The green recovery: an opportunity to address inequalities?

By Enrico Botta, OECD Environment Directorate

Over the past decade, inequalities in income and opportunities have increased. The income of the top 10% is over ten times larger than the bottom 10% while traditional opportunities for social mobility have withered. While official income inequality data for 2020 will be available only in two years time and the impact of government measures on disposable income will need to be carefully examined, it is reasonable to think that low-educated and lower income households have been affected the most by the pandemic. This is primarily because they have less wealth in the first place, and hence less of a “cushion” to weather financial disruptions, and are less likely to be able to telework.

The pandemic is a stark reminder that disadvantaged households are also the most affected by environmental degradation. Unstainable production and consumption patterns are contributing to climate change, air pollution, and increase the risk of the emergence of new zoonoses due to contact between wildlife, livestock, pathogens and people. Each of these impacts are stronger for disadvantaged households, and their effects compound each other. For instance, air pollution is often higher in poorer neighbourhoods, and this increases the risk of developing comorbidities (i.e. cardiovascular and respiratory diseases) that are associated with the most severe consequences from COVID-19 infection. 

The green recovery can serve the dual purpose of addressing these linked issues of environmental degradation and existing inequalities. The green transition, and the deep transformation that this entails for our economic systems, can help to make our societies not only greener but also fairer. Our new paper, The Inequalities-Environment Nexus: Towards a people-centred and green transition, analyses the impacts of environmental degradation and environmental policies on four key dimensions of people’s wellbeing: health, income and wealth, work and job quality, and safety. The analysis builds on the OECD Framework for Policy Action on Inclusive Growth; the Green Growth Strategy and its Green Growth Indicators Framework, and the OECD Well-Being Framework.

How can we ensure a green and inclusive transition? 

Policy packages for a green and inclusive transition should build on four key pillars.

First, possible regressive impacts of pricing carbon emissions or other environmental externalities for vulnerable households need to be addressed.  In addition to the role of broader policy reforms to reduce inequalities, a number of measures can alleviate the possible regressive impact of pricing emissions, including well-designed schemes to recycling the additional tax revenue generated by such price-based measures. 

Second, skills policies, active labour market policies, and well-designed income support measures are needed to facilitate workers’ reallocation from polluting to greener sectors. A fair transition requires that policies are in place to support workers of the most negatively affected sectors, such as coal mining. Upgrading workers’ skills is vital to ensure that they can find new employment while well-targeted income support measures are instrumental to help them weather the transition. 

Thirdly, place-based policies will be necessary to ease the structural adjustment of local economies that rely heavily on fossil fuels extraction or carbon intensive industries. The specific policy package for an inclusive green transition varies from one region to another according to local competitive advantages, opportunities and history. For instance, resource-rich regions may see a decline in hydrocarbon extractive industries but may benefit from increased demand of key minerals for low-carbon technologies (e.g. lithium

for batteries). Regions specialised in heavy industries may need to invest in the infrastructure required for the decarbonisation of such industries (e.g. carbon capture, utilisation and storage facilities).  Social dialogue, investments, social protection, skills and education policies adapted to local needs are crucial elements for the structural adjustment of these economies. 

Finally, efficient and responsive governance will be needed to ensure an inclusive green transition. The systemic transformation required for meeting the target of the Paris agreement and inverting the degradation of our environment will require alignment across a wide range of policy areas. Sound governance mechanisms will need to be in place to ensure this coherence. Clear and regular entry points for the civil society and citizens to contribute to the policy-making process will be also essential.

The green recovery is a major challenge but also an enormous opportunity to design fairer and greener societies.  All countries are together in this endeavour and the OECD is supporting national efforts for a green, inclusive and resilient recovery through a number of initiatives. The OECD green recovery database provides unique insights on the greenness of recovery measures, while ongoing research focuses the labour implications of the green low-carbon transition, including the jobs potential of a transition towards a resource efficient and circular economy and the role of apprenticeships for greener economies and societies. The OECD will keep monitoring the “greenness” of recovery measures and a dashboard to track progress towards a green, inclusive and resilient transition will be launched later this year.

Further reading

OECD (2021), “The inequalities-environment nexus: Towards a people-centred green transition”, OECD Green Growth Papers, No. 2021/01, OECD Publishing, Paris, https://doi.org/10.1787/ca9d8479-en.

OECD (2020), “Building back better: A sustainable, resilient recovery after COVID-19”, OECD Policy Responses to Coronavirus (COVID-19), OECD Publishing, Paris, https://doi.org/10.1787/52b869f5-en.

Read more on the OECD Green Recovery Database and related data visualisation.