The majority of stimulus packages aimed at mitigating the impact of the Covid-19 pandemic will have a negative effect on the environment, nature and people.
South Africa joined 14 countries that showed improvements in a new rating that considers green stimulus spending into the energy, transport, industry, agriculture and waste sectors that reduces greenhouse gas emissions or enhances nature and biodiversity. It however still needs to do much better.
“Brazil, Colombia and South Africa made somewhat greater efforts at green stimulus, but like China and India, fell short of significantly turning around their previous trajectory. To manage the Covid-19 crisis while protecting and rebuilding nature at the same time, these countries would need to better hardwire environmental actions into their public spending and regulatory measures,” the report said.
The analysis of 30 stimulus packages among G20 members and 10 other economies worth$17.2-trillion, found that 20 will not bode well for the environment, because they provide support to environmentally intensive sectors with negative impact. The findings are part of the sixth green stimulus index by the Finance for Biodiversity Initiative.
“Despite many positive examples of green stimulus, most governments have not used the Covid-19 stimulus to transform their economic trajectory in a way that enhances nature or responds to climate change at the scale required,” the authors said.
South Africa joined Russia and Mexico, which were found to have reinforced their historical negative environmental performance in their response to the pandemic. The country has passed the $38-billion mark in fiscal stimulus measures. Its score was affected by bailouts to carbon intensive state firms such power utility Eskom and South African Airways.
Development institutions like the Development Bank of Southern Africa (DBSA), the Industrial Development Corporation of South Africa (IDC) and the Export Credit Insurance Corporation (ECIC) continue to finance oil, coal and gas development.
Friends of the Earth US and Oil Change International last year revealed how South Africa provided at least R2.2-billion a year in trade and development finance for coal projects from 2016 to 2018. The report also noted that poor transparency from DBSA, IDC and ECIC meant that support for oil, gas and coal was likely higher.
“South Africa’s public finance must instead support a just transition from fossil fuels that protects workers, communities, and the climate — both at home and beyond its borders — in order to build a more resilient future. Instead of bankrolling another major crisis, climate change, South Africa should invest in the future,” said Thuli Makama, Africa senior adviser at Oil Change International.
The report followed another study last year by the Centre for Environmental Rights (CER) which found that the public finance bodies are not yet being deployed to support a just transition towards a climate resilient future. The IDC ranked last among peers, while the DBSA was fourth.
The centre recently questioned the decision to extend finance to coal company MC Mining for coal mining developments in Limpopo.
The MC Mining case study highlighted the links between the IDC’s loan to the firm, its investment in steelmaker ArcelorMittal South Africa, the country’s 3rd highest greenhouse gas emitter, and its role in financing industrial activities as part of the Musina-Makhado Special Economic Zone.
“The IDC’s investment in MC Mining is representative of a greater problem, which involves public funds being invested in environmentally destructive and climate-incompatible industries,” the CER said.
In DBSA’s 2019 -20 financial report, Finance Minister Tito Mboweni said that the institution remained firmly at the government’s side as it endeavoured to drive investment and stimulate the economy.
The DBSA is accredited to the Global Environment Facility and the Green Climate Fund which are tied to the Paris Accord on climate. This means it disperses finance tied to South Africa’s transition to a low carbon economy and environment recovery.
Globally, the latest green stimulus index shows that $4.8-trillion (28%) of the total $17.2-trillion stimulus announced to date is going to environmentally intensive parts of the economy, but only $1.8-trillion (10.6%) will have a net positive impact on the environment and green sectors.
Investment in nature-based solutions such as reforestation, urban greening and wetland restoration which offer both economic and environmental benefits constitutes just 1% of spending in European national resilience and recovery plans. Most spending went to lowering emissions (€500-billion) while just €40-billion went to nature.
“Unfortunately, it is impossible to justify the fact that public stimulus money is doing more harm than good to our climate and biodiversity, which underpin our economy,” said lead author of the report and economist Jeffrey Beyer.
“Nature has been particularly neglected, with fewer than 10 of the countries we studied investing in nature-based solutions such as reforestation or wetland restoration. Ignoring nature misses out on the triple-win opportunity for jobs and the economy, climate and biodiversity.”