Green investment and the truth about "Build Back Better"

This blogpost is authored by a member of Montel's content marketing team.

“Build Back Better” has become a well-worn slogan of late. It’s been adopted by Joe Biden – first as a campaign slogan, and then as the name for his first major spending package – the G7, and it’s been repeated frequently by UK Prime Minister Boris Johnson. Indeed, there are few politicians who haven’t been heard uttering some variation on this succinct little phrase in recent months. 

The idea behind Build Back Better is simple: the global economic recovery from the COVID-19 pandemic will be driven by investments in greener, more sustainable and more equitable policies, technology and infrastructure. Yet just last month, the International Energy Agency has become the latest voice warning that actions need to speak louder than words when it comes to ‘greening’ recovery.  

The international organisation and its Executive Director, Fatih Berol, have adopted an increasingly strident tone in recent months. In May, they produced a detailed policy paper which provided a roadmap to achieve net zero emissions by 2050, whilst also warning that current investment strategies were not sufficient to meet such an objective. 

This latest report follows on from the Agency’s special report on how to secure a sustainable recovery from June 2020, which outlined their vision of $1 trillion worth of investment per year in the energy sector for the next three years. Now, the IEA is warning that only 35% of that amount has been put forward under current policies. And after analysing over 800 policies across 50 countries, the IEA calculates that only 2% - $380 billion of around $2.3 trillion – of total fiscal support has gone towards clean energy measures.  

Even in developed countries which have loudly proclaimed green recovery as a priority, only 60% of the investment needed to achieve a sustainable recovery has been put forward. In developing countries that figure drops to 20%. Executive Director Fatih Birol has stated that the investment committed at present is not even sufficient to avoid a new global emissions record in 2023, warning that an emissions peak isn’t even in sight. 

The report is available in an interactive format here, providing detailed breakdowns per sector and a full list of the policies analysed. Some other highlights from the report include: 

• Established areas and existing programmes (such as low carbon electricity, transport and energy efficiency) have attracted the majority of investment. Innovation and research (clean fuels, new technologies) has lagged behind. 

• There has been little significant investment in electricity networks and infrastructure, which the IEA has identified as a major investment priority for sustainable recovery. 

• Developing economies will require more support from developed economies and international institutions to accelerate green investments, although some (notably India and Argentina) have announced significant investment in renewable energy and grid infrastructure. 

• While ambitious policy proclamations and targets have been common, the IEA notes the delayed effect in terms of concrete measures and support being announced. 

The IEA isn’t the first body to warn that the green recovery championed by so many governments will fall short of expectations. The UN Environmental Program (UNEP) published a similar report, with slightly differing figures, in March this year. Vivid Economics, an economic consultancy focused on environmental issues, also published a report earlier in July, in collaboration with the Finance for Biodiversity Initiative. According to their Greenness of Stimulus Index (GSI), which has been tracking investment since February 2021 in 30 countries (including all G20 economies), the impact of investment since the start of the pandemic in 20 of these countries can be considered as a ‘net negative’. 

These reports are about more than just holding governments to account. Fiscal policies, from subsidies to tax incentives, will have significant impacts on markets ranging from carbon to guarantees of origin. Tracking public investment in sustainable technologies will be critical for actors across energy markets over the coming months and years.

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