A ‘green recovery’ can bring long-term ben­e­fits to us all

The Chan­cel­lor’s ac­tions are a step in the right di­rec­tion, but time will tell if there’s more to come, writes Karen Turner

The Herald - - Herald Voices - Pro­fes­sor Karen Turner is Di­rec­tor of the Cen­tre for En­ergy Pol­icy at the Univer­sity of Strath­clyde.

THE Covid-19 pan­demic has caused un­prece­dented world­wide eco­nomic dis­rup­tion with na­tions, com­mu­ni­ties and en­tire in­dus­tries brought to a stand­still. Faced with the prospect of its most sig­nif­i­cant re­ces­sion ever, the UK Govern­ment re­sponded with a res­cue pack­age de­signed to keep busi­nesses and jobs se­cure whilst the worst im­pacts of the virus hit the econ­omy.

Now, as at­ten­tion moves from the ini­tial res­cue to longer-term recovery and re­form, many are ad­vo­cat­ing for a “green recovery” and the Chan­cel­lor seems to have lis­tened – at least to some ex­tent given this week’s an­nounce­ment on en­ergy ef­fi­ciency.

But given the events of the last few months, do we per­haps have a new un­der­stand­ing of the real im­por­tance of en­sur­ing we have a healthy econ­omy where peo­ple have jobs and op­por­tu­ni­ties? It’s there­fore cru­cial to ev­i­dence that a “green recovery” can bring pros­per­ity for peo­ple – some­thing that gov­ern­ments and pol­i­cy­mak­ers will be fo­cused on now more than ever.

Given this con­text, the Cen­tre of En­ergy Pol­icy at the Univer­sity of Strath­clyde (CEP) and the Bel­lona Foun­da­tion have pub­lished a spe­cial joint pa­per that as­sesses the near and longer term eco­nomic im­pacts of dif­fer­ent types of ac­tions that could be classed as “green”.

The ex­am­ples we con­sider here fo­cus on three cur­rent or planned cli­mate pol­icy ac­tions: res­i­den­tial en­ergy ef­fi­ciency gains; fa­cil­i­tat­ing the elec­tric ve­hi­cle roll­out; and in­vest­ing in car­bon cap­ture and stor­age (CCS) in­fra­struc­ture.

Us­ing our econ­omy-wide mod­el­ling we con­sid­ered the net im­pacts of these three ac­tions and as­sess how, when and to whom dif­fer­ent costs and ben­e­fits ac­crue, in­clud­ing con­sid­er­a­tion of whether the ben­e­fits re­alised could be used to bal­ance the in­evitable costs faced by some parts of the econ­omy or to pub­lic bud­gets.

By as­sess­ing the im­pli­ca­tions and con­se­quences of these pol­icy ac­tions, we can sup­port the Govern­ment in as­sess­ing how they stack up against other po­ten­tial stim­u­lus so­lu­tions. This is es­sen­tial when the fo­cus of the Govern­ment is likely to be on cre­at­ing jobs, restor­ing in­comes and earn­ing power and, more gen­er­ally, get­ting the econ­omy back on track.

We show that cli­mate ori­en­tated poli­cies such as those we con­sider here can de­liver the type of short-term em­ploy­ment, real in­come and GDP im­prove­ments that will be cru­cial for near-term eco­nomic recovery from the pan­demic. For ex­am­ple, mak­ing homes more en­ergy ef­fi­cient could not only pro­vide jobs to those in­stalling mea­sures but could also stim­u­late the wider econ­omy by al­low­ing peo­ple to save on their en­ergy bills and spend their money on other things. Some­thing which the Chan­cel­lor and the Trea­sury have clearly un­der­stood.

In the case of elec­tric ve­hi­cles, we find that mak­ing the in­fra­struc­ture up­grades needed, along with a widescale switch in fu­elling from petrol and diesel to elec­tric­ity, could ac­tu­ally bring ben­e­fits to the wider econ­omy, along with cleaner air and emis­sion re­duc­tions.

In the last case, we show that in­vest­ing in CCS in­fra­struc­ture could im­me­di­ately cre­ate thou­sands of jobs, a cru­cial way to stim­u­late the econ­omy. Im­por­tantly, though, this could also lay the foun­da­tions for a wider CCS in­dus­try that may play a key role in re­duc­ing emis­sions in high­value in­dus­tries over the com­ing decades and to evolve the role of the oil and gas in­dus­try.

While we usu­ally con­sider stim­u­lus ac­tions as govern­ment spend­ing only, our anal­y­sis iden­ti­fies that a com­bi­na­tion of pol­icy in­ter­ven­tions, regulatory changes and govern­ment in­vest­ment could be used to stim­u­late ac­tiv­ity in the UK econ­omy. We also show that dif­fer­ent net zero ac­tions can con­trib­ute in com­ple­men­tary ways, for ex­am­ple pro­vid­ing GDP ex­pan­sion, job cre­ation and re­turns to the pub­lic purse at dif­fer­ent times through­out the mid-cen­tury tran­si­tion time­frame. How­ever, our anal­y­sis also shows that much will de­pend on how ac­tions are de­liv­ered and paid for.

We know there will al­ways be a trade-off when pol­icy de­ci­sions come with a sig­nif­i­cant bill. For ex­am­ple, any large up-front in­vest­ment ac­tiv­ity can in­tro­duce price pres­sures and crowd out other ac­tiv­i­ties. In the net zero con­text in par­tic­u­lar, this might in­crease en­ergy prices where in­vest­ments are re­cov­ered through con­sumers’ bills.

This could have a neg­a­tive im­pact on those who al­ready struggle to pay bills and could con­strain any stim­u­lus that re­lies on in­creased con­sumer spend­ing. Given cur­rent fuel poverty lev­els in the UK, this is some­thing which needs to be se­ri­ously con­sid­ered if a so­cially just en­ergy tran­si­tion is to be de­liv­ered.

But cru­cially, what sets these ac­tions apart from, for ex­am­ple, road build­ing is that they can de­liver es­sen­tial foun­da­tions for re­al­is­ing deep emis­sion re­duc­tions over the com­ing decades whilst also aid­ing near-term eco­nomic recovery; a cru­cial win-win that, if de­liv­ered in the right way, al­lows us to pro­tect the pros­per­ity of peo­ple to­day and for fu­ture gen­er­a­tions.

So the Chan­cel­lor’s an­nounce­ment this week is a step in the right di­rec­tion. Time will tell whether there is more to come.

We know there will al­ways be a trade-off when pol­icy de­ci­sions come with a sig­nif­i­cant bill

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