 Archetype policies announced in United States
Bailouts with green strings attached
Green infrastructure investments
Green R&D subsidies
Subsidies or tax reductions
for green products
Nature Based Solutions
Conservation and wildlife
protection programmes
Subsidies for environmentally
harmful activities
Environmentally harmful
infrastructure investments
Deregulation of environmental standards
Environmentally related bailout
without green strings
Subsidies or tax reductions for
environmentally harmful products
Source: Vivid Economics
Note: Green = positive archetype announced in sector, red = negative measure announced in sector, grey =
archetype not applicable for sector.
5
AP News (2020) https://apnews.com/53954f808f0652463d58728ad64cd5b3
Green
Stimulus 22
Index• Underlying sector context (b1)
Performance on key indicators is highly insufficient in supporting nature and tackling climate change.
• Specific environmental measures (b2)
In the United States, deregulation across all sectors coupled with a lack of environmental conditions on
transportation funding have added negative weights to our baseline. Key policies include:
• A total of US$60 billion in bailout funding • The Department of Agriculture has intro-
has been made available to ten airlines in the duced a recovery measure providing grants to
US. The stimulus was provided without any agricultural producers which undertake the
green conditions, although conditions on production of renewable or bio-fuels.10 This
employee retention and equity stakes have funding amounts to US$100 million and is a
been introduced for some carriers depending ‘green’ measure as it encourages generating
on firm financials.6 The US government has supply for biofuel production, but is a very
warrants on up to 1.9% of shares for any small share of total fiscal stimulus.
airline receiving grants or loans.7 But given
the current US administration, we do not • The US Senate has approved the ‘Great
anticipate these equity stakes, if taken, to be American Outdoors Act’, which is set to
used to drive voluntary compliance to any provide funding of up to US$1.9 billion per
environmental standards that would be set year for maintenance projects administered
by the federal government. by the National Park Service, the Forest
Service, the U.S. Fish and Wildlife Service, the
In the US, announcements of environmental Bureau of Land Management, and the Bureau
rules have been rolled back indefinitely. The of Indian Education. The bill also includes
EPA will be exercising “enforcement discre- permanent funding for the Land and Water
tion” indefinitely through the pandemic. All Conservation Fund.11 As the draft legislation is
firms which have pollutant or emissions yet to be approved by the House of Repre-
discharge are not required to monitor or sentatives, it is not currently included in the
report to the Environmental Protection US index score.
Agency (EPA) at this time.8 On May 15th,
President Trump passed an Executive Order
instructing agencies to prioritise the econom-
ic recovery of the US by waiving or exempting
polluters from any regulations or require-
ments “which may inhibit economic recovery.”9
This deregulatory regime is across all key
sectors and is a major driver of the country’s
negative index score.
6
US Treasury (2020). https://home.treasury.gov/system/files/136/Payroll-Support-Procedures-Form-FINAL.pdf
7
Financial Times (2020) https://www.ft.com/content/fb8ef5a9-2e42-4b6a-acd0-078a1faa0d01
8
The Hill (2020) https://thehill.com/policy/energy-environment/489753-epa-suspends-enforcement-of-environmental-laws-amid-coronavirus
NY Times (2020). https://www.nytimes.com/interactive/2020/climate/trump-environment-rollbacks.html?mtrref=www.google.com&assetType=REGIWALL
9
Columbia Climate Law (2020). https://climate.law.columbia.edu/climate-deregulation-tracker
10
TMF Group (2020). https://www.tmf-group.com/en/news-insights/coronavirus/government-support-schemes/#B
11
United States Government (2020). https://www.congress.gov/bill/116th-congress/senate-bill/3422
Green
Stimulus 23
Index1.2 Japan
Japan has passed a total of US$2.17 trillion in fiscal measures as a response to COVID.12
Composition of stimulus: Japan has announced two stimulus packages, each of ¥117.1 trillion (US$1.08
trillion), with measures including funding for health, welfare and employment protection. Of the support for
businesses, a large share is directed at Japan’s industry and transport sectors.
Japan has announced little in the way of specific environmental measures, so its slight negative index
score is driven mostly by its underlying environmental performance.
Table 4 Archetype policies announced in Japan
Bailouts with green strings attached
Green infrastructure investments
Green R&D subsidies
Subsidies or tax reductions
for green products
Nature Based Solutions
Conservation and wildlife
protection programmes
Subsidies for environmentally
harmful activities
Environmentally harmful
infrastructure investments
Deregulation of environmental standards
Environmentally related bailout
without green strings
Subsidies or tax reductions for
environmentally harmful products
Source: Vivid Economics
• Underlying sector context (b1)
Performance on key indicators is somewhat insufficient in achieving environmental targets.
• Specific environmental measures (b2)
Although it held an online event to discuss shifting the future economic recovery towards green stimulus,
the “June Momentum”,13 Japan has announced little in the way of specific environmental measures. Some
small measures to support a zero-carbon society (US$46 million), such as for solar power generation
facilities, but this is a tiny fraction of Japan’s total stimulus package – much more support is required.
12
IMF Policy Tracker (2020). https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19
13
Climate Change News (2020). https://www.climatechangenews.com/2020/06/01/japan-launch-green-recovery-platform-ministerial-meeting/
Green
Stimulus 24
Index1.3 Germany
Germany has passed a total of US$1.38 trillion in fiscal stimulus.14
Composition of stimulus: Germany has announced a number of measures to support businesses, including
US$835 billion in loan guarantees from the Economic Stabilisation Fund (WSF) and the public sector
development bank KfW. Other measures, including healthcare equipment, hospital capacity and vaccine
R&D spending, as well as welfare measures, have been excluded from the sectoral stimulus. Substantial
support for businesses has also been granted by state governments. Germany’s latest additional stimulus
includes US$45 billion‘Package for the Future’, which will provide substantial support for ‘green’ initiatives.
However, in relative terms, this represents a small proportion of the total fiscal package.
Germany’s ‘Package for the Future’ counteracts large unconditional airline bailouts to result
in a positive index score.
Table 5 Archetype policies announced in Germany
Bailouts with green strings attached
Green infrastructure investments
Green R&D subsidies
Subsidies or tax reductions
for green products
Nature Based Solutions
Conservation and wildlife
protection programmes
Subsidies for environmentally
harmful activities
Environmentally harmful
infrastructure investments
Deregulation of environmental standards
Environmentally related bailout
without green strings
Subsidies or tax reductions for
environmentally harmful products
Source: Vivid Economics
14
IMF Policy Tracker (2020). https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19
Green
Stimulus 25
Index• Underlying sector context (b1)
Performance on key indicators is insufficient, but better than most other countries included in the Green
Stimulus Index. Substantial improvements are required in order to achieve environmental targets.
• Specific environmental measures (b2)
As a part of the economic stimulus passed in Germany, only the transport sector has received targeted
funding. Additional environmental measures have not been introduced.
• The German government has bailed out • At the start of June, Germany announced
three airlines, TUI Fly (US$1.98 billion), additional stimulus including a ‘Package for
Lufthansa (US$9.9 billion) and Condor the Future’ which will provide support to
(US$600 million) without environmental ‘green’ initiatives totalling US$45 billion. A
conditions.15 The Lufthansa bailout includes number of measures have been announced to
ceding a 20% equity stake to the German support the green transition in the energy and
government.16 While the equity stake could transport sectors, as well as some support for
yield ‘green’ outcomes in the future through green agriculture and industry. Specific
its membership of the board, at this time measures include support for renewable
there are no explicit commitments to climate electricity, funding for hydrogen and invest-
or environment goals. For the Greenness ment in rail modernisation, among other
Index, Germany is still providing a bailout measures.17 Aside from the EU’s proposed
without any ‘green’ strings attached. stimulus, this package is the first example of a
large green-oriented recovery package.
However, it still represents only a small
proportion of Germany’s total fiscal stimulus.
15
Transport & Environment (2020). https://www.transportenvironment.org/sites/te/files/Airline-bailout-tracker_8_May_2020.pdf
16
DW (2020). https://www.dw.com/en/lufthansa-accepts-terms-of-eu-germany-rescue-deal/a-53650294
Euractiv (2020) https://www.euractiv.com/section/aviation/news/lufthansa-board-gives-green-light-to-e9bn-bailout/
17
Carbon Brief (2020). https://www.carbonbrief.org/coronavirus-tracking-how-the-worlds-green-recovery-plans-aim-to-cut-emissions
Green
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