Economic Stimulus Should Reward Front Runners on Sustainable Development
By Oshani Perera, April 9, 2020
As governments around the world earmark billions of dollars in unprecedented stimulus packages and ask whether it will be enough to avoid a long and difficult recession, another important question comes to mind: how can we ensure these stimulus packages include targets on environmental performance, social cohesion, and economic governance?
In the short-term, it is correct to target stimulus spending on emergency responses, healthcare, food security, jobs, and keeping small businesses alive, as the humanitarian aspects of the pandemic are and will continue to be devastating. But as countries start to flatten the curve, not using this large injection of public spending to trigger better sustainability performance is a missed opportunity.
Trying to spend a lot of money quickly doesn’t leave much time for rigorous analysis of wise spending. Policy-makers and central banks have little space for systemic thinking on how to prioritize or where more spending can optimize value-for-money for society as a whole. Thankfully, evidence to this effect already exists. Our work on Sustainable Asset Valuation (SAVi) has shown that investments in sustainable infrastructure can increase labour income, productivity, and GDP.
Performance targets are useful, as they allow for human ingenuity and invite companies built around maximizing profits to be innovative in how they achieve the required performance. Passing a share of the performance challenge to those receiving public support may increase the likelihood that the post-COVID-19 recovery phase will benefit people and the planet alike.
What might such targets look like in practice? Here are a few suggestions:
- Tie cash injections into airlines, shipping, and cruise lines to carbon targets.
- As countries set up national health funds, target secondary health care services for lower-income communities and improve the handling of medical waste within national boundaries.
- Require the automotive sector to step up sustainable mobility.
- Ask banks to increase lending to green and sustainable enterprises through green and sustainability-linked loans.
- Mandate public agencies to ensure spending on infrastructure is tied to sustainable design, energy efficiency, waste reduction, and green technological innovation.
- Aim direct payments to farmers at performance on clean water and increased biodiversity.
- Prohibit all market participants from using stimulus money to buy bonds issued by fossil fuel firms.
Reducing the immediate impact of disrupted supply chains and job losses is critical, especially as the pandemic begins to spread in lower-income countries and the full cost of the human and social catastrophe begins to reveal itself. In the long run, stimulus spending, the likes of which the world has never seen, will only make a difference if sustainable development is put front and centre.
In other words, as the initial crisis ebbs and the focus moves to propping up consumption, providing low-cost credit, and bailing out strategic industries, there must be no compromise on sustainability. Letting this emergency funding be used to trade off on climate, biodiversity, jobs, education, healthcare, and cybersecurity will be a grave mistake.