KEY POINTS

  • Oxford surveyed over 200 economists and policymakers on the coronavirus recovery
  • Respondents consistently said "green" policies were best for the economy
  • Addressing climate change vs harming the economy is a false choice

An Oxford University survey of more than 200 economists and economic officials has suggested that the impending plans from governments across the world to stimulate their economies in the face of the coronavirus pandemic could be boosted by investing in climate-friendly “green” policy programs.

The survey, to be published in the forthcoming Oxford Review of Economic Policy and co-authored by Prof Nicholas Stern, Prof Joseph Stiglitz, and Dimitri Zenghelis, queried central bank officials, finance ministry officials, and other economic experts from G20 countries on the relative performance of 25 major fiscal recovery archetypes across four dimensions: speed of implementation, economic multiplier, climate impact potential, and overall desirability.

"We identify five policies with high potential on both economic multiplier and climate impact metrics: clean physical infrastructure, building efficiency retrofits, investment in education and training, natural capital investment, and clean R&D.”

The respondents gave some of their highest ratings on the economic outcomes to “green” policies like clean energy investment and retrofitting energy-inefficient structures, while the unconditional airline bailouts just issued by the United States rated poorly across every metric.

Government spending has historically been a key element of any economic recovery, as economic crashes are where the government typically becomes the “lender of last resort.” When investment in the market slows down, governments are the only entities who can spend enough to truly stimulate it, as federal governments can deficit-spend with little short-term harm compared to the carnage a continued economic freeze can inflict. From 1930 to 1933, the United States experienced negative GDP growth as it suffered from the Great Depression, but beginning in 1934, a year after the New Deal was passed, American GDP grew by 10.8%, then 8.9% in 1935, and 12.9% in 1936.

Blindly spending money is not enough to properly stimulate an economy, it matters how it gets spent, and the fact that there are still hundreds of New Deal programs in place today, including major programs like Federal Deposit Insurance Corporation (FDIC) and the Federal Housing Administration (FHA) is additional proof of its success. As humanity heads further into a 21st century defined by increasing natural disasters caused by climate change and a major economic crash triggered by the coronavirus pandemic, the importance of governments building effective programs and institutions that can endure into the next century becomes more and more paramount.

While much of the climate change debate has been centered around the supposed choice of combating a warming planet or hurting the economy, surveys like this prove that to be a false choice that drives policymakers to value protecting the status quo, as Brian O’Callaghan and Prof Cameron Hepburn detailed in their writeup of the survey: “After previous crises, our research found that governments have tended to turn towards brown or ‘colourless’ stimulus policies over those that are green. This has been, at least in part, due to a perception that the economy should trump climate action in times of crisis.”

The survey reveals that five policies have widespread support as smart economic investments, in addition to aiding the long-term fight against climate change, and the authors state that these five are “Clean physical infrastructure investment,” “Building efficiency spending for renovations and retrofits,” “Investment in education and training,” “Natural capital investment,” and “Clean R&D spending.”

The world finds itself at a tipping point where new investments are needed to build a sustainable future, and the economists and policymakers surveyed “show that there is every reason for climate strategy to be top of mind for policymakers as they shape stimulus packages in the coming months. The senior economists we surveyed viewed green stimulus measures as among the most beneficial for the economy.”