An unprecedented opportunity to green the global economy

Photo: J Pat Carter Getty Images Agence France-Presse
In the 77 countries studied, the public support to the production and the consumption of fossil fuels reached a total of 478 billion in 2019.

The stimulus plans to face the pandemic of sars coronavirus offer a unique opportunity to green up massively in the global economy in order to avoid a climate crisis, feel Friday, several central bankers.

“Unless we act now, the climate crisis will be the preferred scenario of the future, and unlike the COVID-19, a person shall not isolate themselves to avoid it “, according to this article published in the british daily The Guardian. This text is signed by the governor of the Bank of England, Andrew Bailey, the Bank of France, François Villeroy de Galhau, member of the Dutch central bank, Frank Elderson, and the special envoy of the UN for the climate, Mark Carney (and the predecessor to Mr. Bailey).

The officials say that the crisis of the sars coronavirus “offers the chance of a lifetime” to rebuild the economy, to the fight against climate change. They welcome the measures to support massive put in place to cushion the shock of the health crisis and avoid a recession too deep. But it is necessary to think beyond a pandemic, prevent they, even as countries in the world are far away, according to them, to respect the Paris agreements on climate, which aim to limit the global warming to 1.5 °C.

Use public money to subsidize fossil fuels is inefficient and these subsidies exacerbate emissions of greenhouse gases and air pollution

— Angel Gurría

The signatories of this forum believe that act now will avoid painful adjustments later and call on the economic and financial world to adapt. They advocate for recovery plans in which the money is intended in large part to the energy transition, investment in renewables or in buildings that are more ” clean “. This would allow ” to go towards an orderly transition and create jobs to support the recovery “, according to them.

Several banks have already launched the Network for greening the financial system (Network for Greening the Financial System, NGFS), of which Mr. Elderson is the president. Among the members of the NGFS include the european central Bank (ECB), the Bank of France, Bundesbank, central banks of England, Canada, Luxembourg, Malaysia, or the financial services Authority of Dubai. In contrast, the american central Bank seems hesitant and still has not decided if she was going to join the movement.

The Bank of England will organise in the near future tests of ” climate resilience “, which will aim to assess the ability of the financial sector to cope with the consequences of global warming. The first results are expected in 2021.

Subsidy to the fossil

In the aftermath, the support to fossil fuel production grew strongly last year, said Friday the OECD and the IEA, calling on governments to take advantage of the recovery plans post-COVID to eliminate this type of aid.

The data show an ” increase of 38 % of the direct and indirect support in favour of the production of fossil fuels in 44 advanced and emerging economies “, according to the Organization for economic cooperation and development and the international energy Agency (IEA). “It is with sadness that I note a slackening of efforts to phase out the support to fossil fuels. This increase in the subsidy to the production, which looks set to continue in 2020, some countries are providing to help this sector and related activities “, regretted Angel Gurría, secretary-general of the OECD, quoted in a press release.

“Use public money to subsidize fossil fuels is inefficient and these subsidies exacerbate emissions of greenhouse gases and air pollution “, he added. For a long time, the OECD believes that this type of subsidies for oil, gas or coal could be much better used and benefit all, for example for the benefit of health systems.

In the 77 countries studied, the public support to the production, but also to the consumption of fossil fuels, for its part, reached a total of 478 billion in 2019. The figure is down 18 % compared to 2018, but it is because of a drop in oil prices : the public authorities have therefore had to spend less to subsidize the consumption.

The OECD and the IEA, two organizations based in Paris and who provide advice to mainly countries considered to be developed, emphasise that the crisis and the economic stimulus packages post-COVID 19 have the opportunity to change the game. “The low level of prices of fossil energy today provides countries with a golden opportunity to gradually eliminate consumption subsidies,” says Fatih Birol, director general of the IEA.

“At a time when public authorities seek to boost employment and to prepare for a better future and more resilient, it is essential to avoid market distortions that favour polluting technologies and inefficient “, he adds.

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