New research by the New Economics Foundation (NEF) has suggested that in the case of a crisis the UK government spend 2-3 percent of GDP in green infrastructure, such as renewables.

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Shadrach   in Business & Finance

Last updated: 15 January 2020, 06:36 GMT


New research by the New Economics Foundation (NEF) has suggested that in the case of a crisis the UK government spend 2-3 percent of GDP in green infrastructure, such as renewables.

The next contraction-which the most current projections estimate will have a 30-40 percent chance of occurring in the next few months-should provide the largest possible green boost, the report states.

This recommends spending £ 30bn to £ 50bn in renewable stimulus packages that would last three years. A third or half of that spending over the first twelve months should be invested.

In the case of a crisis, spending in the private sector is likely to decline, with public investment having to make up for the shortfall.

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Government should therefore stand ready to both step in as a backstop on private sector plans, as well as to bring forward its own plans at short notice in order to aid the recovery and maintain progress towards key climate goals," NEF says.

This means the government is finding a network of zero-carbon ' shovel-ready ' projects, which could potentially kick-start a green economy.

The study also recommends that all policy departments create long-term plans for a green transformation, and that new national organizations be formed to help increase investment in renewable energy and launch a new national infrastructure system for EVs.

The study looked at past recessions and used modern models to show that, without such measures, public debt as a share of GDP is likely to be higher.

Although the government would have to invest for such green stimulus packages to take place, without them federal spending on welfare would grow much more quickly, making tax receipts sluggish. As such, investment in green stimulus programs based on renewable energy an EVs could help the UK address climate change and unemployment as well.

NEF looks at the 2010 financial crisis, noting that if the government had spent £ 10.5 billion in an insulation-focused energy conservation plan, household pollution would have been 30 per cent greater by 2018. In relation to this, energy saving on household bills would have contributed to the program's expense by 2013.

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Senior economist at the NEF, Frank Van Lerven, said

policymakers had failed to respond to the 2008 financial crisis with the investment needed to tack environmental degradation in a socially just way was a missed opportunity.

10 years later, politicians remain hopelessly unprepared for the crisis to come. But there's also a strong opportunity for change in that precarious place. A return to the status quo is not a choice in the form of tax reductions and monetary stimulus. Every solution to the next crisis needs to be focused green, but that means we must start preparing now.

The essence of the UK's reaction to a crisis may show the distinction in how action against critical climate goals eventually remains a disappointment or a triumph. The answer to the next recession has to become the springboard for another, sustainable future, said Van Lerven.