Reconstructing Green Economies in the Aftermath of COVID-19

The 21st century has been heralded as one that will redefine the contours of human civilization. In the first two decades of the millennium, the twin wheels of unconstrained growth and rapid industrialisation, generously oiled by the powerful forces of technology and globalization, generated massive developmental gains for economies all over the world. However, as we entered the 20th year of the millennium, the formidable repercussions of the COVID-19 pandemic brutally jolted the development model of modern economies.  As policymakers struggle to devise an economic reboot, the process must begin with the singular realisation that we cannot and should not restore the pre-COVID-19 world. It was a world built on fragile, precarious and unsustainable foundations. The pandemic serves as a wake-up call to address the vulnerabilities of the existing development paradigm and rebuild a robust and resilient one.

Case for a Green Recovery

Latest research by Nobel laureate Joseph Stiglitz and leading climate economists Nicholas Stern and Dimitri Zenghelis shows that a green recovery will not just be beneficial for combating climate change but will also offer the best economic returns for government spending.1 The key economic challenges of a COVID-19 recovery plan will pivot around job creation and large-scale demand revival. Both can be effectively manoeuvred by deploying green strategies. Investment in green infrastructure, spanning from energy-efficient retrofits to climate-resilient construction, can be a policy win-win as they offer short-term economic benefits as well as long-term climate dividends.  A 2017 study points out that every $1 million in spending generates 7.49 full-time jobs in renewable infrastructure, 7.72 in energy efficiency, but only 2.65 in fossil fuels.2 Thus, green infrastructure spending could provide a powerful solution against widespread unemployment woes. In a similar vein, investment in green physical capital such as forest cover, green cover within cities including community gardens and parks, and landscape restoration projects could create new jobs and preserve biodiverse habitats at the same time. Such projects would be ideal at this juncture as they do not require specialised training, have minimal planning and procurement requirements, and most facets of the work meet social distancing norms.3 Furthermore, investment in such projects is also aligned with the climate policy of most countries and will help them achieve their Intended Nationally Determined Contributions (INDCs). For instance, India has committed in its INDC to create an additional carbon sink of 2.5 to 3 billion tonnes of carbon dioxide through additional tree cover by 2030.4

An emerging trend that coincided with the pandemic, and also perhaps got exacerbated by it, is the decline of the fossil fuel industry. The oil, gas and petrochemical industry, particularly in the United States, has been facing a long-term systemic decline.5 These industries are likely to exploit the pandemic to prevent their collapse by securing regulatory rollbacks and direct government bailouts. However, this must not be allowed to happen. Rather, the pandemic provides an opportunity to initiate the phase out of the fossil fuel industry and ramp up of the renewable sector in economies all over the world. Recent advancements in renewable technology, decline in cost of renewable resources, and downturn in global energy prices provide a conducive policy environment to scale up the sector.6

Another sector with high economic and climate-friendly potential is electromobility. As countries all over the world lift lockdowns and reopen their economies, private vehicle usage is likely to witness a surge as it presents the safest option given the contagious nature of the virus. This trend must be leveraged by giving additional incentives to consumers purchasing electric vehicles. The United Kingdom (UK) government is leading on this front by promoting e-bikes, e-scooters and electric vehicles as the preferred mode of transport in a post-COVID-19 world.7

How Green was India’s Stimulus Package?

2020 has hardly hit the half-year mark but India has already witnessed a series of unforeseen natural crises. With cyclone Amphan ravaging Eastern India, forest fires and heatwave hitting the North and a locust attack in Western India, the country is in desperate need of a revival strategy that can simultaneously address the pandemic and the mounting climate emergency. However, the ₹20 lakh crore Atmanirbhar Bharat stimulus package launched by the Indian government hardly had any green elements that could propel the Indian economy towards a sustainable recovery.

The stimulus package acknowledged infrastructure as one of the five key pillars of the economy, but did not earmark any funds for energy-efficient and climate-resilient infrastructure. Meanwhile, the UK government has launched a £3.6 million programme to retrofit homes with improvements such as better insulation, low-carbon heat and alternative power sources as a part of its economic recovery initiative.8 India, too, could have made substantial environmental gains by leveraging the stimulus package to promote energy efficiency in the residential sector, but no such initiative was included in the stimulus package.

On the other hand, the Indian government made an announcement allowing entry of private players in commercial mining of coal, thereby ending its monopoly in the coal mining sector. The announcement was a predictable one as the government had already passed a bill to that effect in Parliament on 12 March 2020, a few days before the lockdown was announced.9 At a time when most countries are enacting laws and earmarking funds to phase out coal, the government’s decision to give a boost to the most polluting fossil fuel is a massive let down. The rationale offered by the Indian government to support its decision is that it will boost domestic production, reduce coal imports and promote competition and transparency in the sector. However, the fundamental idea of injecting money in a sector that will fuel the climate emergency is not just economically unsound, but also self-destructive.

The renewable energy sector was also largely ignored in the Indian recovery package even though solar energy costs have never been more favourable.

What can Still be Done?

While the stimulus package most certainly did not live up to the expectations of those supporting a green economic recovery, there is still a lot that can be done to salvage the Indian economy’s green ambitions. It has unlikely that another fiscal stimulus will be injected into the economy by the government in the near future, but India already has a large suite of diverse policies which can be enhanced to achieve a high economic and environmental impact. For instance, the Faster Adoption and Manufacturing of Electric Vehicles II (FAME II) scheme could be leveraged to address the twin goals of job creation and promotion of electromobility in cities across India. Under the scheme, the government had earlier announced an outlay of ₹10,000 crore to boost the number of electric vehicles in India.10 The scheme also calls for the construction of 2,636 charging stations in 62 cities across the country. Another green step that is likely to increase the competitiveness of electric vehicles as well as raise government revenue is the increase in taxes on petrol and diesel. A back of the envelope calculation suggests every ₹1 hike in excise duty on petrol and diesel boosts the central government’s tax revenue by about ₹14,000 crore.11

Under the Atmanirbhar Bharat package, an additional allocation of ₹40,000 crore (over and above the budget estimate of ₹61,000 crore) was made for the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) programme.12 If a part of these funds could be utilised for creating green jobs, it could go a long way in catalysing India’s green recovery. Research shows that MNREGA projects such as soil and landscape restoration, check dam or stop dam construction, tree plantation, land terracing, silt application, restoration or desilting of ponds, etc have a positive environmental and economic impact.13 These projects, as stated earlier in the essay, are often well-aligned with local skills, require minimal training and can thus be implemented even within a short timeframe. They can thus play a pivotal role in accelerating India’s green recovery.

Conclusion

COVID-19 has crystallised the age-old tussle between economic and environmental policies. In the most dramatic and unimaginable way possible, it has demonstrated the pitfalls of adopting a development model that decouples economic growth from social and environmental parameters. As India’s economic recovery gathers momentum, we must not fall for the allure of short-term strategies and revert to unsustainable economic policies that make us vulnerable to unforeseen crises such as pandemics and natural disasters. The pandemic offers an ideal opportunity to course correct; we must capitalise on this opportunity and re-build a robust and resilient economy.

Endnotes


[1] Hepburn, Cameron, Brian O’Callaghan, Nicholas Stern, Joseph Stiglitz, and Dimitri Zenghelis. “Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?.” Oxford Review of Economic Policy 36 (2020).

[2] Garrett-Peltier, Heidi. “Green versus brown: Comparing the employment impacts of energy efficiency, renewable energy, and fossil fuels using an input-output model.” Economic Modelling 61 (2017): 439-447.

[3] See supra note 1.

[4] “India’s Intended Nationally Determined Contribution: Working Towards Climate Justice,”

United Nations Farmework Convention on Climate Change, https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/India%20First/INDIA%20INDC%20TO%20UNFCCC.pdf

[5] Pandemic Crisis, Systemic Decline: Why Exploiting the COVID -19 Crisis Will Not Save the Oil, Gas, and Plastic Industries (Washington, DC: Center for International Environmental Law, 2020), 2,  https://www.ciel.org//srv/htdocs/wp-content/uploads/2020/04/Pandemic-Crisis-Systemic-Decline-April-2020.pdf

[6] Christiana Figueres and Benjamin Zycher , “Can we tackle both climate change and Covid-19 recovery?,” Financial Times, May 7, 2020, https://www.ft.com/content/9e832c8a-8961-11ea-a109-483c62d17528

[7] Roger Harrabin, “Electric bikes could help people return to work,” BBC, May 18, 2020,  https://www.bbc.com/news/business-52711992

[8] “Mayor of London leads the way in making homes fit for the future,” Press Release, Februray 12, 2020, Office of the Mayor of London, accessed 20 May 2020, https://www.london.gov.uk/press-releases/mayoral/mayor-introduces-programme-to-update-london-homes.

[9] “Parliament passes law to open coal sector for commercial mining,” The Economic Times, May12, 2020 https://economictimes.indiatimes.com/news/politics-and-nation/parliament-passes-law-to-open-coal-sector-for-commercial-mining/articleshow/74596892.cms?from=mdr

[10] Malyaban Ghosh, “How FAME 2 scheme aims to promote the use of electric vehicles in India,” Livemint, March 12, 2019, https://www.livemint.com/auto-news/how-fame-2-scheme-aims-to-promote-the-use-of-electric-vehicles-in-india-1552352972259.html

[11] Nikunj Ohri, “Government Hikes Taxes On Petrol And Diesel By Rs 10-13/Litre,” Bloomberg Quint, May 6, 2020, https://www.bloombergquint.com/economy-finance/government-hikes-taxes-on-petrol-and-diesel-by-rs-10-13litre

[12]“Nirmala Sitharaman’s 5th tranche covers MNREGA to health and education and more,” The Indian Express, May17, 2020, https://indianexpress.com/article/business/economy/finance-minister-nirmala-sitharaman-fifth-tranche-economic-package-announcements-6413918/

[13] “Esteves T, Rao K.V, Sinha B, Roy S.S, Rai B.B, Rao I.B, Sharma N, Rao S, Patil V, Murthy I.K, Srinivasan J, Chaturvedi R.K, Sharma J, Jha S.K, Mishra S, Singh A.B, Rakhroy H.S, Rai S, Sharma R, Schwan S, Basu K, Guerten N, Porsché I, Ranjan N, Tripathy K.K & Ravindranath N.H, 2013. Environmental Benefits and Vulnerability Reduction through Mahatma Gandhi NREGS: Synthesis Report, Ministry of Rural Development and GIZ, New Delhi.”

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