By Sarah McFarlane
Governments around the world are spending like never before to
kick-start their economies in the wake of Covid-19 lockdowns, in
many cases tying green initiatives to rescue packages, even as some
industries say saving jobs should trump environmental concerns.
Companies, including Volkswagen AG, Renault SA, Air France-KLM
and Austrian Airlines, are receiving government support aimed at
mitigating the effects of the coronavirus pandemic and reducing
carbon emissions. But their industries are resisting stimulus
packages tied to climate policy, saying governments should
prioritize reviving job growth and business activity.
Governments are pushing for change in some of the worst-hit
industries with a dual approach: Providing bailouts on condition
that companies adhere to environmental terms and offering help to
promote low-carbon solutions such as electric vehicles and
The world's top 50 economies have pledged around $583 billion to
boost green efforts, with the bulk of funds coming from the
European Union, according to a report by Bloomberg New Energy
Finance published in June.
In the U.S., lawmakers didn't include climate-related proposals
in the federal stimulus package. Separately, the Trump
administration extended a deadline for tax credits that support
renewable energy investments.
In Europe, the green initiatives have triggered some pushback
from businesses. "You have the conservatives in the European
Parliament, and some industries like aviation and cars, saying we
need to speak to the economic crisis and not to climate as that's
not the priority right now, " said Belén Balanyá at Corporate
Europe Observatory, an organization that monitors lobbying
Businesses say that green initiatives would be too onerous at a
time when they need to focus on minimizing job losses and
supply-chain disruptions, said Europe's largest business lobby,
BusinessEurope, in an April letter to the European Commission. The
group, whose partner companies include Renault, KLM and Volkswagen,
asked the commission to delay some environmental legislation.
The airline industry said proposals to attach environmental
conditions to financial assistance were ill-timed.
"Without a return to financial stability it will be impossible
for airlines to bring new and more efficient aircraft into service,
invest in sustainable aviation fuels or commit resources to
improving the efficiency of their operations," said the
International Air Transport Association, an airline-industry trade
group in an email.
Climate activists and scientists hope the support for
climate-friendly government spending will grow from the current
commitments of 5% of the overall $12 trillion in stimulus packages
announced around the world. Green initiatives represent a smaller
proportion of stimulus funds compared with the packages that
followed the 2008-09 financial crisis. At that time, 16% of the
$3.3 trillion recovery effort went toward environmental efforts,
according to the International Energy Agency.
The Organization for Economic Cooperation and Development said
in June that governments needed to craft policies that would ensure
the world "builds back better" -- including by aligning rescue
packages with emissions-reduction goals.
Bailouts for some industries including airlines and autos have
had climate-friendly conditions attached. Electric-powered
transportation has been the clearest target of world-wide
government action, data from BloombergNEF show.
Government support for electric-vehicle production and demand
could accelerate car makers' focus on the electric-car market at a
time when they are struggling with poor demand for conventional
vehicles and swelling inventories. China recently extended its
subsidies for the sector by two years to the end of 2022 and waived
purchase taxes for consumers.
Subsidies have helped make China the world's largest
electric-vehicle market. In 2018, when the aid could reduce an
electric-vehicle's price tag by about $13,000, sales rose by 62%.
But subsidies available now are much lower. After Beijing slashed
support for buyers sales fell 4% last year, according to the China
Association of Automobile Manufacturers.
More broadly, incentives such as subsidies are among several
factors that can influence the take-up of electric vehicles, along
with charging infrastructure and the range of cars available.
The French government told state-backed Renault it could only
receive a loan of more than $5 billion if the company joined an
electric-battery venture with Total SA and Peugeot owner PSA Group.
Air France-KLM must reduce domestic routes that compete with train
services as well as cut domestic carbon dioxide emissions by 50%
before 2024 if it wants access to a near $8 billion loan
When the German government unveiled its second economic stimulus
package on June 3, it included a new round of incentives for
electric-car purchases, but policy makers stopped short of giving
auto makers the broader financial support they lobbied for.
Volkswagen said the company welcomed the stimulus package,
especially the move to lower sales tax, a spokesman said. "It could
have a positive impact on consumption."
The renewable energy sector, which accounts for around 10% of
global power generation, looks set to get another boost in the
latest government stimulus packages. Renewable energy has dominated
investments in new power capacity in recent years over coal and gas
as costs have come down.
The EU said it would dedicate 25% of its recovery package to
climate action and has proposed a new investment fund to focus on
clean energy technologies such as wind, solar and battery storage.
The bloc will invest around $17 billion in the fund, according to
the European Commission.
"We were already seeing acceleration away from fossil fuels in
several countries before Covid[-19], including South Korea,
Vietnam, Chile and Indonesia," said Andy Kinsella, chief executive
of Mainstream Renewable Power Ltd. The Ireland-based wind and solar
business is active in 12 countries, including Vietnam and
"Anything that accelerates this trend is welcome, and that
includes the EU's recovery package," he said.
William Boston in Berlin contributed to this article.
Write to Sarah McFarlane at firstname.lastname@example.org
(END) Dow Jones Newswires
July 07, 2020 05:25 ET (09:25 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Air France KLM (EU:AF)
Historical Stock Chart
From Jul 2020 to Aug 2020
Air France KLM (EU:AF)
Historical Stock Chart
From Aug 2019 to Aug 2020