Building Back Better: How Big Are Green Spending Multipliers?

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

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Building Back Better: How Big Are Green Spending Multipliers?