March 22, 2021

Are we building back better or back towards a brown, high-carbon economy?

A chance to stabilise or revolutionise
Laxmi Adrianna Haigh
Laxmi Adrianna Haigh
Lead of Editorial
Laxmi Adrianna Haigh
Marc de Wit
Director of Strategic Alliances

As $14.6 trillion entered the global economy as covid-relief funds, calls for short-term recovery measures to be tied to long-term sustainable and green initiatives have grown louder and louder. Hopes have been pinned on a ‘green recovery’ and ‘building back better’. Our Circularity Gap Report 2021, released on the 26th of January, quantifies the huge synergistic power the circular economy holds for the climate mitigation agenda, and calls on governments to mobilise capital toward circular incentives to unlock the potential of building back better. Now, one year into the pandemic, which direction are we building toward: better, or back to a brown, high-carbon economy?

A recent UNEP study, Are We Building Back Better? Evidence from 2020 and Pathways for Inclusive Green Recovery Spending, has fast slashed hopes that the green recovery was already underway. Touted as the most comprehensive analysis of covid-19-related fiscal rescue and recovery efforts by 50 leading economies so far, the report reveals that less than 3%, or only $368 billion of $14.6 trillion covid-induced spending (rescue and recovery) in 2020 was green. The researchers classify ‘green’ spending as that that is likely to reduce greenhouse gas (GHG) emissions, reduce air pollution, and/or strengthen natural capital, compared to a scenario in which the policy was not implemented.

Although these findings may be disheartening — there is still hope as trillions of dollars of budget is still to be announced. Could it be that economies, now that they have covered their bases and stabilised the BPs and Air Frances of the world, funnel the remaining funds into innovation — from rescue to recovery?

Life support to existing industries and business-as-usual

As the covid-19 pandemic swept the world, governments were admirably swift in responding: safety nets of huge proportions were rolled out for people’s welfare, jobs and health. Ensuring basic services, partly due to rising unemployment, became the sole focus: from food aid, to one-off or consistent payments of a percentage of a worker’s usual salary, short-term emergency fixes were amply distributed around the world.

A year ago, as we witnessed these necessary emergency measures, Circle Economy wondered what would come next: stabilisation of business-as-usual or policies to increase resilience in the face of the next crisis; be it another pandemic or climate change.

It is clear now that governments have largely repeated patterns we have seen in past crises: in the 2008 financial crisis they scrambled to resuscitate the financial institutions in the hope the economy could be stabilised — but not revolutionised. The new UNEP report confirms the same for the covid-19 crisis: of the $14.6 trillion (£10.5 trillion) spent on preventing economic collapse, a huge portion went toward bail-outs for polluting industries, such as oil and airlines.

This rings true of the incremental change and focus on the near-term that has been symptomatic of the approach to climate breakdown for years — and one we warned about in our Circularity Gap Report 2021. It’s a massive shame and missed opportunity that as countries bailed out airlines — such as South Africa, South Korea, the UK and the US — they missed the chance to include green conditions to their support which could encourage action toward net-zero emission targets or investment in long-term technological development.

Photo by Dominik Scythe on Unsplash

In recovery, there is a chance for innovation

However, the answer the report gives to ‘are we building back better’ is not a resounding no. It’s a ‘not yet’. And that is where we can be hopeful: governments have so far focussed on short-term fixes. Now comes the opportunity for recovery, and in recovery, a chance for innovation. The demand is there and the way forward is clear. The right people need to listen and take action.

Our Circularity Gap Report 2021 calls for transformational over incremental change; the latter of which is cognisant of current climate mitigation action and Nationally Determined Contributions (NDCs). It also highlights the patchy progress and lack of concrete goals in many countries’ climate-commitments — and Shift countries were particularly at fault here. On this note, we are glad to see that its (albeit not many) Shift countries, those with high HDI rankings matched by high levels of consumption and environmental degradation, have fulfilled some green recovery promises due to their strong governmental spending power. They invested:

  • $35.2 billion for green building upgrades to increase energy efficiency, mostly through retrofits, notably in France and the UK;
  • $66.1 billion invested in low carbon energy, largely thanks to Spanish and German subsidies for renewable energy projects and hydrogen and infrastructure investments;
  • $86.1billion for green transport through electric vehicle transfers and subsidies, investments in public transport, cycling and walking infrastructure;
  • $28.9 billion was announced in green R&D which includes renewable energy technologies, technologies for decarbonising sectors such as aviation, plastics, and agriculture, and carbon sequestration.
  • $56.3bn was announced for natural capital or Nature based Solutions (NbS)– ecosystem regeneration initiatives and reforestation. Two-fifths was directed towards public parks and counter pollution measures, notably in the US and China, improving quality of life and addressing environmental concerns.

But what of the rest of the green promises made? The reason for a lack of green spending is not entirely black and white. Of course, countries were and are under immense strain and protecting citizens’ livelihoods and health in the rescue effort was the priority. All economies slumped, but countries with existing debt were particularly hard hit. Unfortunately, the imbalance among nations reflects inequalities that exist within nations — inequalities that have only worsened during the pandemic.

Source: UNEP study. Graph shows the pre-covid and current rising debts of EMDE countries (emerging markets and developing economies). This include South Africa, India, Brazil.

Unlocking the potential of building back better: the circular economy

‘Given the continuing nature of the pandemic and associated economic handbrake, opportunities to spend wisely on recovery are not yet over. As the pandemic progresses into its latter stages, policymakers will naturally turn their attention from rescue spending measures towards recovery measures’, note the report authors.

Our Circularity Gap Report 2021 illustrates the necessity for circular strategies to be included in a green recovery for us to 1) reach the goals of the Paris Agreement and 2) ensure that recovery includes economic, societal and environmental aspects. With circular strategies, we can ensure that the global temperature rise remains well below 2-degrees by 2032. With business-as-usual, we will surpass 3.2-degrees.

We suggest applying circular strategies at the intersection of materials and emissions hotspots. With this, countries can increase cycling and value-retention of precious resources and cut excessive consumption, thereby slashing GHG emissions. We shared the right ingredients across six core sectors: with a focus on three that deliver 70% of impact for the climate breakdown: Housing, Construction and Mobility. See a breakdown of our circular roadmap across sectors here.

Our Interventions Vortex shows the greenhouse emission and resource use potential of circular strategies. See more here.


Beacon of hope? From rescue towards recovery spending

Now, we wish to reiterate the message of our Circularity Gap Report 2021. The impacts of business-as-usual will be catastrophic on an economic, environmental and social level. There are a multitude of sectors which can be assisted in an economic recovery and also bring environmental benefits; from green energy, transport, energy efficiency and circular construction to reshaping our agricultural and dietary habits. Also importantly, policies that really build back better must fix short-term issues whilst also keeping an eye on raising resilience to future crises — especially in communities that experience rising inequality.

We are living in a time where processes that would normally take years are fast-forwarded. We cannot let this opportunity pass us by and allow funding to take place that does not tackle climate breakdown and inequalities.

In the words of Circle Economy’s Gwen Cunningham, Circle Textiles Lead, ‘never waste a good crisis’.

About the Circularity Gap Report 2021

Circle Economy’s flagship report, published annually beginning in 2018, details the state of our world’s circularity. This year’s iteration combines the twin agendas of the circular economy and climate change mitigation, finding that doubling our current circularity metric — 8.6% — will close the Emissions Gap and get us on a path to a well-below 2-degree world.

For a practical look into the findings of the Circularity Gap Report for businesses, cities and nations, download our Circular Economy Briefing toolkits.

STAY IN THE LOOP

GDPR Permissions and Content Preferences:

Thank you for signing up!

To complete the subscription process, please click the link in the email we just sent you.
Oops! Something went wrong while submitting the form.