Less than a fifth of recovery spending plans is green, UNEP report reveals

Only 18 per cent of recovery spending announced by leading economies can be considered green, despite commitments made by countries to invest in a sustainable future, according to research led by UNEP and the University of Oxford.

The Global Recovery Observatory report, which analysed data from the 50 largest economies, found that of $14.6tn allocated to Covid-related fiscal rescue and recovery efforts in 2020, only $368bn was green, with a few high-income countries accounting for the majority of this.

“Despite positive steps towards a sustainable Covid-19 recovery from a few leading nations, the world has so far fallen short of matching aspirations to build back better,” said Brian O’Callaghan, lead researcher at the Oxford University Economic Recovery Project and the report’s author.

“But opportunities to spend wisely on recovery are not yet over. Governments can use this moment to secure long-term economic, social, and environmental prosperity.”

The world is reeling from the economic fallout caused by the pandemic, with global GDP having contracted by 3.5 percent in 2020. Governments have said that their measures aimed at boosting the economy will also go towards tackling climate change by cutting greenhouse gas emissions.

According to the report, the main area of spending was clean transport, making up a quarter of all investments, through electric vehicles subsidies, public transport capacity increase as well as cycling and walking infrastructure.

Low-carbon energy came in second, representing a fifth of green spending. The report also shows that there is an emerging interest in green hydrogen, particularly from Germany and France.

Green spaces and public parks also feature prominently in recovery plans, mainly thanks to a US policy for restoring national parks and China's policy to prevent water, soil and air pollution. Regarding China’s policy, O’Callaghan said that the details were still unknown, which meant that its exact impact remained to be seen.

According to the findings, countries having announced the largest spending compared to their GDP and with the greenest spending include France, Germany, Denmark, Norway, Finland and Poland.

Countries that are not investing in a sustainable recovery include South Africa, Thailand, Malaysia, Egypt, Saudi Arabia, Argentina, Portugal, Nigeria, Peru, Iraq, Mexico, the Netherlands, and the Philippines.

Asked how much of government spending should be green, Cameron Hepburn, professor of Environmental Economics at the University of Oxford said it depended “on the endowments of different countries”. For example, a country that is already very rich in natural capital should concentrate in protecting and conserving these assets, while a poorer country with high levels of carbon emissions and pollution should focus on cutting these back. In certain sectors, countries should consider if promoting private investment would yield better results.

“One thing that's very clear is that the percentage of spending that should be brown [spending that increases fossil emissions], at this point in human civilisation, given the targets we have, is very clearly zero,” he told media at a press conference on Wednesday, adding that two to three per cent of total recovery spending falls in that category. The remaining investments, while considered to have a “neutral” impact on the environment, contribute to maintaining a “unsustainable status quo”.

The Global Recovery Observatory is a live open source database designed to monitor the environmental, social and economic impact of policies that governments are adopting to stimulate their economies. Currently, 50 countries are featured and another 30 will be added by the end of March. 

The tool aims to help governments “understand how other nations have been spending green to follow suit” and for citizens to “hold leaders to account”, O’Callaghan said.