More than 200 of the world’s foremost economic experts spelled out their wishes for a post-coronavirus recovery on Tuesday (5 May), ranking airline bailouts last in order of climate-friendliness and long-term economic benefit.
According to a survey of 230 finance ministry officials, central bankers and economic experts, the most effective solutions to the economic hardships that will be caused by the virus outbreak will be those that also curb greenhouse gases.
The questionnaire – conducted by luminaries such as Joseph Stiglitz and Nicholas Stern – offered up 25 different economic policies, many of which were deployed in the wake of the 2008 financial crisis, and asked its respondents to rank them.
Replies came from figures such as OECD chief economist Laurence Boone, Bank of France deputy-governor Sylvie Goulard, Danny Alexander of the Asian Infrastructure Investment Bank and Sandra Eickmeier, a top official at Germany’s Bundesbank.
Research and development into clean tech, education investments and disaster preparedness ranked among the most attractive policies, based on how quickly they can be rolled out, their return on investment and their climate impact.
“Our findings show that there is every reason for climate strategy to be top of mind for policymakers as they shape stimulus packages in the coming months,” wrote study authors Brian O’Callaghan and Cameron Hepburn in Carbon Brief.
“The senior economists we surveyed viewed green stimulus measures as among the most beneficial for the economy, as well as having strong potential to cut emissions.”
The European Commission is currently in the process of drafting its coronavirus recovery plan and is set to use the EU’s long-term budget, the MFF, as the mechanism through which to retool the economy along greener lines.
The survey also revealed which policies senior officials think should be avoided when possible, which included assisted bankruptcy measures, rural support policies and business tax deferrals.
According to the survey, however, unconditional economic support for the aviation industry “recorded a markedly poor performance on all metrics and featured in fewer experts’ top 10s than any other policy”.
The issue is particularly relevant at the moment, as airlines are among the hardest hit sectors by the virus, which has all but curbed demand for air travel, prompting big job cuts already in companies like British Airways and Ryanair.
Among the diverse list of respondents, the topic itself proved slightly divisive. Finance ministry officials “perceived that the negative climate impacts of unconditional airline bailouts were not as severe as what others reported”.
The survey did acknowledge that “political and other circumstances related to the national interest” will probably lead to climate-bashing policies in some areas, but the authors insist that even the worst offenders can go green long-term, if shackled to “appropriate conditions”.
“For instance, conditional green bailouts for airlines could require achievement of net-zero emissions by 2050 with intermediate targets set at 5- or 10-year intervals,” the study says.
“If airlines are unable to meet these targets, bailout funding would be converted to equity at today’s very low stock market spot prices.”
Despite the findings of the survey, billions have already been allocated worldwide to help the industry ride out the slump in air travel demand. Australia has shelled out nearly half a billion euros, while the US has splurged nearly €30 billion.
In the EU, member states are bound by the bloc’s state aid rules, which have been relaxed due to the circumstances. Conditions have so far ranged from non-existent to short-term measures like moratoriums on dividend payouts and executive bonuses.
The French and Dutch governments have launched the biggest bailout so far, shoring up Air France-KLM with up to €11bn.
France has set sustainability criteria linked to the cash injection, including a 50% emission cuts target for 2030 and a halving of domestic flight emissions by 2024.
German flag-carrier Lufthansa is set for a reported €9bn bailout but the terms of the government’s involvement in the day-to-day running of the company are still unclear. Shareholders are meeting today and a final deal might be ready this week.
Environmental groups have urged the Commission to rethink its state aid rulebook in order so the EU executive can attach green strings to bailout requests, which is currently the domain of national governments.
Top officials like antitrust chief Margrethe Vestager and transport head Adina Vălean, however, have both insisted that the current priority is saving jobs.
[Edited by Benjamin Fox]