COVID-19 stimulus packages 'doing more harm than good' to environment

16th July 2021

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Public money spent rescuing economies from the impact of COVID-19 is set to do more harm than good to the environment, new research suggests.

The study by Vivid Economics found that just $1.8trn (£1.3trn) of the total $17.2trn in stimulus packages announced by governments to date will have a net positive impact on the environment and green sectors.

This is around a third of the $4.8trn that is going to environmentally intensive parts of the global economy, casting doubt on the promises made by many world leaders to “build back better” from the pandemic.

The findings also show that COVID-19 stimulus packages will have a net negative environmental impact in 20 of the 30 economies analysed, with Russia doing the most damage, and Denmark the least.

“Nature has been particularly neglected, with fewer than 10 of the countries we studied investing in nature-based solutions such as reforestation or wetland restoration,” said Jeffrey Beyer, economist at Vivid Economics and lead author of the study.

“We can only build back better sustainably if we protect the climate and nature. Unfortunately, it is impossible to justify the fact that public stimulus money is doing more harm than good to our climate and biodiversity, which underpin our economy.”

The study involved analysis of the G20's COVID-19 stimulus packages, and those of 10 additional national economies. How their spending will impact the environment is shown below:

Despite the net negative impact on the environment, the study found that 17 countries, including the US, UK and Norway have, improved the ‘greenness’ of their stimulus packages in recent months.

The findings were published on the same day that the International Energy Agency (IEA) released a report revealing that global electricity demand is growing faster than renewable energy capacity.

It suggests that electricity demand will rise 5% this year, with almost half the increase met by fossil fuels, notably coal, which risks pushing CO2 emissions from the electricity sector to record levels in 2022.

“Renewable power is growing impressively in many parts of the world, but it still isn’t where it needs to be to put us on a path to reaching net-zero emissions by mid-century,” said Keisuke Sadamori, the IEA's director of energy markets and security.

“As economies rebound, we’ve seen a surge in electricity generation from fossil fuels. To shift to a sustainable trajectory, we need to massively step up investment in clean energy technologies – especially renewables and energy efficiency.”

Image credit: iStock

Graphic credit: Vivid Economics

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