7 Priorities to help the Global Economy Recover

15th May 2020 by Emma Goring

7 priorities to help the global economy recover while building a healthier, more resilient, net-zero-emissions economy

Overview

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. Development finance institutions will need to play a crucial role in ensuring that such action extends to developing countries facing higher risk premiums.

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 US$1-10 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.

The Energy Transitions Commission is a coalition of leaders from global organisations across the energy, industry, finance and civil society sectors. Their companies and organisations have been hit by the economic downturn, but they continue to be committed to building a better economy. This should be one that enhances the health of people and ecosystems, and that builds our resilience by better anticipating and mitigating risks. In particular, it is vital to reinforce action to address the climate change related risks, by achieving net-zero greenhouse gases emissions by mid-century and driving sustainable economic prosperity.

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 US$98 trillion between 2020 and 2050, greatly exceeding the related investment costs (US$ 15 trillion).

Governments have the choice, the power and the responsibility to build this new economy faster with businesses and civil society. We believe they can do this and help the global economy recover by putting 7 key priorities at the heart of economic stimulus packages. These are:

  1. Unleash massive investment in renewable power systems
  2. Boost the construction sector via green buildings and green infrastructure
  3. Support the automotive sector while pursuing clean air
  4. Make the second wave of government support to businesses conditional to climate commitments
  5. Provide targeted support to innovative low-carbon activities
  6. Accelerate the transition of the fossil fuels industry
  7. Don’t let carbon pricing and regulations spiral down

View the full report here: https://bit.ly/ETC_recov