Faced with the emergency of the COVID-19 crisis, there is a great temptation for recovery plans to prop up yesterday’s economy instead of “building back better”. Instead, recovery plans and any economic stimulus must pass five tests, argue European sustainability think tanks.
This commentary is co-signed by members of the Think Sustainable Europe network:
Céline Charveriat, Executive Director, Institute for European Environmental Policy (IEEP); Camilla Bausch, Scientific & Executive Director, Ecologic Institute; Sébastien Treyer, Executive Director, Institute for Sustainable Development and International Relations (IDDRI); Måns Nilsson, Executive Director, Stockholm Environment Institute (SEI); Alexander Müller, Managing Director, TMG – Töpfer Müller Gaßner GmbH
The decisions which the European Council will make today regarding Europe’s recovery plans will no doubt have long-lasting political, economic and social consequences. In the context of great political tensions between the member states – but also of great expectations from European citizens – the very fate of the European project could be at stake.
While the real magnitude of the COVID-19 crisis and the effectiveness of responses to date are not yet fully known, European leaders know that they do not have the luxury to wait for certainty. In fact, many member states are already putting in place numerous measures to support the most affected citizens and to relaunch key sectors of the economy. Decisions are being made at breath-taking speed – both, to provide immediate relief during the pandemic and to recover from its impacts in the medium- and long-term.
Faced with this perfect storm, there is a great temptation for recovery plans to prop up yesterday’s economy instead of “building back better”. Carbon intensive sectors like the auto industry and aviation are welcoming the relaxation of EU state aid rules and calling for urgent public support. Others are proposing to postpone the Green Deal reforms or even withdraw existing regulation, such as the ban on single used plastics. Listening to voices that ignore the fundamental environmental challenges would be a mistake.
Instead, recovery plans and any economic stimulus must pass the following five tests:
Criteria 1: Sound scientific basis: As think tanks and research institutes, we strongly recommend that scientific evidence is brought to bear to ensure effective public spending in response to the crisis. We also recommend for leaders to listen to scientists. According to a recent poll, 83% of European citizens say that scientists are their most trusted source of information. Numerous scientists are already warning decision-makers that other challenges, such as the pollution, biodiversity loss and climate crisis ought not to be forgotten because the window of opportunity before irreparable damage is done is rapidly closing. Their calls must be taken seriously.
Criteria 2: Resilience: By addressing vulnerability at its very root, recovery plans should strengthen economic, social and ecological resilience to cope with multiple shocks. This requires, for example, building a much more resilient care sector as part of a well-being economy, an approach welcomed by the European Council in its October 2019 conclusions and already pioneered by countries and regions like New Zealand, Iceland and Scotland. All investments, for instance in infrastructure, should be future-proofed so they stand the test of time and avoid burdening future generations with carbon lock-ins.
Criteria 3: Equity and solidarity: According to the OECD, more than a third of households are financially insecure, meaning they risk falling into poverty if they have to forgo three months of their income. Recent polls are also showing that more than a third of Europe’s citizens are worried about losing their jobs. European citizens are also concerned about equity in this current crisis and hope that responses will protect the lives and livelihoods of the most vulnerable members of society. Recovery plans must, therefore, prioritise support for vulnerable households, communities, regions and countries. They must build and strengthen solidarity between the most well-off European countries, and those most affected or further behind, be it in Southern, Central or Eastern Europe.
Criteria 4: Transformation: Recovery plans should not contribute to lock-in of carbon-intensive sectors and should instead lead to the emergence of novel sustainable practices and technologies, their diffusion and uptake within society and the reconfiguration of established systems. According to available research, the global stimulus in 2008-09 failed to achieve a systemic and lasting change, as most countries left in place environmentally harmful subsidies and inadequate regulatory regimes. As soon as the immediate crisis is over, Green Deal reforms must, therefore, be put back on track.
Criteria 5: Scale: Already, the President of the European Council has called for a new EU Marshall Plan. The fiscal stimulus packages introduced into the largest economies in the immediate aftermath of the 2008-2009 crisis averaged 3.4% of GDP. While today’s crisis is expected to be much larger, the European Council will “only” consider a package of measures worth €540 billion, representing a slightly smaller percentage of Europe’s GDP.
In 2008-2009, 60% of the fiscal stimulus in Europe was presented as green measures. Applying the same percentage today would mean the mobilisation of at least €340 billion. While there are no official estimates yet of the total cost of the Green Deal, the European Commission identified an annual funding gap of €260 billion to achieve the existing climate and energy targets by 2030. Meanwhile, the overall investment gap for transport, energy and resource management infrastructure reaches a yearly figure of €270 billion, according to the European Investment Bank, for projects that are already identified and ready to implement and could be part of a recovery package and stimulus.
While many governments and stakeholders are calling for green recovery plans, which is highly welcome, the devil will, of course, be in the details. There is an urgent need to gather objective, high-quality evidence regarding the adequacy and nature of recovery plans. Building on the lessons to date from the EU’s regulatory scrutiny board, we propose the creation of an independent, green recovery scrutiny board or to give an expanded mandate to the EU’s court of auditors, which already issued a warning about the recent decision to relax rules for European Structural and Investments Funds.
This body, which should work in close collaboration with similar independent institutions in member states, would be tasked with assessing the adequacy of both EU and member states’ green recovery plans and could also feed into the semester process. To support democratic processes and influence decision-making, its recommendations should be made public and in close to real-time.
At a time of great hardship, multiple crises and competing demands for public monies, European citizens deserve nothing less than evidence-based decision-making and access to unbiased analysis.