Building Back Better: How Big Are Green Spending Multipliers?

Estimates multipliers for spending in clean energy and biodiversity conservation to help inform stimulus measures for a post-COVID-19 sustainable recovery

From:: Foreign, Commonwealth & Development Office
Published: 19 March 2021

Document Type:: Working Paper
Theme:: Climate and Environment and Economic Growth
Authors:: Batini, N, di Serio, M, Fragetta, M, Melina, G and Waldron, A

Abstract

This paper estimates multipliers for spending in clean energy and biodiversity conservation to help inform stimulus measures for a post-COVID-19 sustainable recovery. Using a new international dataset, part of which was especially assembled for this analysis, we find that every dollar spent on key carbon-neutral or carbon-sink activities—from zero-emission power plants to the protection of wildlife and ecosystems—can generate more than a dollar’s worth of economic activity. The estimated multipliers associated with green spending are about 2 to 7 times larger than those associated with non-eco-friendly expenditure, depending on sectors, technologies and horizons. These findings survive several robustness checks and suggest that ‘building back better’ could be a win-win for economies and the planet.

This work is part of the ‘Macroeconomics in Low-income countries’ programme

Citation

Nicoletta Batini, Mario di Serio, Matteo Fragetta, Giovanni Melina, and Anthony Waldron (2021) Building Back Better: How Big Are Green Spending Multipliers? IMF Working Paper No. 2021/087