Green spending during the 2008 financial crisis and the Covid-19 crisis

This paper analyzes the size and distribution of green stimulus spending in response to the 2008 financial crisis and the 2020 Covid-19 crisis among the G20 countries. We draw on a new dataset for stimulus measures in G20 during the global financial crisis, based on the methodology and coding scheme of Nahm et al. (2022). Second, we use G20 COVID stimulus packages data from Nahm et al.'s (2022) dataset. Descriptively, we provide an overview of G20 countries’ emissions-reducing and emissions-increasing stimulus items in their packages. Next, we fit a series of regressions to test which country characteristics correlate with the share of emissions-reducing measures in the stimulus packages. We focus on explanatory variables capturing the centrality of fossil and green industries in countries’ economies. Examples include production of fossil fuels, the renewables share in energy production/consumption, and net exports of emissions. We also include control variables such as emissions per capita, and GDP per capita. We aim to answer three research questions: 1) Was the share of green stimulus spending higher during the Covid-19 crisis than during the financial crisis? In other words, do we see a tendency that green spending played a bigger role in countries’ efforts to stimulate the economy in 2020 than in 2008? 2) Which country characteristics correlate with green stimulus spending in the two economic crises? We focus on explanatory variables that capture the centrality of fossil and green industries in countries’ economies. 3) How do the correlates of green spending change from 2008 to 2020? For example, has the sign/direction shifted from negative to positive (or vice versa) for any independent variables, or are the correlations relatively stable from 2008 to 2020? We find that, surprisingly, the average share of green spending in G20 countries’ stimulus packages fell in 2020 although climate change was more salient, green industries had grown tremendously, and the costs of renewables had plummeted since 2008. Overall, the same types of countries engage in green spending during both the Global Financial Crisis and the Covid-19 crisis. Preliminary statistical tests show that fossil fuels endowments, the size of a country’s economy, outsourcing of fossil-heavy production, and level of democracy explain some of the cross-country variation in green spending. None of the major carbon-exporting countries engage in any significant green spending in either crisis: countries such as Australia, China, Russia, and Saudi Arabia are consistent green spending laggards. Another notable finding is that the spending outcomes of G20 countries’ stimulus packages are strikingly similar across time despite the vastly different nature and contexts of the two economic downturns. Based on the consistency in country characteristics that explain green spending in 2008 and 2020, we conclude that the two economic downturns have largely mirrored the entrenched economic interests and political priorities prevailing prior to these downturns.