Guess what? Building a better world will also speed economic recovery

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As we emerge from this global crisis we have an unprecedented opportunity to create a better world, a healthier world, a happier and fairer world, and a low carbon world. It turns out this also represents better value for money than not doing so.

Many governments are considering how to rebuild their economies once the pandemic is brought under control, and there’s no shortage of voices calling for revival packages to be in line with pre-pandemic commitments to solve the climate and extinction crises.

Normally it takes around 25 years to transform any industrial sector and all its associated value chains. But we’ve now seen how fast things can move when they have to; here’s how our big chance can speed up action on the other crises.

The International Energy Agency (IEA) is saying that the top three categories of investments for governments to consider in their economic stimulus packages are energy and resource efficiency, upgrading technology, and infrastructure. Here’s why:

Energy efficiency

The key advantages  of implementing energy efficiency and resource efficiency programs for governments wanting to stimulate and revive their economies are:

  • They create new jobs and quick upsurge in economic activity in labour-intensive sectors, especially amongst SMEs and sole traders
  • They can convert short-term benefits into long-term improvements such as increased competitiveness and reduced greenhouse gas emissions
  • They can do so at scale and speed by utilising existing programmes and designs, eligibility criteria and contracts
  • Building retrofits and technology upgrades will reduce energy bills for householders and businesses, which they need as cash is scarce
  • Policymakers can combine high goals for energy efficiency with other infrastructure rollout programs e.g. in public transport
  • Programs can come with sufficient incentives to attract high uptake without greatly increasing costs and risks

In the United States and Europe alone, more than 3.3 million people worked in the energy efficiency industry before the pandemic, with the majority employed by small and medium-sized businesses.

According to the IEA research, policies targeting the buildings and construction sector yield the greatest macro-economic impacts because most countries have great need of new buildings and renovations of existing ones.

In addition they have large and local value chains, and investment can improve housing, schools, hospitals and municipal facilities.

Around 60 per cent of expenditure on home energy efficiency retrofits is to pay workers so the benefits in terms of job creation compared to other types of stimulus programs are greater.

Cash for clunkers

The replacement of inefficient technologies with more modern and efficient ones has similar benefits. Governments can introduce replacement schemes – sometimes called “cash for clunkers” – which come with incentives, directly to consumers or through manufacturers and retailers.

They can include vehicles, boilers, appliances, motors, drives and digital devices. If combined with a circular economy approach, they can simulate jobs and economic activity at both ends of the chain: manufacturing and recycling.

Programs using this approach should use well-established energy efficiency standards and labels to make sure that the highest efficiency products are provided, says the IEA.

The evidence for success comes from the United States Obama administration. The 2009 economic stimulus scheme gave rebates to 680,000 consumers to replace old vehicles with new ones with the largest rebates going for more efficient vehicles to increase the proportion of energy efficient sales. It resulted in 380,000 vehicle sales brought forward from the future.

Similar schemes were introduced after the global financial crisis in other countries such as France, Germany and the UK, but not all included favouring high-efficiency new vehicles. More below.

Large-scale infrastructure projects

Large-scale infrastructure projects can create many more jobs per dollar spent and also use local value chains.

Examples of projects which support energy efficiency include smart grids, electric-vehicle charging, next-generation digital connectivity, public transport infrastructure, cycle lanes and pedestrian zones, and LED street-lighting upgrades.

Street light poles can double as electric-vehicle charging stations, and include 5G telecommunications infrastructure.

The IEA cites the example of India’s Street Lighting National Program which upgraded around 11 million street lights with efficient LEDs and employed 13,000 people.

How to design the perfect policy

The report linked to the above, which evaluated previous recovery packages in relation to sustainable development emphasises these challenges for governments:

  1. Policies need to be designed to send long-term price signal that carbon-based energy is expensive compared to energy efficiency and renewable energy, despite the fall in the price of oil.
  1. Governments must resist the temptation simply to protect existing jobs and industries as they were prior to the crisis. They must build jobs for the future that we want to see.
  1. Crucially, perverse subsidies, especially to fossil fuel companies and airlines, must be eliminated as a complete waste of public money.

Lessons from the past

Energy efficiency and the clean economy had a vital role to play in countries’ recovery from the last economic crisis.

The UK‘s 2009 (Labour Party) Budget included £1.4 billion (A$2.7 billion) low-carbon investment

program. This focused on energy efficiency grants and financial support for renewable energy, mainly for offshore wind and small-scale technologies owned by households and small businesses (microgeneration), plus a Low Carbon Investment Fund.

The United States invested $11 billion (A$17.3 billion) in building upgrade programs which delivered twice that amount in energy cost savings and over 200,000 jobs.

Austria introduced a subsidy of €100 million (A$170 million) for the thermal retrofitting of private residential and commercial buildings which covered up to 40 per cent of investment costs for commercial buildings, or up to 20 per cent for residential buildings and mobilised a total investment of about €650 million (A$1108 million).

Germany introduced green measures worth about €3.8 billion (A$6.5 billion) which included energy efficiency and renewable energy programs for educational buildings – in the KfW Building Refurbishment program. They also invested €620 million (A$1057 million) in railways and €430 million (A$733 million) in waterways.

France‘s post-2008 crash recovery scheme invested in sustainable infrastructure in the context of the longterm Grenelle plan, promoting the installation of renewable energies by state-owned energy company EDF, and extensive investment in new rail and subsidies for building refurbishment.

It’s important though that we learn other lessons from the recovery packages of 10 years ago: many countries also invested in roads, fossil fuel power stations and other polluting infrastructure. This time around these should be avoided in favour of sustainable, low carbon infrastructure and the circular economy.

Europe’s challenge

EU president Ursula von der Leyen wants to see the bloc’s Green New Deal at the heart of the economic stimulus for the recovery, although she must face down calls from some members – the coal-heavy Czech Republic, Hungary and Poland – to drop the European Green Deal.

The deal aims for Europe to reach net-zero by 2050. Ursula Woodburn, head of EU relations for Corporate Leaders Group (CLG) Europe is in agreement: “the point will be to make sure that any [recovery] stimulus is a Green Deal stimulus,” she has said.

The European New Green Deal means every EU law and regulation will be reviewed to bring them into line with the goal of net-zero emissions, and no business or industry will be untouched.

The European Commission originally wanted to tackle three big challenges at the same time: the climate crisis, the need for a growth strategy to address the fourth industrial revolution, and to provide citizens with the skills needed to operate in a restructured economy.

The deal will now help to solve a fourth crisis: the economic chaos caused by the pandemic.

Let’s create a better world

Previous recovery stimulus packages were not designed to address underlying structural deficiencies in national economies, but the current crisis has underscored the urgent need to change the way we run our societies in order to align them with our values.

As we emerge from this global crisis we have an unprecedented opportunity to do this to create a better world, a healthier world, a happier and fairer world, and a low carbon world.

It beholds every citizen needs to hold its government to account to ensure they do so.

David Thorpe is author of the books Energy Management in Buildings and the new One Planet Cities. He also runs on line courses such as Post-Graduate Certificate in One Planet Governance. He is based in the UK.

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