Covid-19 and Climate Change

Conclusions from the Smith School of Enterprise and the Environment, Oxford University, England

The COVID-19 crisis represents a dramatic shock to the global economy that will affect progress on climate change in multifaceted ways. The biggest driver of the long-term impact on climate is through fiscal recovery packages, along with possible shifts in power within and across national and international institutions. Green fiscal recovery packages can act to decouple economic growth from GHG emissions and reduce existing welfare inequalities that will be exacerbated by the pandemic in the short-term and climate change in the long-term. Short-term reductions in GHG emissions resulting from lockdowns will themselves have minor long-term effects, unless they facilitate deeper and longer-term human, business, and institutional changes. Urgent rescue packages have been necessarily ‘colourless’ and focused on preserving liquidity, solvency, and livelihoods, but their climate impact is also unlikely to be positive.

Five policy recommendations,plus one item specific to low and middle-income countries (LMICs) that are well-placed to contribute to achieving economic and climate goals. These are:

— clean physical infrastructure investment,
— building efficiency retrofits,
— investment in education and training to address immediate unemployment from COVID-19 and structural unemployment from decarbonisation,
— natural capital investment for ecosystem resilience and regeneration
— clean R&D investment.

For LMICs, rural support spending is another high-value policy item, with clean R&D investment less vital. National governments differ significantly in their economic, social, and environmental priorities, and recovery packages will reflect these priorities, with different consequences for the climate.
Several other insights emerged from the survey. Many climate-positive policies were perceived by our respondents to have high overall desirability; most climate-negative policies had relatively low desirability. This was true even for climate-positive policies that took more time to implement. Long-run multipliers of climate-positive policies were found to be high, reflective of strong return on investment for government spending. Given the uncertainty in the future waves of the pandemic, flexibility and timeliness will also be important considerations. Finally, appropriate policies differ by
national context.

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