Building Back Better: How Big Are Green Spending Multipliers?

IMF Working Papers, March 19, 2021

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Provides estimates of output multipliers for spending in clean energy and biodiversity conservation, as well as for spending on non-ecofriendly energy and land use activities.
Uses a new international dataset.
Concludes that every dollar spent on key carbon-neutral or carbon-sink activities can generate more than a dollar’s worth of economic activity.
Notes data limitations: not all green and non-ecofriendly expenditures in the dataset are strictly comparable.

Estimated multipliers associated with spending on renewable energy investment: 1.1-1.5.
Estimated multipliers associated with spending on fossil fuel energy investment: 0.5-0.6.
The multiplier for renewable energy investment is larger than that for fossil fuel investment with over 90 percent probability.
Results survive several robustness checks.

Analysis covers clean energy and biodiversity conservation spending as well as non-ecofriendly energy and land use activities.
Based on a new international dataset; comparability across some green and non-ecofriendly expenditures is limited due to data constraints.

Findings lend support to bottom-up analyses arguing that stabilizing climate and reversing biodiversity loss are not at odds with continuing economic advances.
Implication: green spending can be an economically stimulative tool, with some green investments generating more than a dollar of economic activity per dollar spent.

By Nicoletta Batini, Mario di Serio, Matteo Fragetta, Giovanni Melina.
March 19, 2021.
Series: IMF Working Paper No. 2021/087; DOI: https://doi.org/10.5089/9781513574462.001

Source: Building Back Better: How Big Are Green Spending Multipliers? (IMF Working Paper No. 2021/087, March 19, 2021).