It’s Earth Day this week, and according to CarbonBrief the first three months of 2020 were the second warmest on record. With COVID-19 understandably distracting the world from conversations about environmental degradation and #climatecrisis, Liz Emerson, IF Co-founder, discusses the huge potential for the greening of the economy post-COVID
Earth Day started back in 1970 when 20 million people took to the streets to protest against the environmental damage being inflicted on the planet. In 2009 the United Nations General Assembly formally recognised the day, and on Earth Day 2016 the Paris Agreement was adopted by the United Nations, committing nations around the world to limit global temperature rises to less than 2°C over pre-industrial levels.
The only time the world temperature has been higher was in 2016 when El Niño contributed to an increase in temperatures. With global temperatures running along the lines predicted in the 2013 climate models of the Intergenerational Panel for Climate Change (IPCC), there are positives to come out of the current lockdown.
The current crisis gives us an exceptional opportunity to pause and restart our economies with green policies – ones that protect the young today as well as the young in the future.
Invest in climate, invest in growth
So, what green initiatives should policymakers be prioritising as we come out of lockdown and face the fact that more than a third of our economies has disappeared?
The OECD’s Investing in Climate, Investing in Growth, published in 2018, is a good starting point. The report argues that G20 countries can achieve strong and inclusive economic growth at the same time as moving towards green economies with low greenhouse gas emissions by scaling up investment in clean, resilient infrastructure.
Get planes out of the skies
Way back in 2012, IF published Flying in the Face of Fairness: Intergenerational inequalities in the Taxation of Air Travel. The report identified the £11 billion (2012 figures) annual subsidy given to the UK aviation industry through tax-free fuel and being zero-rated for VAT. The subsidy to aviation travel diverts taxpayers’ money away from green alternatives which could be spent on a rapid transition to sustainable low-emission travel.
Since that report, £100 billion (close the annual budget for the NHS) has been spent propping up one of the worst polluters. Short-haul air travel could have been diverted to better, and faster, train travel and reduced the amount of air travel by one-third.
Reduce our reliance on cars
What the pandemic has shown us is that our air has become cleaner, noise pollution lower, and the streets reclaimed by cyclists and pedestrians – from New Zealand to Canada, Germany to the US – as road closures have given space back to pedestrians and cyclists. Councils across Britain have now been given permission to cut red tape governing temporary road closures, but the trick will be to encourage this in the long term.
Understandably, people are likely to want to avoid public transport, particularly the underground, trams and buses where passengers are crammed together, but on social distancing, safety AND environmental grounds, let’s not give the roads back to cars.
Oil – what was that?
Oil is now trading at below zero for the time ever recorded. A price of –37 US dollars a barrel has been recorded, thanks to the sharpest drop in oil demand for years because of the near-zero consumption while we are in lockdown.
As well as providing an environmental incentive to launch a just and rapid transmission to the production of renewable energy, this historic low is a wake-up call to all those pension funds that justified maintaining unenvironmental investments in fossil fuel. Just three months ago many of Britain’s top pension funds were defending their position in not exiting oil and gas stocks. Fast forward to Earth Day 2020 and it’s clear that schemes such as Greater Manchester’s Pension Scheme (a member of the Local Government Pension Scheme (LGPS)), with $51.4 billion in assets, are in deep trouble.
There is also another hidden whammy to younger and future generations in pension schemes’ decisions not to look to a more sustainable energy future, and that is the looming deficit built up from negative oil stocks that councils will need to fill by calling for more government (= younger taxpayer) money.
Pre-pandemic, IF published a report on the massive iceberg of liabilities already in the LGPS, largely obscured by scheme trustees’ use of fiscally irresponsible discount rate levels. The report estimated that, to deal with the current liabilities, a six-fold increase in the current level of deficit contributions would be required by local councils. Add a pandemic and an oil price crash, and it is clear our councils and their pension schemes are in deep trouble.
It could have been so different: around the world Scandinavian pension funds, church groups and university endowments have pulled out of fossil fuel investment. Will Britain’s over-bloated pension funds grab hold of this tipping point and be part of a green investment revolution? Let’s see.
Photo by Louis Reed on Unsplash: https://unsplash.com/@_louisreed
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