Green spending during Economic Crises

Abstract

What conditions lead governments to invest in decarbonization in an economic downturn? Existing research has frequently pitted climate policy against concerns about economic growth, demonstrating that individual attitudes and government policies indeed tend to prioritize growth over climate. Yet government stimulus spending during recessions also offers an opportunity for decarbonization through long-term investments in infrastructure, transportation electrification, building efficiency, and clean-energy technologies that can reduce emissions and sustainably shift the economy away from fossil fuels. A popular strategy for building political support for climate policy has been the promise of “green growth,” defined here as the combination of economic and climate objectives in support of new industries. Advocates of a US “Green New Deal” and a “European Green Deal” have been joining other economies, including China, in aiming to create green jobs, growth, and support for decarbonization. While such approaches offer an alternative to the claim that a trade-off exists between environmental protection and economic growth, only some countries have been able to deliver such promised economic co-benefits of climate policy. Drawing on differing theoretical perspectives, this panel aims to analyze conditions for green spending during economic downturns. According to collective action theory, we would expect moderate levels of green spending that change only slowly over time, even during crises. In contrast, the recent ‘distributive politics’ perspective on climate policy argues that divisions in the material interests of political and economic stakeholders trigger distributive conflict over climate policymaking. Seen from this perspective, we would expect the relative strength of different domestic economic interests to shape governments’ ability to combine economic recovery and decarbonization. Thus, substantially increasing strength of “green” industries, relative to fossil fuel-based industries, should entail a significant increase in green spending over time. More specifically, we should expect the importance of the domestic fossil-fuel industry, energy-intensive manufacturing sectors, relative to potential economic interests that would benefit from strict emissions targets (e.g., renewable energy industries), to shape a country’s ability and willingness to invest in emissions-reducing measures during economic downturns. Where the domestic economy is dominated by actors invested in fossil fuels, we should expect substantial opposition to green stimulus packages. In contrast, where clean-energy industries or non-emitting service sectors dominate, coalitions supporting climate policies should be able to mobilize in support of decarbonization. The panel aims to answer research questions such as the following: 1. How important is the relative domestic strength of fossil vs. green industries for countries’ green spending during crises? 2. Do we see a tendency that green spending played a bigger role in countries’ efforts to stimulate the economy during the Covid-19 crisis than during previous economic downturns? 3. Have the correlates of green stimulus spending during crises changed over time? 4. Which country characteristics are associated with green stimulus spending during crises? 5. Concerning the energy transition, do crises increase or narrow the North-South divide?

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