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Investing in Europe's COVID-19 recovery for the next generation

Investing in Europe's COVID-19 recovery for the next generation
By Renato Roldao, Jerome Kisielewicz, and Yann Verstraeten
Managing Director, ICF China; Vice President, Green Transition for China and East Asia; Deputy Director, ICF Climate Center
Jul 20, 2020

The spread of COVID-19 around the globe has turned our everyday lives upside down. It has exacted an enormous toll on our lives, communities, health systems, livelihoods, and economies. Ironically, the restrictive measures governments have rightly put in place to protect us also mean we face a monumental recession. Can we use the current crisis to reshape our future for the better? Many of us hope the European Union (EU) will take an active lead to bring this about.

The EU’s ambitious lead on how to start the recovery

After several months of the COVID-19 pandemic, the EU has published an ambitious recovery plan. As part of it, the European Commission’s president, Ursula von der Leyen, will spearhead an impressive initiative to repair the economic damage in the wake of the pandemic by launching “Next Generation EU”: a seven-year budget proposal worth €1 trillion combined with a further €750 billion in “reinforcements” to the 2021–2024 EU budget.

Designed to empower the COVID-19 recovery, this concerted action by the EU will help encourage cooperation from the international community and the EU’s external partners. Other leaders around the world are poised to respond, too. Canada has already thrown a hat into the ring and declared its own recovery plan. Similarly, South Korea’s President Moon Jae-in recently introduced a policy of economic recovery based on low-carbon, green initiatives rather than coal. In the United Kingdom, former Prime Minister Gordon Brown recently called on G20 countries to back a $2.5 trillion coronavirus emergency plan to aid “the world’s poorest people.”

The EU is attempting to turn the colossal “challenge of the pandemic into an opportunity” by putting sustainability at the heart of its approach. Yet this recovery plan comes with sustainable strings attached. The question is whether or not these sustainable strings are strong enough to keep a tight hold on the economic recovery while bringing about a strong, resilient future for the EU.

A budget for the future of a green Europe

Following the chaos of the pandemic, the new budget for the future of Europe builds on themes set out in its forerunner: the EU Green Deal (published in late 2019 as a multi-year proposal). The EU Green Deal is designed to reconcile the need for economic growth with action to avert the imminent climate change emergency. Using the EU Green Deal as a “compass,” the COVID-19 recovery plan will “transform our economies and societies to confront climate change.”

Officials quickly pointed out that this recovery plan is designed to “do no harm” to the milestone represented by the EU Green Deal and its important climate change goals.

The EU Green Deal outlines eight priorities for transformative policies:

  1. Increase the EU's climate ambition for 2030 and 2050.
  2. Supply clean, affordable, and secure energy.
  3. Mobilize industry for a clean and circular economy.
  4. Build and renovate in an energy- and resource-efficient way.
  5. Aim for a zero-pollution, toxic-free environment.
  6. Preserve and restore ecosystems and biodiversity.
  7. Transition to a fair, healthy, and environmentally-friendly food system.
  8. Accelerate the shift to sustainable and smart mobility.

To succeed, the COVID-19 recovery plan will need to retain key sustainability elements in the EU Green Deal. At this early stage, the recovery plan upholds the eight priorities outlined above, but it also emphasizes key sustainable aspects which are arguably the most pressing due to the COVID-19 pandemic, including:,

The EU Green Deal and the COVID-19 recovery plan are ground-breaking in their promise of a resilient, prosperous future. Both initiatives provide a pragmatic roadmap for making the EU’s economy sustainable and delivering on all 17 sustainable environmental, economic, and social development goals.

The UN suggests the pandemic has provided an “unprecedented wake-up call, laying bare deep inequalities and exposing precisely the failures that are addressed in the 2030 Agenda for Sustainable Development and the Paris Agreement on climate change.” At a time of fundamental disturbance in our usual policies and social norms, UN representatives argue there’s a perfect opportunity to leverage “this moment of crisis” and set in motion a “profound systematic shift” to a more sustainable economic framework for society and the planet.

Although this shared approach by the UN and the EU seems compelling, not every nation appears to agree. There may be a consensus that the economy needs urgent attention, but there’s some disagreement over what approach governments should take to restart it.

Polarized positions

On the one hand, there is the temptation to make economic growth and job creation the top priority, and to focus on rebuilding on conventional lines where businesses rely heavily on polluting fossil fuels. When the COVID-19 pandemic swept through China, air pollution levels dropped dramatically. But by April, they had already exceeded their pre-crisis levels.

On the other hand, there is growing interest in a new paradigm for business favoring the growth of companies along sustainable lines. Many nations recognize the value of a new growth strategy to transform the EU into a modern, resource-efficient, and competitive economy. The EU Green Deal advocates economic growth through clean, sustainable industries—not fossil fuels. There is a private-sector dimension within the COVID-19 recovery plan which will encourage economic development. This is very different from encouraging unmitigated growth at any cost. Instead it’s about “relaunching the economy [and] does not mean going back to the status quo before the crisis, but bouncing forward.”

The worry is that policymakers could opt for the former of these two polarized positions, but early signals suggest that many nations are behind the EU Green Deal, including members of the Green Recovery Alliance.

Restrictions brought in to halt the spread of COVID-19 gave us an attractive glimpse of how the world might be with cleaner air, fewer emissions, and reduced pollution and noise levels. Fragile natural ecosystems have had some space to breathe and thrive, too. The pandemic brought the most dramatic fall in CO2 emissions the world has ever seen. In early April, daily CO2 emissions dropped by 17% compared to 2019. However, without structural changes, overall CO2 concentration in the atmosphere continues to increase as illustrated by recent calculations from the Scripps Institution in Mauna Loa (Hawaii). It would be useful to usher in a new, sustainable way of working while emissions are still low to help us meet the zero-carbon targets the EU, UN, and other nations have set. The overriding aim is to use the pandemic as a catalyst to “build back better.”

Reasons to trust the green, sustainable route to recovery

Evidence shows that taking the clean, renewable, and sustainable route back to prosperity is not only possible but can hold financial and practical advantages.

A recent study led by the University of Oxford looked at whether COVID-19 fiscal recovery packages accelerate or halt progress on climate change. It considered over 700 stimulus policies and surveyed 231 experts in over 50 countries, and was found to be in favor of green fiscal recovery packages that “seek synergies between climate and economic goals [and] have better prospects for increasing national wealth, enhancing productive human, social, physical, intangible, and natural capital.” These packages were found to create more jobs, to result in higher short-term returns, and to lead to greater long-term savings than customary fiscal stimulus. In addition, these stimulus packages are “shovel-ready” for immediate use.

Many proponents of the green and sustainable route to boosting the economy believe we simply do not have a choice about this. We have to opt for the kind of policy measures contained in the EU Green Deal because returning to our old ways will simply speed up an inevitable rush toward irreversible climate change.

Johan Rockström, director of the Potsdam Institute for Climate Impact Research, maintains that there is no going back to our reliance on fossil fuels and business as usual. If we do, then the next disaster “will only be a matter of time.” He asserts that “the root cause of the COVID-19 pandemic is the unstainable world we have built.”

Professor Rockström argues that we need to stop overusing natural assets (such as the oceans), which is destroying the sensitive natural world on which we all depend. He notes this environmental degradation is directly linked to unpleasant repercussions, such as humanity having less control over diseases. Humanity’s damaging actions have brought about our current position of being part of “the sixth mass extinction of species since the arrival of complex life on Earth, 540 million years ago.” This, and the imminent rise in global temperatures beyond 2°C, constitute serious “tipping points” we need to avoid.

The hope is that as governments worldwide take action to avert the spread of COVID-19, they will similarly take immediate action to stop the even greater crisis of climate change.

Keeping the sustainable strings firmly attached

It is vital that the sustainable elements of the original EU Green Deal and the COVID-19 recovery plan are not undermined as these proposals are approved and rolled out in practice. So much rides on the sustainable strings remaining firmly attached to the economy-boosting policies required to take action. It is important that sustainable credibility is maintained. If Europe adopts such green policies, it is highly likely other countries will want to do the same.

Ursula von der Leyen mentioned there is the motivation to do “whatever it takes” to keep the EU Green Deal and the COVID-19 recovery plan on course. We need von der Leyen to maintain this powerful, active lead, and to encourage other regions to follow.

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Meet the authors
  1. Renato Roldao, Managing Director, ICF China; Vice President, Green Transition for China and East Asia; Deputy Director, ICF Climate Center

    Renato is a climate, energy, and environment expert with nearly 20 years of experience in international climate policy and carbon markets.  View bio

  2. Jerome Kisielewicz, Managing Consultant, Sustainable Finance + ICF Climate Center Senior Fellow

    Jerome leads work in the field of European sustainable and positive impact finance, combining expertise in climate, renewable energy, and biodiversity finance. View bio

  3. Yann Verstraeten, Senior consultant, Public Policy

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