Building a tomorrow better than yesterday?

Building back better after COVID-19 is about just that - better. Better for populations. Better for economies.  Better for the world.  A tomorrow better than yesterday.

It should be hard to argue with that, whatever your political persuasion. No one seriously wants things to be worse. And yet there is still a way to go, to persuade some groups that ‘better’ is about more than GDP.

No one seriously wants things to be worse. And yet there is still a way to go, to persuade some groups that ‘better’ is about more than GDP.

Brian O’Callaghan, the lead researcher on Oxford University’s Economic Recovery Project, is accustomed to doing just that. Over the last year, since the pandemic arrived in Europe, Brian and his colleagues have been keeping track of governments’ spending on recovery, through Oxford’s Global Recovery Observatory, supported by the UNDP as well as IMF, UNEP, and GIZ through the Green Fiscal Policy Network.

Brian and his academic supervisor Professor Cameron Hepburn established the Observatory in March last year, aiming to understand if economic recovery was going to lead to a better future. That meant looking at whether the policies enacted by governments around the world met social and economic needs, but also whether they were directed at a ‘green’ or sustainable future, one in which climate commitments were met...or not.

In the midst of the havoc of 2020, it was not always an easy ‘sell’. (Officially, just 18% of international recovery spending is currently ‘green’ – and just 2.5% of total spending).

But, says Brian [above left with Cameron Hepburn right] , an economics researcher, a green recovery really does mean ‘better’ – in every sense.  In a major report on Wednesday [10 March], written with Em Murdock from Harvard and published with the UNEP, they set out findings from the Observatory and make a powerful argument for the wrap-around benefits of sustainable recovery spending.

Brian O'Callaghan and Professor Cameron Hepburn established the Observatory in March last year, to understand if economic recovery was going to lead to a better future

The message is clearly already getting through. Since the middle of last year, a steady stream of administrations and policymakers from around the world have been beating their proverbial path to the Oxford team’s virtual door for advice on how to craft effective recovery plans.

In 2020, many requests came from advanced nations. But, in 2021, advice is overwhelmingly being sought by developing nations, which recognise the very real economic benefits of green spending - and are not so much building back but building for the first time.  

‘Quite simply, you can get a bigger bang for your buck with green spending,’ says Brian, the Australian-born engineer-turned-economist. ‘This is particularly true in the developing world. For instance, investment in renewable energy can bring electricity to people who have never had it before.’

Quite simply, you can get a bigger bang for your buck with green spending...This is particularly true in the developing world. For instance, investment in renewable energy can bring electricity to people who have never had it before

Brian O'Callaghan

It is the sort of language which governments of all persuasions want to hear - new jobs, building future industry and maximising future prosperity. If it saves the world too, so much the better.

Brian is insistent that this is not an ‘either, or’ dilemma, there is no contradiction in being pro-jobs, pro-livelihoods and pro-environment.

Along with the report, Wednesday saw the launch of the Global Recovery Observatory, a joint project between the university, the United Nations Environment Program, the United Nations Development Program, the International Monetary Fund, and the German Agency for International Cooperation. It will continue and extend the work begun, and which still continues, in Oxford.

It is the sort of language which governments of all persuasions want to hear - new jobs, building future industry and maximising future prosperity. If it saves the world too, so much the better

Fitting the times, Brian’s first involvement with the project came through a Zoom meeting. In mid-March 2020, Brian’s doctoral supervisor, Professor Cameron Hepburn, wanted to discuss an urgent new idea. Brian had come to Oxford as a Rhodes Scholar to study renewable energy finance. But, given the international situation, the conversation turned to the imminent lockdown and the likely impact on the economy.

‘It seemed inevitable that the UK was going to go into a lockdown,’ says Brian. ‘And for us the first thought was that the economy was going to be in a lot of trouble.

This is not an ‘either, or’ dilemma, there is no contradiction in being pro-jobs, pro-livelihoods and pro-environment

At that point, it was not imagined that a year later, the world would still be reeling from the economic impact of the pandemic or that the impact would be as big. But the pair knew that even a few months’ economic shutdown would have major consequences. According to Brian, ‘It was obvious that the economy would come out of the lockdown in tatters and we would need a concerted effort on economic recovery.’

And so, thought the academics, what may a recovery look like? How could it impact climate progress? How about green energy investment and commitments to sustainability? Could there be an opportunity for ‘green’ spending to both aid recovery and progress climate targets?

Professor Cameron Hepburn determined on a project to survey leading economists around the world...a project was launched to call on some 230 other global leading economists, including central bank and ministry of finance leaders, to outline their thoughts on the crisis - it was to become a seminal work

Professor Hepburn determined on a project to survey leading economists around the world. Assembling an eight-strong team of assistants, a project was launched to call on some 230 other global leading economists, including central bank and ministry of finance leaders, to outline their thoughts on the crisis. As part of the project, Brian O’Callaghan and his team set about to launch Oxford’s Observatory, to track and understand COVID-19 spending.

Carefully avoiding any influence over the economists’ responses, the aim was to find out  which policy options could both bring high economic returns and be good for the environment. In May, Cameron and Brian’s paper was published in partnership with Nobel laureate Joseph Stiglitz and the UK’s Professor Nick Stern and Dimitri Zenghelis – it was to become a seminal work.

But the work did not end there. Oxford’s Observatory kept tracking government recovery spending – and the Economic Recovery Project team became advisors to governments the world over.

As mentioned above, currently ‘green’ spending accounts for only 18% of recovery spending – and most of that comes from a few developed nations. Developing nations are keen to do the same. The main stumbling block is the high interest rates they would have to pay to fund the recovery spending. Brian O’Callaghan maintains, ‘Developing nations don’t have the same access to capital.’

He says, ‘We are issuing a big call to action [in the report] to advanced economies...to support investments in developing countries...or the crisis could put back by 10 years, the progress that has been made in alleviating poverty in these nations.’

Are we on track for a green recovery? Not Yet. But perhaps soon

 The report underlines two key points:

• ‘A green recovery... can kill two birds with one stone...you get higher bang for your buck. Governments must be spending a higher proportion of recovery funds here.’
• And, ‘Advanced economies must consider generous concessional finance for developing countries [so they can borrow at low or zero interest rates] – that could support both development and climate action.’

Now in combination with the UN, the Observatory will continue to grow, tracking and assessing the spending of countries around the world. It can help countries to learn from the experiences of others, to see what works, what brings employment, industry, and prosperity – as well as what supports climate commitments.

 More green recovery spending will follow, according to Brian. He emphasises the ‘yet’ in the headline of the report:  Are we on track for a green recovery? Not Yet. But perhaps soon.