I am a big fan of using the current COVID19 recovery to pursue the investment in a low-carbon economy. Let me explain.
G7 governments will use significant amount of new debt to spark and support their economies to recover. It’s the new reality. At the end of each wave and total pandemic of Covid19, no nation will escape its impact on their economy.
All G7 countries have capitalist economies, some more interventionist than others, but surviving this is about interventionist economic policies. Anyone, any leader, fighting the use of funds to spark economies will be on the wrong side of history. There will be a time to focus back on tightening expenditures and reducing debt levels, but until the economy reaches the levels prior to COVID19, don’t expect it.
The debates for the foreseeable future will be which prescriptive policies will create the desired outcomes over others. There will be some form of balance among individuals and businesses. Likely there will be lessons learned from handouts and stimulus packages from the Great Recession, fresh in our minds.
What the reaction to COVID19 has already taught us is that while people have good intentions to stop the spread of the virus and follow instructions, two things have been apparent:
1- A great number of people have a difficult time to change behaviour for a long period of time, and we’re talking about months; Arguably, for the switch to low carbon economy to be successful, people will need to be part of the shift in behaviour to make it successful; great lesson learned that there isn’t much patience on behalf of the public; and
2- In general, a great majority of people have followed the advice of Trusted People, like Chief Medical Officers, but two weeks lag affect from taking precautions to the desired outcome have proven to be difficult to sustain. Two weeks is proving difficult to get people to wait for result. This should scare any climate change fighter to appreciate that the public have really high expectations of quick turn around in cause and effect, and stopping climate change is not that immediate.
As I look at the G7 leaders, vast majority are highly motivated to fight climate change.
I believe that they will use this opportunity to combine the stimulus funding to reach the tipping point of new low-carbon economy quicker. It makes political sense what we know to be the impacts of climate change, human behavioural responses to change and the pending deployment of stimulus funds.
The how will be part of the equation. I see layers of meaningful impacts.
Institutions will be part of a typical Keynesian economics expenditure program on what would be green infrastructure projects. In simple terms, the construction and design and materials and types of use will support low-carbon output and expected use of infrastructure. In this way, the public become users of the low-carbon economy without the choice involved.
Next, industries need to be carefully balanced. If governments are going to stream additional cash to one industry over another because of their impacts on climate change, then the main focus will need to be on sustaining job growth at a greater rate than the loss from the carbon-rich sectors. You cannot afford a lag effect.
Finally, public will have choices to move into newer greener industries and jobs or not. I think the reality will be that consumers will end up having better choices and options for low-carbon solutions and fewer carbon-rich solutions.
To state the obvious, if you have a carbon-rich industry and you’re not greening it quickly, you will be one of the losers of this recovery.
Here’s a reality that people forget. As some businesses grow and improve in market share, it is at the expense of others. There will always be losers when there are winners.
Don’t kid yourself that this is anything less than a shift from an old energy paradigm to the new one. Just as governments don’t get elected by everyone, not every business will survive in order to have a successful transformation shift to this new low-carbon energy paradigm.
No business should be thinking about how they can tap into government programs to survive. They should first be thinking about is their business and model the type that their government wants to survive, then begin your shift.
Now, let’s be really honest, if your business mode isn’t destined for survival out of this pandemic, then you already knew that the writing was on the wall before it.
I have always found complacency the death of innovation and growth, and this pandemic has been horrible from a human toll perspective, but it is the equivalent of the “industry rapture”.