Environmental Investments Major Part of Economic Stimulus Packages


The Asian economies of China and the Republic of Korea are emerging as global leaders in their commitments to invest significant slices of their stimulus packages in environmental, ’green new deal’ projects.

Pittsburgh/Nairobi - A Global Green New Deal update by the UN Environment Programme (UNEP), launched as G20 nations meet in Pittsburgh, Pennsylvania, shows that over a third of China’s recovery spending is being focused on areas ranging from railways and water infrastructure to energy efficiency and renewables like wind and solar.  

The Republic of Korea is going even further in terms of setting the stage towards a transition to a low carbon, resource efficient Green Economy.  Close to 80 per cent of its stimulus package or around $31 billion is aimed at promoting energy efficient buildings and water and waste management-but also investments in areas such as renewable energy, low emission vehicles and railways.  

Other countries that have in part seized the economic crisis as an opportunity for a different development path include Australia, the United States, Japan, Germany, South Africa and France.  

Yet UNEP and economists are warning that major pitfalls remain in terms of the overall size of the green component of the global stimulus package. This currently falls short of the $750 billion or one per cent of global GDP that is recommended for reducing carbon dependency and seeding the process of transition. 

In addition there are log-jams in many countries in terms of the speed at which funds are being spent and red-tape surrounding access to green new deal money which is hindering the pace of transformational change. 

Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said: “This progress report, coming some 12 months since the economic crisis emerged and less than 80 days before the crucial UN climate convention meeting in Copenhagen, is both cause for optimism and cause for concern”.  

“An estimated 15 per cent of the estimated $3.1 trillion-worth of global stimulus packages are green in nature and this is a positive development and a sign that some governments in particular have seen an opportunity to make their recovery strategies part of a new and more sustainable, longer-term development path, “he added.

“But this transition is patchy, far from embedded and in many cases well below the recommended one per cent of global GDP which economists advise is the sum that can catalyze real and sustainable, world-wide change,” said Mr Steiner.

“The G20 meeting in Pittsburgh is a moment in time for nations representing close to 70 per cent of the world’s population and 90 per cent of global GDP, to re-confirm their pledges and review their options so that the investments being made in addressing the crises of the here and now carry forward a double, triple and quadruple dividend-addressing climate change, natural resource scarcity and decent employment possibilities for two billion people.” Achim Steiner, UNEP Executive Director

The update makes a series of recommendations to deepen green investments and embed them in a broader transition including: 

  • Reducing perverse subsidies in areas such as fossil fuels and agriculture-up to $250 billion-worth of fossil fuel subsidies are operating across the G20
  • Just three per cent of the overall G20-announced green investments have been spent over the first half of 2009-the speed and pace of disbursement needs to be stepped up in 2009 and into 2010. 
     
  • Mechanisms and processes are needed to mitigate any negative environmental and social impacts of new spending-including the planned investments in railways-and to ensure that these are truly green 
     
  • In order to peak C02 emissions and keep the global temperature rise to under two degrees C, investments in sustainable energy need to more than double to $500 billion a year-the global stimulus packages need to reflect that reality
  • Green stimulus packages need to be ’proofed’ to ensure that that do not inadvertently undermine the competiveness of developing country businesses and exports
  • Stimulus packages need to be complemented by more comprehensive policy reforms including greater use and deployment of incentives such as emissions trading and levies
  • Governments need to Seal the Deal at the crucial UN climate convention meeting in Copenhagen in December as one significant way of turning essentially national ’green new deals’ into a global Green Economy phenomenon

With its broad membership, the G20 offers a chance to commit to working closely with developing countries and provide international financing mechanisms that would allow these countries to strengthen and expand their own green stimulus packages.

 Highlights from the UNEP Update

The update has looked in detail at seven G20 countries which are China, France, Germany, the United States, Mexico, the Republic of Korea and South Africa.  

It also carries data on a further six countries covering such statistics as the total sums being spent on green investments and how this relates to for example their total stimulus packages, as a percentage of GDP and green spending per capita. 

The report notes that, according to recent HSBC figures, among the seven countries studied in detail the Republic of Korea’s green component represents 79 per cent of its overall planned stimulus followed by China, 34 per cent; France, 18 per cent; Germany, 13 per cent; the United States, 12 per cent; South Africa, 11 per cent and Mexico, 10 per cent.  

Other countries with significant green spending as a percentage of their stimulus packages-studied in less detail- are Australia, over 20 per cent; the United Kingdom, 17 per cent; Canada, eight per cent; Spain, six per cent and Japan, six per cent.  

In terms of the green stimulus per head of population, the Republic of Korea also emerges as a forerunner with over $1,230 per person followed by Australia, $420 per person; the United States, $365 per person and Japan, over $280 per person. 

Analysis by HSBC indicates that overall the G20’s spending on environmental investments is highest on rail, with $120 billion being spent, or planned to be spent, in this sector. 

Investments in rail are followed by improvements to electricity grids including smart grids, just over $90 billion; water and waste projects, $80 billion; energy efficiency in buildings, just under $70 billion; renewable energy, just under $40 billion; areas including carbon capture and storage, $30 billion and low carbon or emission vehicles, $15 billion.

The Global Green New Deal update is available here.

For More Information: United Nations Environment Programme

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