By Brian O'Callaghan, Lead Researcher and Project Manager, Oxford Economic Recovery Project, Oxford's Smith School of Enterprise and the Environment.
A bizarre political narrative has emerged over the last six months. Apparently, safeguarding our energy supplies and enjoying a better future requires that we…move backwards. Some governments are using public funds to grow our dependence on fossil fuels – the same fuels that have caused unfathomable environmental damage and continue to accelerate climate change. That way, say the Siren voices, in five or ten years, we will be free from the grips of energy suppliers we do not like in 2022.
There is an alternative, of course, but one that vested interests and short-term oriented policymakers, wish to obfuscate: doubling down on clean technologies.
Government investment in clean energy and energy efficiency makes more sense on traditional economic metrics than dirty alternatives...economic evidence is mounting
In a research paper this week, colleagues and I highlight hard evidence that government investment in clean energy and energy efficiency makes more sense on traditional economic metrics than dirty alternatives. Green policies can be faster to implement, create more jobs, and better support economic growth. Certainly, the research is still in its infancy, but economic evidence is mounting.
Two years ago, the slogan ‘build back better’ looked to a green recovery from the global pandemic. And our work shows these calls were warranted. Alongside the obvious health and environmental benefits, our paper explains, the overall economic characteristics of green fiscal investment appear positive and are likely superior to dirty investment options.
In 2021, governments began to heed these perspectives, directing around $1 trillion to green investments. The next step should be to reinforce these positive actions, continuing a decadal shift that builds from political one-year plans. Going backwards should not be on the agenda.
If governments choose to spend or introduce new tax subsidies despite the risks, as is demanded by fossil fuel lobbies, green alternatives make far more sense...green measures outperform traditional ones on the most fundamental of economic criteria
In this time of economic uncertainty, it is understandable to be hesitant about any new expansionary fiscal policy. Yet, if governments choose to spend or introduce new tax subsidies, despite the risks, as is demanded by fossil fuel lobbies, green alternatives make far more sense. With a review of over 900 research papers, we find consensus that green measures outperform traditional ones on the most fundamental of economic criteria – job creation, fiscal multipliers, and speed of implementation.
Beyond this, support for green measures could also be less inflationary and more beneficial to long-term fuel security. Since electricity tends to be a domestic market, more firmed green generation can reduce power prices. By contrast, gas markets are global and more extraction in one economy often does not influence domestic prices. On security, one needs only look to the UK or Australia to see extracting more gas means little, if it is shipped overseas in periods of greatest need.
Much of this conversation is about the need for long-termism in government. We need our politicians and policy makers to break free of their fossil fuel Stockholm syndrome. They must think beyond a one or two-year horizon and be proactive in building resilience. If governments had prioritised resilience two years ago, they would have gone all-in on renewable energy systems - despite having natural gas trading at its lowest price in 30 years. Those who had done this, would be in a much stronger position today.
Policymakers now face a stark choice – artificially rekindle the dying flames of fossil fuels or reinforce the efforts of the green recovery. The first pathway leads to long-term energy volatility, stranded assets, and no just transition. The latter leads to a protected environment and greater economic strength.