How can we achieve a COVID-19 recovery that avoids old patterns and assures a fossil-free future? For one of our first in-person workshops since the pandemic, Silke Bölts and IISD expert Lourdes Sanchez tackled this question with young international leaders from the private sector at the One Young World Summit in Munich, Germany.

Most of the participants believed that current global support for COVID-19 recovery is not in line with the United Nations Sustainable Development Goals nor with countries’ net-zero commitments—a major missed opportunity. As Luca Anselmi, who works in the renewable energy sector, explained, “It seems that some want to return to the past, while we need to build a better future. A lot of big opportunities could be missed.” 

Their sentiments are backed up by research: the Energy Policy Tracker has found that, to date, 45% of all public money committed to energy production and consumption in G20 recovery packages has supported fossil fuels, versus only 35% for clean energy.

At the same time, many participants stressed the importance of the energy sector in recovery plans. “Electricity must be renewable,” said Friederike Göpel, who works as a project lead and business developer at BMW. “Otherwise, it will not be sustainable to drive a car. The energy sector needs to deliver its part in the recovery. Therefore, incentives for investments in fossil-free technologies need to be provided.”

But how can that be achieved? And what is the government's role in supporting this transition?

IISD’s report Achieving a Fossil-Free Recovery proposes five steps that governments can take to align their economic recovery with a sustainable energy sector. As countries continue to develop and implement their recovery plans, there is a critical window of opportunity to put these principles into action.

Participants suggested that COVID-19 is a chance for some countries, especially those in the Global South, to move away from or even leapfrog old technologies and instead directly invest in future-proof fossil-free ones. While some countries, such as Iceland or Costa Rica, already run on mostly renewable energy, most countries still have a long way to go to implement their pledges. 

Although the costs associated with catastrophic climate change would be far greater, the energy transition will not be free. Workshop participants discussed who should pay: governments, companies, or consumers? Fossil fuel subsidy reform is one way for governments to raise money while reflecting the social and environmental costs of burning fossil fuels. Another important tool is carbon pricing. But the reality is that some of the costs will get passed down to consumers in the form of higher taxes or higher prices.

In order to minimize the impact on people and communities and to protect vulnerable populations from high costs or hardship, participants agreed that governments must put measures like social compensation packages in place. Governments can also follow in the footsteps of Nordic countries’ green taxation policies by simultaneously lowering other consumer costs such as income taxes. In this way, policy-makers can reduce pollution while mitigating the effect on taxpayers’ budgets and stimulating economic growth.

However, governments have been slow to implement a price on pollution. “We have been discussing taxing fossil fuels already for quite some time,” Davina Savelli, who works at Deutsche Bahn, noted. “I remember learning about it when I was in school. But it has not been put into practice in the meantime. In business, we run pilots, analyze, improve, and then scale up. Why is it so different in politics?”

“The discussion made me realize that we need to rethink the decarbonization of our economy more ambitiously after this pandemic.”

Adli Renhoren, an advisor at Energy Investment Management BV

Another key point raised was that governments need to guarantee transparency on fossil fuel taxation. Tax revenue should be used for investments in renewable energy or for social compensation measures instead of just adding to the government’s general budget. Another “Gilets Jaunes” incident should be avoided, emphasized a participant. In the end, participants proposed a carrot-and-stick approach, meaning governments should provide incentives to those that abandon fossil fuels and penalize those that are reluctant.

But implementing the required changes is very complex, the group agreed. Many important questions were raised. How can energy efficiency and reduced consumption be incentivized (at least in the Global North, where this idea is often neglected)? How can renewable energy be promoted without resulting in higher costs for consumers (as has happened in Germany and Spain)? And how can young people drive solutions most effectively? Our work on Fossil-Free Recovery principles provides some answers to these questions—youth activists and organizations are voicing others—now what we need most is bold and responsible leadership from our governments.

“Very interesting workshop, with many different voices, from across all aspects of the Global North industry.”

Tamara Myers, One Young World Ambassador and Project Engineer at Deutsche Bahn