Maximising the benefits: Economic, employment and emissions impacts of green recovery stimulus in Europe
CLG
Europe is now considering how best to structure its recovery from the deep health, social and economic crisis stemming from the Covid-19 pandemic. New modelling demonstrates how a Green Recovery Plan maximises benefits compared to other options, providing positive long-lasting economic benefits, a boost to employment and reducing emissions. In the EU, the green recovery plan could save 2 million jobs in the EU in the next few years and generate longer term employment gains, while reducing CO2 emissions by more than 15 per cent.
In this technical report, we contribute to the growing evidence base of what green recovery policies can achieve in Europe by drawing on Cambridge Econometrics’ E3ME modelling results carried out for the We Mean Business Coalition publication, Assessment of Green Recovery Plans after COVID-19. Our CLG Europe technical report presents an overall view of the EU, the UK and specific EU economies including Poland, Germany and Spain. The modelling results clearly show the identified Green Recovery plan as consistently more favourable than other options – boosting GDP and employment, as well as contributing to additional reduction in CO2 emissions. Indeed, at EU level, this effect increases over time with significantly better outcomes shown in 2030 if Green Recovery packages are pursued. The modelling in this report illustrates some of the options for how countries can achieve maximum impact at a national level, taking into consideration the contextual factors that may restrict the benefits from specific green recovery measures. Most importantly, the results show the substantial climate benefits that can be derived from channelling some of the recovery spending to actions and activities that also facilitate progress towards the 2030 and 2050 climate targets. However, it is also clear from the results that in some countries there will be a need for longer-term support beyond the two-year period that most countries have announced economic stimulus packages for and as modelled in the packages in this report.
The modelling assesses two recovery plans that could boost both GDP and protect jobs. The first plan follows a ‘return to normal’ approach by reducing VAT rates and encouraging households to resume spending. The second plan is a Green Recovery Plan that aims to boost economic activity while simultaneously reducing CO2 emissions. Both plans have the same cost to government. The Green Recovery Plan includes a smaller reduction in VAT than the VAT Recovery Plan, in addition to public investment in energy efficiency and in upgrading electricity grids, subsidies for wind and solar power, a tree planting programme and a car scrappage scheme in which subsidies are only provided to electric vehicles.