The COVID-19 virus hit the world economy swiftly, taking a devastating toll on businesses of all sizes, from small restaurants and family-owned retail shops to multinational corporations. Governments have stepped in to provide more than US$9 trillion in various forms of stimulus to mitigate the long-term fallout. In the short term, these loans and cash infusions have propped up the economy and provided assistance for business recovery, but the virus has proven relentless and the road to full recovery looks long. The vast majority of countries remain on the brink of recession, which means that more government stimulus is likely to come.
The “Great Reset”
As leaders debate what type of aid to provide businesses, and how much, there is the possibility for governments to use their leverage in rescuing distressed corporations as an opportunity to create a better future — not just back to normal, but a new normal where we emphasise social and environmental responsibility over corporate profits. The virus essentially hit pause in our lives, and the World Economic Forum has called for a “Great Reset” as we prepare to push play again. We need to reflect on the lessons of the 2008 economic crash, where stimulus packages led to the largest increase in carbon emissions in 50 years, followed by a decade of sluggish recovery that only exacerbated some of our biggest global challenges, so we can use this crisis to create meaningful change. By attaching the appropriate strings and conditions to bailouts, governments can encourage responsible business practices to address climate change, income inequality, and job insecurity, while protecting against future shocks by creating a more resilient economy.
Just weeks before news of a novel coronavirus started trickling out of China, world leaders were meeting in Madrid for a United Nations climate summit. On the agenda were severe warnings from leading scientists that we are much closer to a global “point of no return” than previously thought. Instability in Antarctic and Greenland ice sheets, sea level rise, and global temperature increases are exacerbating severe weather events and forcing the mass migration of millions living in vulnerable coastal regions. Warmer ocean temperatures may forever alter Australia’s Great Barrier Reef, leading to a profound change in marine biodiversity. Deforestation is devastating the world’s largest rainforest. In the wake of COVID-19 as governments weigh the requests for assistance from large corporations, some are attaching conditions and requirements to the financial aid — a sort of “green tax” — to address these looming climate crises. Australian lawmakers, for example, required that a portion of state aid for Australian Airlines be used to hit specific targets for reducing carbon emissions. The final deal includes requirements to reduce total emissions by 30 percent by 2030 and eliminate short-haul flights where a train route is available, among others. France followed suit with its own conditions for an Air France bailout. Other opportunities include:
- Providing more subsidies to diversify energy options, adding more renewable energy to reduce reliance on coal and other fossil fuels
- Strengthening initiatives surrounding sustainability in food production, and requiring farmers to invest portions of bailout money to reduce pollution
- Requiring disclosure and more stringent reporting about firms’ financial risks and exposure related to climate change or other dual economic-climate threats
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