The Macroeconomics of a Green Recovery

21 October 2020


Reported by Kate McNeil, CSaP Communications Coordinator

In the second episode of our podcast series exploring science, policy, and a green recovery, CSaP Executive Director Dr Rob Doubleday was joined by Cambridge University economists Dr Kamiar Mohaddes and Dr Nina Seega to explore the macro economic shock from the covid-19 pandemic, and how that shock relates to arguments for investment in a green recovery.

You can listen to the episode here:

The covid-19 pandemic has brought to light some of the pressing challenges facing our society, however, this health emergency is not the only crisis we currently face. As we recover from the economic, social and health consequences of the pandemic, we have an opportunity to also address the environmental crises facing our planet, including climate change and biodiversity loss. Produced in partnership with Cambridge Zero, CSaP's Science and Policy Podcast's series on science, policy and a green recovery aims to answer questions about the opportunities and challenges ahead as policymakers aim to achieve a green recovery. Throughout this podcast series, we will explore topics ranging from civic action and climate protests, to the big geopolitical, infrastructure, and economic challenges our society faces as we seek to build back better, promote wellbeing, and protect our environment.

According to Dr Seega, the economic shock resulting from the covid-19 pandemic can be understood as a forewarning of the shocks we might face if we do not manage the transition to a net zero economy carefully, through investment and a gradual transition towards a sustainable economy. She also highlighted that the covid-19 pandemic has brought attention to the role of nature in planning for financial risks. On the other hand, she also notes that the covid-19 crisis has placed limitations upon investor's budgets, which may constrain he ability of financial institutions and corporations to invest in various aspects of of a green recovery. With a limited bandwidth for response, she has voiced concerns that some environmental issues, may take precedence over others, with areas such as investment in biodiversity and preventing land degradation receiving less attention.

Meanwhile, Dr Mohaddes has noted that there is a tension between the long-term aspirations and short-term priorities of policymakers and elected officials. In the immediate aftermath of the covid-19 shock, the primary concern is to preserve livelihoods, while at the same time many have made long-term climate commitments, such as getting to net zero by 2050. Here, he notes that a lot of the fiscal stimulus that has gone into national recovery plans is not presently aligned with a green recovery. While some funds have been dedicated to reducing emissions in the transport and agriculture sectors, for instance, much greater sums have been earmarked for polluting industries.

As we go forward in preparing for of climate risks and responding to climate change, Dr Mohaddes has emphasized the need for policymakers to think about aligning incentives, including recognizing that failing to respond now to climate change will be extremely costly in the long term. Meanwhile, Dr Seega has posited that policymakers should focus on tying recovery funding to sustainability targets, with the goal of creating jobs and recovering the economy in a way that is sustainable and environmentally friendly. She has further noted the need for institutions to plan for climate and nature related financial risks, because covid-19 has given us a taste of what a shock and abrupt transition could look like. Finishing on a note of optimism, Dr Seega also highlighted that the response to the pandemic has seen technological shifts, creativity and the innovation on a rapid scale, and that we can harness those trends to move towards a much more sustainable future.

CSaP's Science and Policy Podcast's series on Science, Policy and a Green Recovery is available across all major podcasting platforms, including Spotify, Apple Podcasts, Google Podcasts, RadioPublic, Pocket Casts, and Castbox.