Economic stimulus packages established by governments around the world will be vital to sustain economic activities, jobs and livelihoods over the next few years. The current crisis reduced the already low interest rates at which advanced economy governments can borrow, while it increased the risk premium paid by many private sector players as well as countries perceived as riskier. In that context, governments are in a position to drive a massive wave of investment to stimulate the global economy, either by using their own balance sheets or reducing the cost of private capital through various forms of financial support. Indeed, trillions have already been committed to support immediate economic stabilisation and longer-term economic recovery.
We should learn the lessons from the COVID-19 crisis, which has dramatically demonstrated the unpreparedness of the global economy to systemic risks, despite early warning from scientists. In 2019, climate change was linked to at least 15 extreme weather events costing between USD1-10 billion each. The IPCC predicts that such extreme weather events will likely become more frequent with the rise in global temperatures. Investing in high-carbon activities without climate conditionality in the hope that it will help the global economic recovery would only prepare the ground for future systemic crises. Economic stimulus packages should contribute to building a healthier, more resilient, net-zero-emissions economy.
Clean energy, low-carbon and digital solutions are fundamental pillars of a better economy: they can improve the quality of the air we breathe, enhance our quality of life, limit the occurrence of climate-related disasters. They can also underpin new businesses and new jobs: according to IRENA, the cumulative gains for transforming the energy system could reach USD98 trillion between 2020 and 2050, greatly exceeding the related investment costs (USD15 trillion). Putting 7 key priorities at the heart of the economic stimulus package can deliver this future.
- Unleash massive investment in renewable power systems
- Boost the construction sector via green buildings and green infrastructure
- Support the automotive sector while pursuing clean air
- Make the second wave of government support to businesses conditional to climate commitments
- Provide targeted support to innovative low-carbon activities
- Accelerate the transition of the fossil fuels industry
- Don’t let carbon pricing and regulations spiral down
The Energy Transitions Commission is a coalition of leaders from global organisations across the energy, industry, finance and civil society sectors.