Green Fiscal Stimulus Packages

Samuel Fankhauser, Grantham Research Institute, LSE

Sets out the case for a green fiscal stimulus, initially through evidence for its impact, before considering the impact of the recession on green investment. It questions why a fiscal stimulus is needed, suggesting the crisis is one of demand and that monetary instruments are exhausted; and that in terms of a green fiscal stimulus, it is highlighted that many green measures fit the stimulus criteria (i.e. they are targeted, timely, temporary) and that green investment makes sense anyway. Since the announcement of green stimulus packages there has been some boost to demand e.g. car scrappage schemes, but there have been mixed environmental benefits and little on energy efficiency. Since then talk has shifted more towards the use of spending cuts. It is questioned whether there is a need for a policy response to help underpin the carbon price and to better facilitate access to credit.