Should the government use Coronavirus as an opportunity to create a green economy?

(Picture: World Economics Forum)

By Gemma Longman – Contributor

Whilst there was some discussion of investing to create a green economy during the 2008 financial crisis, little was done, with politicians instead advocating for prioritising the speed of economic recovery. Governments funded schemes that damaged the environment, in the aim of having the fastest possible recovery, and between 2008 and 2009, only 16.3% of worldwide government spending was invested in policies that boosted the economy, whilst aiming to reduce environmental damage. Some countries passed laws making environmental impact assessments optional in the name of a sooner monetary return, providing long term investment to projects without being aware of the environmental damage that could continue well after 2008. In failing to attach investment to ‘green strings’ – funding on conditions that will benefit the environment, governments worldwide further entrenched the economy’s reliance on sectors with large amounts of carbon emissions. With more information now available on the scale of the threat that the climate crisis poses, it brings forward one question – should the government use the Coronavirus pandemic as an opportunity to create a green economy?

Professor Hepburn of Oxford University has stated that the main reason further green measures were not implemented in 2008 was because there was a lack of “shovel-ready” projects and willpower for change. These projects would be ones that involved large government investment that would prioritise both employment and long-term economic growth. Their study came up with more than 700 stimulus policies that can grow the economy whilst creating a greener Britain. Such policies include building electric vehicle charging ports and insulating draughty houses to save energy. Others have suggested investing in public projects such as building more solar panels and wind turbines. With thoroughly researched projects that have both economic and environmental benefits, as well as more political motivation to implement green measures, the government should be using this period of investment to fund green projects. This would help to permanently transition the economy through providing long-term funding for positive changes in society that would help to entrench a more climate friendly economy in the future.

Another way in which the economy could be transformed to benefit the environment would be to restructure supply chains. The coronavirus pandemic has exposed the UK’s reliance on sourcing products from other countries, as governments were slow to contact the relevant British manufacturers and only one British company, Don & Low, were able to produce the fluid-repellent material used to make medical gowns. The problems with PPE have strengthened existing arguments to begin decreasing the UK’s reliance on globalization, and a switch to relying more on local supply chains would indirectly help the environment through reducing the carbon emissions omitted during transport. To create these new supply chains, the government should encourage and fund public sector bodies such as councils, hospitals and schools to source their goods locally whilst building up the manufacturing abilities of smaller domestic businesses. Theoretically, such a transition would make the economy less vulnerable to future international supply shocks alongside reducing carbon emissions, limiting the threat from multiple types of future crises.

The current pandemic has provided a great opportunity to transform the economy through the decreased demand for flights and energy facilitating change in individual sectors. For years, academics have argued that an economic ‘degrowth’ was necessary for the economy to transition to one that focused on the wider impact of companies and not only profit. This theoretical strategy was reliant on a voluntary decline of financial gain, but it could be argued that changes during the pandemic have made such a ‘degrowth’ possible through forcing some of the most damaging sectors into inactivity. 

One such sector that now has the opportunity for change is the aviation industry, as inactivity and requests for government support make environmental restrictions possible. Airlines have previously managed to avoid government attempts to persuade them to limit their carbon footprint through arguing that they are private companies and not a public service. However, with this sector suffering huge economic losses at the hands of coronavirus, airlines have requested government bailouts, which would reduce their separation with the government. Many have argued that in return for taxpayer money, airlines should agree to ‘green strings’, which are limitations that benefit the environment. Suggested examples include taxing aviation fuel for domestic flights, frequent flyer levies and the inclusion of aviation emissions in the government’s climate targets. With commercial flights down 55% from their typical frequency by the end of March and airlines calling for government support, this is a very rare opportunity to place limitations on the aviation industry that could limit their environmental impact over the coming decades, and the government should act firmly to enforce such limitations.

Some have argued that given the depth of the current recession, it is much more important to boost the economy in the short term rather than selecting green projects which may not have immediate economic returns. The US has already given $50 million to oil and mining companies and $27m to a private jet company without any “green strings” under the Coronavirus, Aid, Relief and Economic Security Act. Through providing grants to polluting companies, it supports companies to continue producing large amounts of carbon emissions for the foreseeable future, reinforcing a polluting economy and making it harder to limit the environmental damage of relevant sectors in the future. Another concern is that some governments are relaxing green regulations in an attempt to boost the economy as soon as possible. The US government has rolled back rules that ensure auto companies produce fuel-efficient cars, a regulation change that the New York Times has predicted would add 1bn more tonnes of CO2. In India, the law on environmental impact assessments have been removed, allowing projects to go ahead without full clearance or public consultation. 

The reduction of environmental regulation is not surprising, as following the 2008 financial crisis many countries followed the same path of waving regulations, fearing such regulations would limit the extent or speed of the economic boost. Changes in environmental regulations have long term impacts and are difficult to wholly reverse once economic stability has returned. For example, in Canada the government made Environmental Impact Assessments optional in 2008, yet even whilst the economy had mostly recovered in 2012, the amount of EIA carried out was less than 10% of the amount carried out in 2007. Most significantly, Professor Hepburn’s research at the University of Oxford found that loosening environmental regulations and green strings make the economy worse, as green projects have higher returns than traditional stimulus packages both in the short and long term. This brings into question the belief that there has to be a choice between prioritising the economy or the environment at times of crisis, when this study suggests that many initiatives suggested by environmental researchers can boost both environmental protection and the economy.

It is fundamental for the sake of the economy and human health that governments around the world use the current immobilization of polluting sectors and unprecedented government stimulus to entrench a transition to a green economy. Unlike in 2008, we now know that there are many green projects the government can invest in to boost the economy and provide jobs whilst cutting carbon emissions. We are also more aware of the huge economic threat that coronavirus poses, with a study by Wei warning that if we continue on our current polluting path, the cost of the climate crisis will cost between US $150 trillion and $792 trillion by 2100. The economy and the environment are much more interconnected than they seem, and with large changes to the economy comes the opportunity to set the world on a much greener path. A group of MPs have been lobbying for such change since the start of the pandemic through promoting green projects explained in a “faster, further, fairer” paper. If we are to have any chance of decreasing the risk of the next looming crisis, the cause of creating a green economy from this period of investment has to be supported and acted on by mainstream politicians and the government.


Barry, J. (2020) ‘Coronavirus: how economic rescue plans can set the global economy on a path to decarbonisation’

Bond, A., Morrison-Saunders, A., Retief, P., and Doells, M. (2020) ‘Environmental regulations likely to be first casualties in post-pandemic recovery’

Chassagne, N. (2020), ‘Here’s what the coronavirus pandemic can teach us about tackling climate change’

Harvey, F. (2020) ‘Covid-19 economic rescue plans must be green, says environmentalists’,

Harvey, F. (2020) ‘Green stimulus can repair global economy and climate, study says’,

International Institute for Labour Studies (2011), Green stimulus measures in “Addressing European Labour market and social challenges for a sustainable globalization”—dgreports/—inst/documents/publication/wcms_194185.pdf

Skarbek, A. (2020) ‘Why it doesn’t make economic sense to ignore climate change in our recovery from the pandemic’

Watts, J. (2020) ‘Is the COVID-19 crisis the catalyst for greening the world’s airlines?’

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