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Green economic recovery from corona pandemic
The ongoing economic recession due to coronavirus pandemic has created opportunities for countries to replace the standard growth path with the green growth. There is a renewed effort in many developed and developing countries to adopt a green recovery path in the backdrop of economic recession due to Covid-19. This is about reviving the economy through investment on green technology which will not degrade the environment and exhaust natural resources, but will create jobs. The pattern of growth will rely on investment in the environment as a major driver of economic development. This is opposed to the currently followed growth pattern that destroys environmental resources and emits carbon dioxide (CO2).
Thus, as countries have planned stimulus packages for economic recovery, global leaders have now called for green recovery. The impact of Covid-19 has been devasting on the lives and livelihoods across the world as the economy slowed down. This has reduced emission of CO2 significantly. However, as the economies across the world have started to reopen CO2 emission has also started to increase. Clearly, with faster pace of economic recovery, carbon emissions will also pick up faster. Therefore, many countries have proposed for green recovery by cutting carbon emission while reviving the economy.
Several European countries have put a “European Green Deal” at the heart of corona recovery efforts. The recovery fund of the European Commission amounts to about USD 848 billion so far. This will be invested in coronavirus recovery as well as green programmes to create jobs. The European Union announced that 25 percent of its budget will be reserved for climate action. But whether the recovery package will also set aside 25 percent for climate spending is unclear till now.
Denmark has set its ambition to cut carbon emissions by 70 percent from 1990 levels. It also aims to export clean energy by 2030. Despite coronavirus, the government of Denmark announced its strategy in May 2020 to meet its climate targets including generation of wind power, carbon capture and storage, and improving energy efficiency. The country will also create new jobs by making green investments. Germany has planned a stimulus package worth USD 146 billion till June 2020. This package has a number of green plans. About 38 percent of the stimulus has been allocated for future friendly Germany. It aims for energy transition for a sustainable path. The UK government has also taken initiative to explore green recovery by establishing five working groups who will evaluate recovery measures.
Among the Asian countries, China and South Korea have taken major plans towards green economic recovery. China has introduced the “new infrastructure” concept which will include low-carbon transport, 5G and ultra-high voltage electricity transmission. The country has made a six-year plan during 2020-25 for a low-carbon stimulus package amounting to USD 1.4 trillion. It may be recalled that China’s stimulus package amounted to USD 586 billion during the Global Financial Crisis (GFC) in 2008-09. Of this, about USD 221 billion was for green investments.
South Korea has announced its ambitious “Green New Deal” climate plan to revive its economy from Covid-19. The country plans to invest USD 10.8 billion by 2022 through this deal to boost green energy sector and create thousands of jobs. Under this new plan the country will reduce its dependence on coal and increase renewable energy production to 20 percent by 2030. During GFC in 2008-09, about 80 percent of the Korean stimulus package was allocated for green projects and create about one million jobs in environmentally friendly fields.
In the past, during the GFC in 2008-09 several countries provided stimulus packages for investment in green infrastructure such as public transport, energy efficient public buildings, renewable energy, smart grids, water and sanitation, pollution control, green technology investment and green research and development. Unfortunately, carbon emission after the GFC went back to the pre-GFC period. Investment in traditional infrastructure and increase in consumption resulted in higher CO2 emission and air pollution.
At present while green plans are being laid out along with stimulus packages, many contradictory policies are also being pursued parallelly. One of the most harmful as well as debated one is the subsidy on fossil fuels. In its recent proposal for corona recovery, though the EU is expected to exclude investments in high-polluting infrastructure, there are concerns that this proposal may also include spending on fossil-fuel. South Korea, on the other hand, has kept allocation from its economic relief package for the polluting industries such as aviation and shipbuilding. China will rely on coal for economic recovery which has created concerns among environmentalists.
So, countries will have to make their commitments firm and transparent if they really want to follow a green path. It has been estimated that the removal of fossil fuel subsidies in emerging and developing countries will not only reduce global greenhouse gas emission by 10 percent by 2050 but also increase efficiency of these economies.
Bangladesh is the worst victim of climate change. Given the massive and widespread nature of the impact there should be initiatives at the national level. This will mostly be in areas of strategising, planning and designing efforts to combat the negative impact of climate change and also in resource allocation for the cause.
Bangladesh also has to adopt a green economic path in order to reduce the burden of future environmental cost. It can make a gradual shift towards green growth through investment in the environment for economic recovery and sustainable growth, decent job creation and poverty reduction. There can be a number of areas for intervention to adopt a green growth policy in the context of Bangladesh. These include: green infrastructure such as energy efficient buildings; green energy generation, such as solar energy; energy saving measures for housing; water management, water desalination, treatment of wastewater, solid waste infrastructure to support, clean water; secure alternative water sources, such as rain water; coastal area development and management; reforestation; environment related R&D; public transport, railways, foot and bike paths.
A list of fiscal measures may include tax incentives for investments on energy efficient building; support for energy efficient bulbs; fiscal benefits for installation of solar panels in private buildings; low interest rate for loans to support low carbon technologies; tax rebate for environmentally friendly cars; measures to increase energy efficiency in industry and agriculture; allocation for protected areas and cultural heritage; support for environmental research and development.
Bangladesh’s stimulus package to deal with the impact of Covid-19 amounts to about 4 percent of its gross domestic product. However, there is only an insignificant stimulus for green recovery. The central bank has doubled the size of its refinancing scheme from Tk 200 crore to Tk 400 crore for entrepreneurs who intend to take up green projects. Apart from this no other distinct allocation has been made for green recovery. In fact, large entrepreneurs which are eligible to receive loans from banks at a lower interest rate may well include the polluting industries. This requires close monitoring of the environment authorities. Though Bangladesh is a negligible emitter of CO2, it should plan for a greener economy to prepare for the future. And now is the time when fiscal measures are being undertaken to build back the economy.
Dr Fahmida Khatun is the Executive Director at the Centre for Policy Dialogue.