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Tackling Climate Change and the COVID-19 Pandemic Crisis

Tackling Climate Change and the COVID-19 Pandemic Crisis Economy Near Us (XLI)

The issue of climate change has been a global concern in recent years. Based on the theory that global warming is caused by human activity, in the context of industrialization in the last century, governments, corporations, non-governmental organizations, international actors, have actively engaged in an unprecedented effort to mitigate the negative effects of greenhouse gases and to reduce emissions.

These steps were catalyzed by the 4 agreements[1] that drew attention to the seriousness of the phenomenon. The latest, the Paris Agreement, signed in 2015, sets out the current strategy for fighting climate change, imposing as targets the reduction of greenhouse gas emissions by 50% by 2030 and to “zero” by 2050.

According to climate change advocates[2], reducing pollutant emissions is an urgent issue. This urgency stems from the fact that the damage caused by the high level of greenhouse gases on the environment is considered irreversible.

Furthermore, they favor the spread of diseases and damage people’s health, cause rising sea levels (and coastal erosion) and threaten island populations, generating climate migration, producing floods, fires, cyclones. It is estimated that about 2/3 of the world’s population is affected in one way or another by these changes. In terms of climate migration, according to the World Bank, by 2050, more than 140 million inhabitants of the Earth may be displaced by the extreme natural phenomena caused by global warming.

All this means economic costs and lower living standards for the population. 

Stepping up the fight against climate change due to the pandemic 

The COVID-19 pandemic has put our social life and economies in a new perspective. It changed how we interact, our habits, the way we carry out our activities. On the other hand, in economic terms, it has led to the closure of businesses, rising unemployment and reductions in incomes.

In close connection with this, governments have allocated significant resources to the health system and to support companies and employees. These consisted in postponing the payment of taxes and fees, paying the hours not worked by employees due to the pandemic from the budget, subsidies and others. All this has led to rising deficits and public debt and put pressure on tax systems.

In this regard, the main problem that governments will have to answer, in the context of the current pandemic, in the following period, is how the economies will recover.

As economic theory shows, in times of crisis it is necessary to increase public investment. These boost aggregate demand, create jobs and generate economic growth.

From this perspective, public investment in “green” projects can be an extraordinary vehicle in the economic recovery and can allow public budgets to contribute more than ever to achieving the goal of reducing greenhouse gases.

In relation to the latter, we must say, in recent years public resources have been considered insufficient for the scale of climate change projects. In this context, special attention was paid to private sector involvement.

In this regard, the UN and other international organizations have provided information and launched guides for companies and financial institutions on how to adopt sustainable business models, financing instruments have been developed, such as green loans, green bonds and so on. However, in 2020, the total size of the green finance sector amounted to $350 billion, less than necessary.

The main impediment in its development was the belief, among private actors, that investments in sustainable development involve high costs and are uncompetitive. 

Climate change needs large-scale investment 

Reducing the effects of greenhouse gases requires significant changes in many fields of activity. This involves replacing the use of fossil fuels (coal, oil, natural gas), which are pollutants, with renewable energy, introducing energy efficiency measures, stopping deforestation, replacing CO2-emitting raw material extraction and refining in industry and others.

The transition to renewable energy needs high investments in solar and wind energy – photovoltaic and wind turbines, for example –, biomass energy, geothermal energy and hydropower. The goal is that this renewable energy to increase its share from below 20% today to over 85% by 2050.

With regard to energy efficiency, which involves reducing energy consumption, it aims to switch to the use of electric vehicles, to replace personal vehicles with public transport, building products with lower energy consumption and so on.

All of these investments would have net benefits. Beyond the positive impact on the environment, human health and quality of life in general, renewable energies are said to involve lower costs than the use of fossil fuels or nuclear energy.

All this requires a high consumption of financial resources. It is estimated that, by 2030, spending on the switch to clean energy would be $6.3 trillion annually (almost 7% of world GDP). Several countries seem to have already adopted such a position. Although in the midst of a pandemic, the European Union, for example, has announced that its economic recovery strategy will include significant investments in climate-related projects, in the context of the Green Deal, in the following period.

In conclusion, as several observers point out, the current COVID-19 pandemic crisis should not be an impediment, but a great opportunity to step up the fight against climate change. 

References 

[1] Bjerde, A. (2021), Pandemic Recovery is an Opportunity to Step Up Climate Change Action in Europe and Central Asia, available at: https://www.worldbank.org/en/news/opinion/2021/04/15/pandemic-recovery-is-an-opportunity-to-step-up-climate-change-action-in-europe-and-central-asia.

[2] Engström, G., Gars, J., Jaakkola, N., Lindahl, T., Spiro, D., Benthem, A.A. (2020), What Policies Address Both the Coronavirus Crisis and the Climate Crisis?, available at: https://link.springer.com/content/pdf/10.1007/s10640-020-00451-y.pdf.

[3] Podesta, J. (2019), The climate crisis, migration, and refugees, available at: https://www.brookings.edu/research/the-climate-crisis-migration-and-refugees/.

[4] Schnabel, I. (2020), Never Waste a Crisis: COVID-19, Climate Change and Monetary Policy, Speech at the “Sustainable Crisis Responses in Europe” virtual roundtable, organised by the INSPIRE research network, 17 July 2020, available at: https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200717~1556b0f988.en.html.

[5] Volz, U. (2020), Investing in a Green Recovery, available at: https://www.imf.org/external/pubs/ft/fandd/2020/09/investing-in-a-green-recovery-volz.htm

 

[1] We refer to the United Nations Framework Convention on Climate Change (UNFCCC) (1994), the Kyoto Protocol (1997), the Copenhagen Accord (2009) and the Paris Agreement (2015).

[2] We say “advocates” because, although there is an international consensus, there are opinions that argue that global warming is not based on human activity but occurs naturally, in the context of the cyclical evolution of the Earth. For a presentation of them see Lăzescu A. (2019), Cultul Schimbărilor Climatice și apostolii săi, available at: https://www.contributors.ro/cultul-schimbarilor-climatice-%C8%99i-apostolii-sai/.

 
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OEconomica No. 1, 2016