Where did all our money go?

Governments around the world reacted with a spending-frenzy facing a triple crisis of the worst economic downturn since the second world war, energy insecurity and climate change. Never before so much public money was invested in such a short time. But where did all our money go to? Was “smart green growth” merely rhetoric or substance? Research shows that but little was actually invested in green jobs around the world. The best pupils were South-Korea, China and the European Union (see “% green fund” table below).

Governments’ pledge

On September 15, 2008 the Lehman brothers collapsed, marking the biggest bankruptcy in US history. It also marked the beginning of a huge financial crisis, developing in the biggest economic crisis since WWII.

The reaction of governments worldwide was as swift as it was humongous. Trillions of dollars were spent worldwide to save the economy with the citizen’s hard earned tax money. Many pledged to spend the money on green measures. Much in the same wording as at the G-20 summit in London on 2 April 2009 where the largest economies vowed to “make the best possible use of investment funded by fiscal stimulus programmes towards the goal of building a resilient, sustainable, and green recovery.  We will make the transition towards clean, innovative, resource efficient, low carbon technologies and infrastructure.”

How green was the recovery?

The question now arises if the rhetoric matches reality, how green were these individual economic recovery packages? HSBC’s Global Research Division has published a report on 25 February 2009 answering exactly that question. The report “ A climate for recovery” investigated more than 20 economic recovery plans on their green credentials in spending and tax-cutting.

HSBC concluded that roughly 15% of the estimated $2.8 trillion could be associated with investments consistent with stabilising and cutting global carbon emissions.

South-Korea allocated more than 80% of its fiscal stimulus spending to green initiatives, taking the lead on a percentage basis. The European Union (58.7%) and China (34%) followed up closely. But China did top the list in terms of absolute size of planned green spending ($200 billion). By contrast, India was investing nothing of its $13.7 billion stimulus plan for green ventures. Italy and Japan were the least green of the rich G7 countries, allocating just 1.3% and 2.6% respectively. The United States ranks second in terms of absolute spending, although but 5th in percentage.

On the left you can see a graph of the theme allocation in the green stimulus plans. As HSBC notes, the bulk of spending is allocated to green infrastructure. By laying the foundations future green growth is underpinned. Spending went in large part to buildings, grids, rail and water. The construction and capital goods sector are likely to be the major beneficiaries, according to HSBC.

Did governments become greener in the last months?

Although the HSBC report is a good documentation of the planned spending behaviour of the world’s recovery packages, many has changed in the last 8 months. Perhaps most notably, Japan has elevated its climate change targets to a 25% cut in carbon emissions by 2020, baseline 1990. The green character of the recovery package in United States diminished starkly under pressure from the Senate (and its associated lobby groups). Chinese President Hu Jintao pledged to cut emissions of carbon dioxide by a notable margin in coming years, even with a still booming economy. And India’s environment minister Jairam Ramesh says India could agree to “implicit” carbon emissions targets as part of a global climate change deal, by passing domestic laws enshrining concrete measures that India would take to control greenhouse gases as its economy grows.

But this is again just rhetoric, I am looking forward to the next hard facts in a comprehensive study.

Give us back our money

3.4 million jobs were created in Europe alone through green funding and regulatory support. However, only 15% of the recovery packages went to stimulating jobs in this sector. Meanwhile the prospects for the earth’s climate are further deteriorating.

The lesson learned is that we shouldn’t be so rash anymore letting our political leaders spend so much public money so fast on things like fast German cars or easy tax-cuts.

In my last post I documented the rise of green jobs. Governments play a crucial role in stimulating these new jobs. Which country did best for its people?

Originally published on the Th!nk About It blogging competition (link)