Renovating Europe: a path to green recovery

A green recovery from the pandemic would heal its social scars by quickly creating jobs and fostering inclusion.

Europe is in a pivotal position to lead a green recovery from the economic blows of the coronavirus crisis. Unlike in many individual countries, the flagship policies paving the way for climate-neutrality, such as the European Green New Deal, are already in place to shape the path forward.  

The necessary shift to a climate-neutral continent, with net-zero greenhouse-gas emissions, must be a ‘just transition’. This emergent concept is now more at the core than before the crisis, as the pandemic has only aggravated social and economic disparities. 

An obvious example is the employment divide. Many people have been able to continue working from home during periods of enforced social distancing—but typically in higher-paying and more reliable work than those employed by restaurants, driving taxis or in the retail sector. And those who cannot work remotely, while also facing more risk of exposure to the virus, have more often been confronted too with loss of employment, temporary or permanent.

Stark choice

As unemployment rates climb and the depth of the economic shock becomes plain, the choice as to what recovery will look like becomes equally stark. A dirty global recovery, fuelled by immediate economic concerns and ramping up a return to the pre-pandemic emissions trajectory, would quickly drive us away from any climate goals. From the other side, a green recovery, including climate mitigation, needs to get off the ground immediately—but with green investment will come jobs. 

Countries such as Italy and Spain, with already high unemployment rates, are seeing unemployment further rise sharply. Looking back at the last economic shock, caused by the 2008 financial crisis, recovery in Spain was accelerated by enhancing the technology sector. And there remains room for growth in this sector, through addition of value and investment in innovation. 

But the current economic climate, in a globalised context, was made manifest with the announcement in May by Nissan of the closure of its manufacturing plants near Barcelona, at the direct expense of almost 3,000 jobs—albeit with union resistance leading to a stay until the end of next year. 

The move has been attributed to intensified competition with China over the manufacture of electric vehicles (EV) and a shift away from the European market, yet European countries such as Germany are positioning themselves to combat such developments. With parts of its recovery package dedicated to stimulating EV infrastructure growth and battery production, instead of funding the traditional automotive industry, Germany is setting the tone for green recovery and investment. 

Building renovation

Long overdue for green investment is building renovation in Italy and Spain. But with pre-pandemic financial burdens being exacerbated, the already low rate of refurbishment is likely to fall further. This jeopardises not only first steps to decarbonise the stock but more importantly the wellbeing of those who cannot afford adequately to heat or cool their dwellings as they stay home or shelter in place. 

With uncertainty around continued waves and outbreaks of Covid-19, however, a ‘new normal’ of distance learning, remote working and being at home is here to stay. In an effort to address these realities, Spain established a minimum living income, beginning in June, to help individuals and families cope.

As we similarly anticipate this adjustment and prepare for coming seasons, addressing energy poverty will be critical for short- and long-term gain. In the near term, catalysing building refurbishment for all will help reduce heating bills over winter months as well as strengthen an economic recovery with local, non-transferable jobs. About 19 new direct jobs in the construction sector are created from every €1 million investment in improving the energy efficiency of EU building stock. 

Looking to the longer term, boosting employment in construction, Europe’s large industrial employer, not only makes sense in terms of economic recovery but allows renovation and refurbishment to facilitate a green recovery, increasing the EU’s energy security and moving the needle on climate objectives.

Eco-bonus

A prime case is Italy’s eco-bonus incentive, a stimulus measure put forward by its tax authority. The scheme offers a 110 per cent tax write-off of the cost of an energy-efficiency upgrade to a home or building. For a building industry which had ground to a halt, along with other non-essential business, the incentive aims to stimulate the economy as goods are purchased from suppliers, tradespeople return to site and revenues are generated which are then taxable. 

Services are expected to move from under-the-table in Italy’s large shadow economy to legitimate—again generating taxable income. The scheme is tailored to attract investment in the private and public building sectors, upgrade the country’s depreciating buildings and recharge investor optimism following a period of record low sentiment. It highlights the role of inclusive local governance, as it opens doors for public authorities to upgrade their social housing and pursue otherwise complicated projects. 

In Spain, the municipality of Barcelona is working together with the European Investment Bank to finance 40 energy-efficiency and social-infrastructure projects, to support climate-change mitigation and adaption while promoting economic recovery. The €95 million aimed at urban regeneration will create 1,500 jobs during construction. Half of the proposed projects will serve areas the city has labelled vulnerable, with all new social infrastructure meeting the nearly-zero-energy criterion.

As everyone races to recover from the standstill, the implications for our collective approach to climate-change mitigation and resilience-building are high. To make a green recovery happen will require inclusive action which provides jobs swiftly and improves the quality of lives—through building renovation and beyond.