Vivid Economics: Greenness of Stimulus Index

Green Stimulus Index

Credit: Vivid Economics

Out of 17 major economies, the United States' economic recovery has the largest scale risk of supporting sectors that are harmful to the environment.

Across 17 major economies, announced economic stimulus packages will pump approximately USD 3.5 trillion directly into sectors that have a large and lasting impact on nature. These flows present an opportunity to support these sectors through the current COVID-19 crisis, while increasing their sustainability and resilience in the face of the parallel climate and biodiversity crises. So far, government responses have largely failed to harness this opportunity, disregarding the broader sustainability and resilience impacts of their actions.

In 13 of the 17 countries considered, potentially damaging flows outweigh those supporting nature. Of the more developed countries, the United States stands out as the largest scale risk, with $479 billion USD providing unrestricted support to sectors proven to be environmentally harmful in the past amidst several rollbacks on environmental regulation. Australia, South Korea, Japan, Germany and Spain join them on the negative side, owing largely to the existing negative impacts of their environmentally-intensive sectors, and their lack of decisive action to ensure stimulus supports a more sustainable transition.

The ‘Next Generation EU’ recovery package is set to be the most green stimulus package to date. Initial proposals suggest substantial and sustained positive impacts for the climate and nature with a host of specifically targeted measures including policies to reduce dependence on fossil fuels, enhance energy efficiency, invest in preserving and restoring natural capital, among others. However, as the package is yet to be approved by the European Parliament, the Commission’s index score remains provisional.

Regardless of economic structure or past environmental performance, each country has the opportunity to steer their stimulus package to support nature and the climate. Governments have the opportunity and responsibility to ensure short-term emergency measures lead to a better more resilient future. Nature has suffered a pandemic-like crisis for over a century. Human activity has accelerated the rate at which plant and animal species are becoming extinct by a factor of over 100, and paved the way for a growing climate crisis. To date, the global economic response to the COVID-19 crisis is set to reinforce this trend. However, there is an opportunity to act decisively now to prevent irreversible damage to nature and dramatically lower future costs of protecting the planet. In solving one crisis, we cannot ignore another.