How Green Are China, Europe, And The United States’ COVID-19 Recovery Packages?


The release of China, the E.U., and the United States’ COVID-19 recovery packages last week demands a closer look at the intersection between the economy and the environment during a pandemic. Although China has permitted the construction of new coal plants, it has, according to the NYT, refrained from setting specific economic growth targets for the first time since 2002, reducing the pressure on its industrial sector. Europe, despite facing a projected decline of 7.4% in its economy, proposed a €750 billion package that encourages the production of no-carbon fuels (hydrogen) and increasing employment through the repurposing of older buildings to become energy-efficient. Meanwhile, the White House has not discussed this matter with the Environmental Protection Agency, having announced a relaxation of its environmental restrictions earlier in March. Over 300 American businesses, however, have rallied together under the group, LEAD on Climate 2020, to “call for a build back better strategy that recognizes the need for a resilient, clean energy economy,” according to Ceres. 

It is imperative that we analyze the impact of countries’ attempts at a quick return to ‘business as usual’ during the financial crisis of 2008. As uncovered by the consultancy firm McKinsey & Co., despite the immediate reduction of global greenhouse-gas emissions in 2009, “by 2010, emissions reached a record high, in part because governments implemented measures to stimulate economies, with limited regard for the environmental consequences.” This issue is particularly pressing as acting now or failing to do so could determine whether the world meets or misses the 1.5ºC to 2ºC emissions goals agreed upon in the 2015 Paris Agreement. As Mohamed Adow of Power Shift Africa says, “It would be shameful if rich countries recharge their economies on the backs of the climate vulnerable.” 

China has decided to move away from its earlier economic model which was heavily reliant on an export-oriented strategy – “big in, big out” – in favour of bolstering its domestic market. As its economy shrank by 6.8% in the first quarter, Chinese President Xi Jinping announced that “For the future, we must treat domestic demand as the starting point and foothold as we accelerate the building of a complete domestic consumption system, and greatly promote innovation in science, technology and other areas.” President Xi Jinping had, in the week beginning on 11 May, encouraged local officials and workers in the Shaanxi province to “speed up the diversification of the local economy to reduce dependence on traditional industries like coal and energy,” according to the South China Morning Post (SCMP). This emphasis on development may indicate that the “affluent society” target could, as the SCMP argues, be “redefined using measurements other than just gross domestic product,” providing a more holistic approach. 

The government’s potential political motives should be carefully monitored. As director of the SOAS China Institute Steve Tsang suggests, Xi Jinping’s provincial tours promote “a new narrative of China in the post-Covid era,” one of “the steadfastness of the central leadership and superiority of the party state” in lifting China out of the crisis. Others are concerned that the Chinese government may choose to resume setting economic growth targets, as supported by a Chinese official involved in drafting the government work report. However, Chinese Premier Li Keqiang was quick to note that “protecting jobs, basic livelihoods and market entities … all have a direct relation with economic growth” – learning from the large overhang debt caused by their 4-trillion-yuan stimulus package of 2008, that a shift from growth to development may be worthwhile. Although the nation has, in recent years, employed greener energy sources, with wind power growing 173 fold according to the New Internationalist, and the switch from coal to gas, it remains to be seen if the environment will remain central to China’s developmental goals

Europe’s proposal, though substantial, is likely to be “watered down in the weeks and months ahead,” according to the NYT, as it requires the unanimous backing of 27 national leaders, who do not all agree on joint borrowing and grant distribution – let alone on the speed of a green transition. The €750 billion will be split into two with €500 billion distributed amongst countries as a need-based grant and €250 billion as a loan. As of late, the European Central Bank has supported the economy by ensuring money continued flowing into finance stimulus efforts. If agreed upon, this package would be, as the NYT explains, “the first time that the bloc raised large amounts of common debt in capital markets, taking the E.U. one step closer to a shared budget, potentially paid for through common taxes,” whereas collective debt was resisted by wealthier nations in 2008. Some believe that this will deepen the economic ties between E.U. members, but experts warn that this is not a leap into mutualized debt. 

Additionally, Chancellor Angela Merkel of Germany and French President Emmanuel Macron recognized the possibility that allowing certain E.U. countries to recover faster would “deepen inequalities in the bloc, hampering the way it trades and operates internally.” This could be further exacerbated by growing tensions between China and the U.S., with whom the bloc heavily trades. To finance unemployment benefits, small businesses, and the rebuilding of healthcare systems, the European Commission made €540 billion available earlier in the crisis. Since then, 17 European environment ministers, 79 members of the European Parliament, 37 CEOs and business associations, and 50 banking and insurance CEOs have signed a statement “urging governments to make the E.U.’s recovery a Green Deal,” building a “bridge between fighting Covid-19, biodiversity loss and climate change.” As the bloc debates a law enforcing carbon neutrality by 2050, it is imperative that they seize the opportunity to take actionable, sustainable steps now which would allow them to achieve that goal. 

Early U.S. aid packages did not address calls to fund renewable energy, allowing many fossil fuel companies to share the relief money. This is compounded by the Environmental Protection Agency’s relaxation of environmental rules on 26 March, 2020, allowing power plants, factories, and other facilities to determine whether or not they are able to meet legal requirements on reporting air and water pollution for themselves. Although this has helped businesses which have faced layoffs and personnel restrictions amongst other challenges, it has given them the “open license to pollute,” according to Gina McCarthy, who led the E.P.A. under the Obama administration. Some agency officials defended the move saying that “the new policy relaxes compliance for monitoring and reporting only so that facilities can concentrate on ensuring that their pollution-control equipment remains safe and operational.” 

With the presidential election looming, it is vital that the recovery package does not become an issue divided along partisan lines, or between past, present, and future administrations. Disapproving of the narrative that climate-friendly policies would significantly reduce employment – a narrative often associated with Republicans, though they are not a monolith – 300 companies announced, on 13 May, the largest call to action from the business community. They are advocating for investment in resilient infrastructure, immediate investment in the country’s transition to a net-zero emissions economy, and longer-term solutions, including a price on carbon. Although the Democratic candidate Joe Biden has emphasized his pledge to rejoin the Paris Agreement, action needs to be taken now, from across the political spectrum. The vocalization of support for environmentally-favourable policies should not be leveraged primarily or exclusively for political gain. 

On 28 May, the United Nations announced the delay of the Glasgow climate talks to November 2021, but we are running out of time to avert climate catastrophes. Without the pressure of the Glasgow talks, leaders should continue to actively partake in global conversations and reinvigorate international cooperation, resisting the impulse of some nationalist leaders to become insular. Many view this as a defining moment; we could “either kill … two birds with one stone – setting the global economy on a pathway toward net-zero emissions – or lock [ourselves] into a fossil system from which it will be nearly impossible to escape.” It is only with this sense of urgency that our future – both environmentally and socio-economically – will be secured. 

Leave a Reply