The coronavirus has disrupted the global economy and has caused what analysts are predicting to be the most severe recession since the Great Depression of the 1930s. According to the IMF, the global economy was expected to grow by 3.3% at the beginning of the year and is now expected to contract by 3%. Governments and central banks have implemented strategies to minimize the economic damages brought by the lockdown measures. Concurrently, environmental activists and once considered radical economists have found an opportunity to begin drawing up plans to transition to a more sustainable economy post corona.
Amsterdam is one city making the move towards a more circular economy. Municipal officials have teamed up with Kate Raworth of Oxford University’s Environmental Change Institute to develop strategies to implement her doughnut economics model in the city. The goal of this model, described in her bestselling book Doughnut Economics: Seven Ways to Think Like a 21st Century Economist, is to meet human needs without exceeding environmental limits. Like a doughnut, the inner ring represents the minimum requirements to lead a good life, the outer ring represents the ecological constraints we must live by, and the area in between is where we thrive.
While Amsterdam’s adoption of more sustainable principles might provide some hope, others caution against wishful thinking. Dr. Ori Sharon, Deputy Director at the Israel Society of Ecology and Environmental Sciences mentioned that “during times of economic crisis, it’s hard for governments to invest in new economic models. Switching to a new model inevitably involves risk.” He added that “experimentation typically works in times of economic stability when there is lots of capital moving around.”
Dr. Adi Levi, Scientific Director of the Israel Society of Ecology and Environmental Sciences, pointed out that the observed reduction in air pollutant levels – such as nitrous oxide – in countries where strict quarantine policies were implemented, will be temporary. Additionally, with oil prices at a historical low, “we can expect oil demand to increase back to normal levels once businesses open up again. Lastly, since no infrastructure or technological shift occurred during the lockdown, the transformation rate to renewables and electric transportation might be slowed down.” As China begins to emerge from its own lockdown, plans to invest up to a trillion USD in major projects, including gas pipelines and nuclear plants have been announced. This response is expected to outweigh any of the short term impacts of reduced energy consumption and emissions during their lockdown.
In a webinar presented this month titled “Will COVID-19 Kill or Save the Planet?”, Dr. Ram Fishman of the NITSAN Sustainable Development Lab at Tel Aviv University suggested taking lessons from the 2008 financial crisis. During that time, President Obama pledged to bail out the crumbling automobile industry on the condition that they promise to avoid laying off workers and to improve the fuel efficiency of their new automobiles. This sort of deal had significant social, environmental, and economic impacts resulting in a win-win-win scenario.
The current situation has led to a political standstill in the USA with democrats and republicans fighting over which industries to direct stimulus packages towards. However, other nations could use this crisis to support clean energy industries or influence other industries with certain provisions in the stimulus packages like President Obama did in 2008.
Unfortunately, in Israel, some stimulus packages have also come without any sort of provisions. Dr. Sharon mentioned that “one of the big problems is that in the middle of a rapidly developing crisis, there is no time for long-term strategic thinking. We are considering market remedies under an emergency situation. The government should use this as an opportunity now that companies depend on it, to impose provisions, which, unfortunately, is not happening.”
According to Dr. Sharon, the Israeli government has promised to bail out El Al if they default on their loans, without any sort of provisions. Currently, El Al brings in an estimated 3 billion NIS to the Israeli economy in taxes and fees. The airline industry is responsible for over 2% of human-induced carbon dioxide emissions.
On a positive note, Dr. Fishman mentioned how Black Rock, the globe’s largest asset manager, has, in the last years, decided to diversify their customers’ portfolios and begin investing in green technologies due to customer demands. As the fossil fuel industry is highly dependent on banks and investment firms, investors could potentially help redirect capital towards clean and greener firms and force the fossil fuel industry to comply with stricter environmental regulations. “This can have massive impacts on the fossil fuel industry because they can’t survive without these investments,” Dr. Fishman added.
Currently, with capital moving out of the stock market and being directed to safer investments, customers could use this time to demand that polluting companies change their policies so that once economies bounce back and investor confidence is restored in the stock market, real effective change can occur.
This ZAVIT article was also published in Ynetnews on 05/23/2020.