An outline of the case for a 'green' stimulus
11 February 2009
Governments need to commit US$400 billion by summer to ‘green’ measures that tackle economic crisis
Governments need to include spending on ‘green’ measures in their packages for tackling the global economic crisis in order to address the growing threat of climate change, according to a report published today by former members of the team that produced the landmark report on ‘The Economics of Climate Change: The Stern Review’.
The researchers from the Grantham Research Institute on Climate Change and the Environment and the Centre for Climate Change Economics and Policy (CCCEP) conclude that about US$400 billion should be spent worldwide on ‘green’ policies and investments which also help economic recovery and lay the foundations of sustainable low-carbon growth. The report, ‘An outline of the case for a ‘green’ stimulus’, points out that this sum represents about 20 per cent of the US$2 trillion, or 4 per cent of global gross domestic product, that governments might spend in the next 18 months on fiscal stimulus packages to lessen the economic downturn.
The lead author of the report, Dr Alex Bowen, who joined the Grantham Research Institute on Climate Change and the Environment last autumn from the Bank of England, said: “Governments around the world need to commit by this summer to a strong ‘green’ element in their economic recovery plans to deal urgently with both the current economic crisis and the growing climate crisis. Our assessment shows that US$400 billion spent globally in the next 18 months on green polices and investments, such as smarter use of electricity, will help us to deal with the current economic crisis, create jobs and tackle climate change.”
Professor Lord Stern of Brentford, a co-author of the report who chairs the Grantham Research Institute on Climate Change and the Environment and the Centre for Climate Change Economics and Policy, said: “With billions about to be spent by governments on energy, buildings and transport, it is vital that these public investments do not lock us for many more decades into a costly and unsustainable high-carbon economy. The rich industrialized countries need to show leadership this year by committing to reduce their greenhouse gas emissions by at least 80 per cent by 2050, compared with 1990, and their economic recovery plans need to be consistent with this target.”
The report examines the economic case for both fiscal stimulus packages and ‘green’ expenditure. Specific measures and investments are assessed, on a scale from 1 to a maximum 3, in terms of timeliness, long-term social return, positive lock-in effects, domestic multiplier and job creation, targeting areas with slack, and time-limitedness and reversibility.
Dr Sam Fankhauser, a co-author of the report and a member of the UK Committee on Climate Change, said: “We have systematically assessed various investments and policies that have been proposed to aid economic recovery and promote low-carbon growth. The most timely and targeted measures include those that promote smart energy-efficient public buildings and homes, and switching to cleaner types of transport.”
Dr Dimitri Zenghelis, a co-author of the report and senior visiting fellow at the Grantham Research Institute on Climate Change and the Environment, said: “It is clear that ‘green’ investments are not luxury items that should be put off until after the current economic crisis is over. Our assessment shows that many of these measures fit the criteria for stimulating recovery, and we hope that governments will judge their merits in the same way that we have.”
Notes for Editors
The Grantham Research Institute on Climate Change and the Environment was launched at the London School of Economics and Political Science in October 2008. It is funded by The Grantham Foundation for the Protection of the Environment.
The Centre for Climate Change Economics and Policy (CCCEP) is hosted by the University of Leeds and the London School of Economics and Political Science (LSE). It was officially launched at the University of Leeds on 27 January 2009. The Centre is funded by the UK Economic and Social Research Council and Munich Re.