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Pierre Guérin, Felix Suntheim, and Miss Mahvash S Qureshi

The shutdown in economic activity due to the coronavirus disease (COVID-19) crisis has resulted in a short-term decline in global carbon emissions, but the long-term impact of the pandemic on the transition to a low-carbon economy is uncertain. Looking at previous episodes of financial and economic stress to draw implications for the current crisis, we find that tighter financial constraints and adverse economic conditions are generally detrimental to firms’ environmental performance, reducing green investments. The COVID-19 crisis could thus potentially slow down the transition to a low-carbon economy. In light of the urgent need to reduce global greenhouse gas emissions, these findings underline the importance of climate policies and green recovery packages to boost green investment and support the energy transition. Policies that support the sustainable finance sector, such as improved transparency and standardization, could further help mobilize green investments.

Nicoletta Batini, Mario di Serio, Matteo Fragetta, and Mr. Giovanni Melina
This paper estimates multipliers for spending in clean energy and biodiversity conservation to help inform stimulus measures for a post-COVID-19 sustainable recovery. Using a new international dataset, part of which was especially assembled for this analysis, we find that every dollar spent on key carbon-neutral or carbon-sink activities—from zero-emission power plants to the protection of wildlife and ecosystems—can generate more than a dollar’s worth of economic activity. The estimated multipliers associated with green spending are about 2 to 7 times larger than those associated with non-eco-friendly expenditure, depending on sectors, technologies and horizons. These findings survive several robustness checks and suggest that ‘building back better’ could be a win-win for economies and the planet.
Felix Suntheim
The shutdown in economic activity due to the coronavirus disease (COVID-19) crisis has resulted in a short-term decline in global carbon emissions, but the long-term impact of the pandemic on the transition to a low-carbon economy is uncertain. Looking at previous episodes of financial and economic stress to draw implications for the current crisis, we find that tighter financial constraints and adverse economic conditions are generally detrimental to firms’ environmental performance, reducing green investments. The COVID-19 crisis could thus potentially slow down the transition to a low-carbon economy. In light of the urgent need to reduce global greenhouse gas emissions, these findings underline the importance of climate policies and green recovery packages to boost green investment and support the energy transition. Policies that support the sustainable finance sector, such as improved transparency and standardization, could further help mobilize green investments.