Global Corporations and Politics
Why Green Recovery Is Not Enough

The crisis that humanity is facing is too complex, and its social component is underestimated the most. But when the ship begins to sink, it is necessary to patch all the leaks at the same time. Green recovery must be inclusive, otherwise it wont be green. Perhaps it wont even be a recovery, writes Igor Makarov, Head of the HSE School of World Economy. 

One of the few positive effects of the coronavirus pandemic has been the improvement of the ecology. The lockdown gave the inhabitants of Beijing, Delhi, Bangkok and São Paulo a unique opportunity to breathe clean air, purified water in the canals of Venice and to launch the meme "Nature is healing". The International Energy Agency predicts the largest ever drop in greenhouse gas emissions - by 8% in 2020.

Alas, pollution is recovering as quickly as it once disappeared: for example, in China by mid-May, the concentration of harmful substances in the air exceeded the indicators recorded a year ago - a kind of symbol of the country's return to the old normal. And some environmental problems may be aggravated: for example, in conditions of isolation, people began to use more plastic packaging; the coronavirus will slow down the development of public transport. Despite the reduction of greenhouse gas emissions, their concentration in the atmosphere continues to grow. To prevent the globe from warming to above 1.5-2 degrees Celsius compared with the pre-industrial level, it is necessary to reduce emissions at the same rate annually over the next decade.

In this regard, the direct environmental effects of coronavirus should not be exaggerated. Another thing is important: the pandemic has clearly demonstrated that if we do not deal with global problems, they will take care of us. All leading states focusing on the recognition of the value of human life deliberately admitted huge economic losses. The question now is whether the same logic is to be applied to air pollution or climate change, from which more people die than the coronavirus, and offers no opportunity for vaccination. At the same time, by returning clean air to the cities, the coronavirus intensified the demand for a clean environment. Contrary to sceptical forecasts that environmental problems under the influence of a pandemic will fade into the background, this hasnt happened: discussions about a green future in the world havent lost momentum.

The most important part of these discussions proceeds from the spirit of the well-known maxim Never let a good crisis go to waste. A crisis is a time of change, which can be, to some extent, programmed. The key role here is played by state anti-crisis programmes. So far, most government measures around the world are aimed at saving especially vulnerable citizens from going under, as well as small and medium-size businesses. But gradually, the time has come for recovery measures aimed at supporting those sectors that are designed to bring the economy out of the crisis. The face of the world economy in a decade will largely depend on what sectors it resembles. Will states be oriented toward saving traditional industries or supporting fundamentally new ones that can transition the economy to new priorities, including green ones?

You can make an analogy to the financial crisis of 2008-2009. The boom of renewable energy, green building and clean transport, which has swept the world in the last decade, arose precisely at that time. In the funding provided by the American anti-crisis package, 12% was earmarked for green measures; even more funding was allocated in China (38%), Europe ( 59%), and South Korea (81%). A repetition of this experience (only on a larger scale) is now being requested by scientists from all over the world, as well as public intellectuals and the representatives of non-governmental organisations.  The European Union has heeded the first call; its anti-crisis plan is to accumulate 150 billion euros for environmental purposes. Separate steps are being taken by China, which is allocating a significant proportion of the funds under the anti-crisis plan to the development of green infrastructure (although the coal industry is also supported at the same time).

Green recovery measures are welcome. However, when developing anti-crisis programmes, it is first necessary to understand what crises you face. The anti-crisis packages under discussion are based on the assumption that there are three of them: a health crisis, an economic crisis caused by the pandemic (falling GDP, the bankruptcy of companies and unemployment, upcoming problems facing banks, increasing fiscal deficits and government debt), as well as an environmental crisis. Within the framework of such logic, those areas of government spending that create the maximum multiplier effect for the economy and contribute to solving environmental problems will be optimal. In particular, investments in green technologies and green infrastructure - they were at the centre of green anti-crisis packages 12 years ago and today.

However, one more crisis has been overlooked - the social one. The epidemic and the onset of economic depression have exacerbated the problem of inequality, which has reached its maximum severity. The big brass of modern high-tech business, concentrating areas of prosperity around themselves, have only benefited from a pandemic that has driven the whole world into a digital environment. But a new blow was inflicted on the self-employed, small businesses and traditional industries - and in developed countries, the incomes of those involved in these sectors have stagnated in recent decades. A new wave of anti-establishment protests could easily be expected to emerge from the pandemic, and they began in earnest - so far they have rallied around the fight against racism, but this is only the beginning.

Green anti-crisis measures could be considered satisfactory for the world that came out of the crisis 11 years ago, but today they should be far more encompassing. Not only the economy, but also the welfare state needs to rebuild in a new way as we exit the crisis: as a child of the industrial era, it is hopelessly out-dated in the era of digital monopolies, deindustrialisation, aging populations and growing educational inequality.

Traditional environmental policy instruments aimed at developing green technologies hit the poor. Barack Obama's green policy, which ignored this, was summarily rejected by voters of Donald Trump, who promised to save jobs in traditional sectors. "Yellow vests" in France forced Emmanuel Macron to tone down his ambitious plans to address climate change. After coronavirus, the resistance to the green transformation will only increase. To prevent this from happening, the environmental agenda needs to be maximally linked to the social one. An increasingly polarised world needs progressive taxation - and it can be implemented in the form of a tax on emissions stemming from the consumption of the most wealthy; this tax can be accompanied with elements of an unconditional basic income. In place of the carbon tax or the quota trading system, a carbon dividend may be introduced, which implies a return on payment for emissions to the population. By creating incentives to reduce emissions from everyone, this simultaneously redistributes wealth from rich to poor.

Inclusivity is equally important at the international level. Thus, in the European Union, it is planned to introduce a carbon border tax on imported goods in order to protect domestic producers suffering from carbon regulation from unfair competition from companies from abroad. Of course, this will help European business, but the result will be more expensive products for European citizens, and most importantly - a blow to one of the most important fruits of globalisation - the transfer of technology from the developed world to the developing world. But isnt it better to concentrate on managing emissions along the entire value chain instead of destroying the chain itself? A green technology transfer to the developing world would give European consumers access to clean goods from abroad, and about a billion people in Asia, Latin America, and parts of Africa would have the chance to make the transition from poverty to the middle class on cleaner consumption patterns. This is much more important to prevent a climate catastrophe than achieving the symbolic goal of carbon neutrality within the EU, which now accounts for only 10% of global emissions.

The crisis that humanity is facing is too complex, and its social component is underestimated the most. But when the ship begins to sink, it is necessary to patch all the leaks at the same time. Green restoration must be inclusive, otherwise it won’t work. Perhaps the recovery can be green, too.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.