OECD Technical Expert Workshop on Modelling the Impact on Circular Economy and Low Carbon Transitions of the Covid-19 Recovery Packages

1. TECHNICAL EXPERT WORKSHOP ON
MODELLING THE IMPACT ON CIRCULAR ECONOMY
AND LOW CARBON
TRANSITIONS OF THE COVID-19 RECOVERY
PACKAGES, 13-14 April 2021
Session 2: Quantifying the impacts of recovery
packages on economic activity
Edward B. Barbier
Department of Economics, Colorado State University

2. Great Recession vs Post-Pandemic Recovery
Great Recession Stimulus 2009-
2010a
• $3.3 tn stimulus, $522 bn green
(16%)
• 2/3 of green stimulus on energy
efficiency ($335 bn) , “shovel-
ready” clean energy projects.
• Little impacts on deficits/debt.
• Little/modest pricing reforms
• Stimulus effects ended by 2012/3,
job creation and renewables
expansion, little de-carbonization
Post-Pandemic Recovery 2020-
2021
• $14.6 tn stimulus, $1.9 tn for long-
term recovery, $341 bn green (2.5%
and 18%)b
• 10% on energy efficiency ($35 bn),
35% on clean energy and transport
($121 bn), 8% on green R&D ($29 bn)b
• Global deficits of $30 trillion by 2023c
• Pricing reforms?
• Decarbonization requires:
• $300 bn/year additional spending to clean
energy.d
• Increased support for green R&Da
• Removal of fossil fuel subsidies and
carbon pricinga
Sources: a Barbier (2020a, 2020b); b O’Callaghan and Murdock (2021); c Assi et al. (2020) d Andrijevic et al. (2020).

3. Quantifying the impacts of recovery packages
• Two modeling scenarios
• Scenario 1: Existing green recovery packages
• Scenario 2: Full “decarbonization” packages (pricing reforms; increased
green R&D support; more clean energy investment).
• Net sectoral gains and losses
• Clean energy/transport gains, fossil fuels lose but what about other
sectors?
• Do any economies end up with a competitive “green race” advantage?
• LR multiplier effects
• If $1 spent today on green spending priorities, what are the economy-
wide $ gains in 5-10 years? (Batini et al. 2021).
• Deficits, debts and revenue spending effects
• Impacts of growing debts on spending under both scenarios.
• In Scenario 2, what are the pricing reform revenues spent on, and what
are the overall economic impacts?

4. References
• Andrijevic, M. 2020. "COVID-19 recovery funds dwarf clean energy investment
needs." Science 370(6514):298-300.
• Assi, R., de Calan, M., Kaul, A. and Vincent, A. (2020) Closing the $30 trillion gap: Acting
now to manage fiscal deficits during and beyond the COVID-19 crisis. McKinsey &
Company, July 2020
• Batini, N., M. Di Serio, M. Fragetta, G. Melina, and A. Waldron. 2021. “Building Back Better:
How Big are Green Multipliers?” IMF Working Paper WP/21/87. International Monetary
Fund, Washington, D.C.
• Barbier, E.B. 2020a. “Building a Greener Recovery: Lessons from the Great Recession.”
Covid-19 Green Recovery Working Paper Series. United Nations Environment Programme
(UNEP), Geneva, Switzerland. 5 October 2020.
https://greengrowthknowledge.org/guidance/building-greener-recovery-lessons-great-
recession
• Barbier, E.B. 2020b. “Greening the post-pandemic recovery in the G20.” Environmental
and Resource Economics 76:685-703 https://doi.org/10.1007/s10640-020-00437-w
• O’Callaghan, B.J. and E. Murdock (2021). “Are We Building Back Better? Evidence from
2020 and Pathways to Inclusive Green Recovery Spending?” United Nations Environment
Programme (UNEP), Geneva, Switzerland. 21 March 2021.
https://www.unep.org/resources/publication/are-we-building-back-better-evidence-2020-
and-pathways-inclusive-green