You are on the Green & Sustainable Hub website
You are on the Green & Sustainable Hub website, part of Natixis CIB.

Covid-19 economic crisis: heated debate about public support’s conditionality

"Greening" economic recovery plans is becoming a mantra. One of the latest calls came from the EU Technical Expert Group on Sustainable Finance (TEG). It argues that the Taxonomy, EU Green Bond Standard, and Paris-Aligned & Climate Transition Benchmarks, can guide public and private sector plans for recovery from the Covid-19 pandemic. The European Council’s recently announced Roadmap to Recovery is under scrutiny.

The TEG argues that recovery plans “should not support environmentally or socially harmful activities, which would worsen the current and future crises, locking in highly polluting infrastructure or promoting activities that do not contribute to social wellbeing for decades to come”. But we still fall short of a brown taxonomy to avoid that dead-end (see our article this month on EU’s Renewed Strategy).

“From the why to the how”: we must swiftly switch to calls in favor of green “recovery plans” to implementation specifics. What assets or projects should be prioritized, which ones have the highest co-benefits on climate and employment, what prerequisites should be required in exchange for public support. Sustainable finance offers usable tools that could be used for that purpose. A selection of them and structuring options are presented at the end of this article.


The interplay between globalization, climate change and pandemics

It is vital to avoid sidetracking from our already steep and perilous climate change mitigation pathways. Furthermore, pandemics and climate change share similar patterns. The French High level Council on Climate Change (thereafter the “Council”) brought an insightful contribution to this debate.  It has published a compelling report titled “Climate, Health: better prevention, better healing – accelerating the just transition to strengthen our resilience against health and climate risks”. It identifies socio-economic structural changes that created new vulnerabilities triggered by the covid-19 crisis.



Table 1 - Structural changes & vulnerabilities revealed by the covid-19 pandemic

  Changes Vulnerabilities

Globalization of trade and value chains, outsourcing of critical industries, intensification of mobility of all kinds

Interdependencies between societies and countries, fostering the rapid global spread of the epidemic and causing materials shortages

Urbanization, mobility and consumption habits, clearing and fragmentation of natural habitats, international trade in wildlife, even protected wildlife

Easy spread of zoonotic viruses to man

Reduced state intervention, decline in the welfare state and access to public services, decline in social protection

Challenges states encounter in the wake of the epidemic, despite the high level of scientific and technical development and the financial expenditures

Source: The High Level Council on Climate Change (2020), Climate, Health: better prevention, better healing



Table 2: Similarities between Pandemics & Climate Change

Global & systemic impact

  • Major and existential threats to humankind
  • Health and climate are common / global goods
  • Related crisis have far-reaching consequences (spillover effects)
  • The risks of the northern hemisphere summer followed by the Atlantic hurricane season will bring climate change back to the forefront, along with the risks of food shortages resulting from both the effects of the pandemic and climate change

Social & economic toll

Disrupt daily life, lead to deaths, destroy social & economic value

Relationship to science and time, intergenerational justice 

  • Effects are spread in time and space and question the interface between science and politics
  • Raise the question of whistle-blowers and the consideration of weak / low intensity signals
  • Complexity and nature of the threats generate numerous uncertainties, which are presented as such by the scientific community
  • Uncertainties hamper the perception of threats, both among decision-makers and public opinion


  • Inability to imagine the magnitude of the threat and take it seriously
  • Lack of prevention, anticipation and preparedness both make the health crisis and climate crisis hard to prevent and tackle

Exacerbates inequalities

  • Consequences are geographically and socially differentiated, in particular because vulnerabilities are not uniformly distributed
  • Inequalities in income and living conditions found in both health and climatic crisis create tensions within the population and reduce the acceptability and feasibility of mitigation measures while increasing overall system fragility and individual risk

Source: The High Level Council on Climate Change (2020), Climate, Health: better prevention, better healing



The Council warns that the combination of a pandemic episode and an extreme climatic event (drought, centennial flooding, heat wave, cyclone of very high intensity for overseas France, coastal submersion) is no longer a classroom hypothesis. Furthermore, rainfall in France in recent weeks has been very low and raises fears that a heat wave may break out while the pandemic is not yet over. In spite of agriculture mechanization, which is uneven across countries and farms, population lockdown has hindered the necessary work on farms around the world. Severe droughts would likely lead to a global agricultural crisis.



An unfit decrease in emissions: what we need is structural transformation

The Council stresses that the sharp decrease in French greenhouse gases emissions resulting from lockdown remains marginal and temporary. A rebound similar to that following the 2008 financial crisis is possible.



Table 3 - Reasons not to celebrate the current drop in emissions

#1 The drop in emissions remains
marginal in the trajectory towards carbon neutrality (for 2020, a fall of 5% of average annual emissions for 2019-23)

#2 Unsustainable fall with negative and undesirable side effects

#3 Drop based entirely on an imposed and temporary reduction in terms of travel and consumption.

The likelihood of a Rebound Effect
After the financial crisis of 2008, global CO2 emissions related to energy and cement decreased by 1.4% in 2009 before increasing by 5.9% in 2010 (-4.2% in 2009 and +3.4% in 2010 for France).  The climate component of the recovery plan in France in 2008 was around €1.7 billion, or 0.08% of GDP, out of a €26.5 billion recovery plan, or 1.4% of GDP.  This is due to counter-cyclical measures from a climate point of view: the scrappage premium benefiting thermal cars that emit more than the targets previously agreed with the manufacturers, road construction,

Remnent effects of the behavioral changes associated with the health crisis?
One ignores what will remain of the new transport habits, home/remote-working, short delivery channels, domestic solidarity.

Source: The High Level Council on Climate Change (2020), Climate, Health: better prevention, better healing



Guiding principles for a green “stimulus plan”

The Council has made recommendations for the greener recovery plans possible. It calls for reinforcing synergies between climate, environment and health: fight against pollution and imported deforestation, healthy diets, evolution of modes of transportation.



Table 4: Budgetary and fiscal measures to be deployed

Source: The High Level Council on Climate Change (2020), Climate, Health: better prevention, better healing


The Council has pinpointed some measures that could contribute to a green recovery alongside guiding principles for a green “stimulus plans”. This “recovery” must be green, not grey, maximise co-benefits for climate and ecosystems, and must not lock down on carbon-intensive trajectories. 




Table 5: Investment priorities for a Green Recovery

Source: The High Level Council on Climate Change (2020), Climate, Health: better prevention, better healing



Focus on public opinions: growing concerns about discrepancies between companies’ bailouts & sustainability objectives

A recent poll conducted by Ipsos in 14 countries revealed that 71% of adults globally agree that, in the long term, climate change is as serious a crisis as Covid-19 is. The survey shows widespread support for government actions to prioritise climate change in the economic recovery after Covid-19 with 65% globally agreeing that this is important.

- 63% of the French - and 65% globally- consider, it is important that government actions prioritize climate change in the economic recovery after Covid-19

- A majority of the public globally (68%) agree that if their governments do not act now to combat climate change, they will be failing their citizens. 58% of the French disagree that government should focus on helping the economy to recover first and foremost, even if that means taking some actions that are bad for the environment

The survey was conducted online with almost 28,000 adults between 16 April and 19 April 2020.

The French Citizen’s Climate Convention published its contribution to the covid-19 crisis with a focus on climate. It states: “We ask that the financing mobilized in the context of the emergency and recovery plans be socially acceptable, earmarked towards green solutions and that priority should be given to climate-friendly sectors for new investments. The recovery plans to be adopted at the end of the crises will mobilize massive financing mechanisms and inject considerable capital into the economy. We must therefore ensure that this boost in investment is channeled massively towards the ecological transition and takes into account the situation of the most fragile".


A mounting debate about “conditionality”

The pressure from public opinion lead to a mounting debate about the “conditionality” of public aids aiming at safeguarding businesses from bankruptcy and avoiding massive unemployment. Calls are becoming louder to ringfence funds and impose climate, social and value-added sharing (dividend, pay ratio) prerequisites in exchange of public support.

In France, the revised budgetary law encompasses a €20bn budget for capital stakes in companies in jeopardy. An amendment was adopted requiring the Agence française des Participations de l’Etat (APE) to guarantee that companies that will benefit from support “fully integrates, and in an exemplary manner, corporate, social and environmental objectives in their strategies, particularly in terms of the fight against climate change”. Within one year, a progress report is meant to be submitted to the Parliament. It is expected to describe the use of the public resources and take stock of the implementation of the aforementioned objectives, notably compliance with the Paris Agreement.

As evidence of this “win-win” or “trade-off” requirements for public support, Air France will have to cut its carbon emissions and domestic flights as conditions for government financial support (€7bn made up of state-guaranteed bank loans and loans directly from the state), France’s finance minister announced on April 29, 2020. The aid was granted on condition that the airline set the goal of becoming “the most environmentally friendly carrier in the world”.  The airline will no longer be allowed to sell purely domestic trips between Paris and domestic cities that are within a 2.5-hour train ride of the capital. Only passengers connecting from outside the country will be able to fly from Paris to places like Lyon, Bordeaux, and Rennes (only hubs for transfers). The airline would have to cut its carbon emissions by half per passenger and per kilometre by 2030, from 2005 levels. For flights specifically in mainland France, emissions would have to be halved by 2024. In a further condition, 2% of the fuel used by Air France’s planes would have to be derived from alternative, sustainable sources by 2025.“Lastly, investments will have to be directed in the coming years to renewing the fleet of long and medium-range planes to more effectively fight emissions,” Le Maire said.

We consider that the task is challenging for public shareholders and have identified various priorities.



Table 6 - Core missions & priorities in the Covid-19 for State Shareholder

Source: Authors (Natixis GSH), proposals from the Group “Nous sommes demain” (press release: here)