Green Recovery Plans More Effective Than Return-To-Normal Stimulus
Analysis commissioned by the We Mean Business coalition and conducted by Cambridge Econometrics, shows that green recovery plans boost income, employment and GDP better than return-to-normal stimulus measures, with the added benefit of reducing emissions.
In all geographies modelled (global, the EU, Germany, Poland, the UK, USA and India), green recovery plans were found to be more effective than return to normal stimulus approaches that reduce VAT rates and encourage households to resume spending
The analysis models a five point ‘green recovery plan’ and a ‘return-to-normal’ plan each at an equal cost to government. The green recovery plan includes a (smaller) reduction in VAT and:
- Public investment in energy efficiency
- Subsidies for wind and solar power
- Public investment in upgrading electricity grids
- Car scrappage schemes in which subsidies are only provided to electric vehicles
- Tree planting programmes
Both recovery plans provide immediate boosts to output and employment, but the impact is consistently larger in the green recovery plan.
Director, European Corporate Leaders Group (CLG Europe)
Key Findings
The green recovery plan in the EU would result in 2 million more jobs by 2024. Whilst a green US recovery would deliver nearly 1 million more jobs than a return-to-normal plan.
Globally, there would be 7% reduction in greenhouse gas emissions reduction by 2030 if the five point green recovery plan was implemented.
While not enough to be consistent with the Paris Agreement, the reductions delivered by a green recovery plan would provide a starting point for further policy.
Of the five green stimulus measures, car scrappage schemes to boost EV sales would drive the greatest jobs and GDP growth up to 2030.
For maximum impact green recovery plans need to be tailored to specific economies. For example, in Germany, a car scrappage scheme could boost the economy while simultaneously creating jobs. It could also reduce emissions by 12-14% if combined with measures to increase energy efficiency and the use of renewables.
Tree planting schemes are effective at creating jobs in countries with the available land, accounting for 10% of the additional GDP and 27% of the additional employment in India and half of the new jobs in Poland.