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Here’s How to Stimulate the Global Economy in a Climate-Protective Way

Just one year ago, I stood in a remote village in India watching the lights go out at dark, only to flicker back on a few minutes later for the first time, enabling shops to remain open, children to study, and households to cook a hot meal safely.  Before The Rockefeller Foundation’s Smart Power initiative and the construction of a solar powered micro-grid in this village in the state of Bihar, the businesses and homes here would have been shut or burning dirty and expensive fuels.  I saw the promise of distributed renewable energy in this community, and how it could be used to solve two persistent problems: enabling billions of people left out of the modern economy to build a future that would benefit us all while cutting the rising carbon emissions that are causing catastrophic rises in sea levels, storms, and disease.

When Covid shut down India, and the world, the promise of building thousands more solar powered micro-grids seemed to evaporate. While I realize reliable, renewably powered electricity might seem irrelevant to many focused on an economic recovery from this crisis, it actually is the key to a truly global, green recovery – a recovery that lifts up communities that have been locked out of the opportunity we take for granted every day.

In April 2009, President Barack Obama attended the G20 Summit in London just as the United States and the rest of the world faced the greatest economic crisis since the Great Depression.  Together, those world leaders in London and in other meetings that year joined forces to set in motion, as they called it, an “unprecedented and concerted,” fiscal expansion to stimulate growth.  That and other decisions, according to President Obama, “marked a turning point in the G20’s effort to prevent economic catastrophe.” But critics say it wasn’t big enough because for the most part middle class and low income families were left further behind, growing inequity and instability.

This weekend, Saudi Arabia will host the G20 leaders, some in person and others virtually, amid another moment of economic devastation. Covid-19 has not only killed more than [1.2] million people and infected another [48] million, it’s pushed 435 million deeper into poverty and erased $28 trillion in growth.  Although, global economies have so far taken monetary and fiscal measures—some estimates suggest at least $15 trillion in commitments thus far—the recovery has so far proven insufficient to the crisis at hand and the one that looms ahead, the existential threat of climate change. Indeed, this weekend and in the months ahead, global leaders need to come together behind a global green recovery to revitalize growth, create millions of jobs and prevent a climate disaster.

To date, current stimulus spending has understandably sought to protect public health and provide financial support to those in need during the pandemic.  As the world transitions from trying to control the pandemic to stimulating economic growth, they will, as nations have in the past, invest a great deal in infrastructure. That makes sense: in the short term, infrastructure investments crowd in private investment and create jobs. In the medium-term, the availability of reliable infrastructure boosts the productive capacity of countries and provides the fundamental basis for prosperity.

But not all infrastructure investments are equal.  Although some organizations like the EU have set targets for green investment, too often, as the Organization for Economic Cooperation and Development has observed, most countries fail to balance green and non-green spending, risking further environmental degradation with every dollar, Euro, riminbi, peso and yen spent. Another issue is that because emerging and low-income countries lack the social safety nets to protect the vulnerable and the fiscal flexibility to stimulate their economies, the Covid-19 crisis has drained dollars from the Global South and makes a balance of payments crisis likely.

Given the depth of the current economic crisis and risks in the recovery, the world must act and act together in a different way.  The response to the 2008 financial crisis is a good guide but we should learn the lesson that more is better.  A decade on, the world is more divided economically, and it is clear that without the same kind of concerted action, the pandemic will widen inequality in emerging and low-income countries and the usual infrastructure investments in oil and gas would hasten a climate emergency.  The good news is that technological breakthroughs in renewable energy offer new opportunities for investment that open the doors to opportunity for billions without risking the planet, and at a lower cost than new fossil fuel reliant infrastructure. Renewable energy projects are labor-intensive, which is good for local jobs, and can be developed far quicker, thereby opening up a new recovery and development pathway for low-income countries worldwide.

Ten years ago, the world escaped a harrowing crisis by thinking big and working together.  Today, a globally coordinated green stimulus would not just avoid economic disaster, it would put the world on a more stable footing and make progress against climate change. Rather than going it alone, and returning to a status quo of inequality and vulnerability, this moment is a unique opportunity to come together and to set out a cohesive multi-year plan for a green recovery that supports all countries and all people and saves the planet.

 


This post originally appeared on Dr. Rajiv J. Shah’s LinkedIn. Head over to his profile to subscribe to his monthly newsletter.

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