LSE (London School of Economics) report calls for global investment of an additional $3T each year to drive economic recovery and transformation

Published in Green Car Congress 07 June 2021 
The world should invest at least $3 trillion more every year in sustainable infrastructure and nature to drive the recovery from the COVID-19 pandemic and the transition to a zero-emissions and climate-resilient global economy over the next decade, according to a new report that was requested by the UK Prime Minister ahead of the G7 Leaders’ Summit in Carbis Bay, Cornwall.

The independent report, published today, on “G7 leadership for sustainable, resilient and inclusive economic recovery and growth” was led by Professor Lord Nicholas Stern, I.G. Patel Professor of Economics and Government at the London School of Economics and Political Science (LSE), with a team from the LSE.

The report highlights the potential for investments in zero-emissions energy and transport to create new jobs and economic growth. It recommends that these should be a central part of the recovery packages of the G7 countries, which together should increase their annual investment by 2% of GDP, or $1 trillion, compared to pre-pandemic levels.

The report indicates that “the G7 will need to assist emerging market and developing countries in tackling their greater debt and finance constraints that have resulted from the pandemic, and embark on programmes of green recovery and transformation”.

It also calls on the G7 to “make a collective commitment to double climate finance” and to lead on ensuring that the rich countries “deliver on and go beyond” their commitment to mobilise $100 billion per year by 2020 from public and private sources to support developing countries in tackling climate change.

The report says that $1.5-1.7 trillion more each year should be invested globally in low-carbon energy, including renewables, and the electrification of economies over the coming decade, while annual expenditure on fossil fuel energy should decrease by $350-600 billion.

The report identifies investment priorities in electricity storage and networks, energy efficiency in buildings and industry, charging infrastructure for electric vehicles, the deployment of green hydrogen manufactured with renewables, and decarbonization of industry and heavy transport, including aviation and shipping.

It suggests that $1.4 trillion more each year should be invested worldwide in improving transport, particularly mass transit systems and the extension of railway networks.

Increases of $100-250 billion a year are required for investments in protecting and restoring nature on land and in the sea. Additional investments of $150 billion per year are needed in “productive, sustainable and efficient agricultural systems”.

The report lists 30 specific actions that could drive investments in G7 countries, including generating 80% of electricity from net-zero sources by 2030, applying standards for 100% net-zero buildings by 2024, and ensuring there are 100 public electric vehicle chargers per 100,000 population by 2023.

The report states: “While eventually the private sector would be the main source of investment, public investment must play a key role, especially in the early phase – private investors are cautious given the uncertainties, and corporate balance sheets are highly leveraged.”

It recommends “frontloading a public investment push, on the order of 1–2% of GDP, initially financed by public borrowing and declining in the outer years of the 2020s”, and adds: “Public investment should replace rescue-related consumption spending and be financed by public borrowing in order to avoid premature withdrawal of macroeconomic stimulus”.
Posted on 07 June 2021

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