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Towards a recovery plan? Let’s learn from 2008

1 April 2020 - Blog post - By : Quentin PERRIER, PhD

The world is confronted with a health crisis that has caused a global social and economic shock – and in the short term we must be focused on responding to this disaster. Nevertheless, it is also important to start preparing now for the aftermath of the COVID-19 pandemic to avoid a deep and lasting economic recession. Around the world, international, national and local stakeholders are starting to draw up recovery plans. Many recognize that actions that contribute to climate goals can be an effective part of improving both the economy and the resilience of our society. We thus have an opportunity to accelerate investments that will be both pro-recovery, as well as contribute to the fight against climate change. However, this will require that we do not repeat the mistakes of the past, as explains I4CE’s Quentin Perrier, who draws parallels from the post-2008 financial crisis recovery plan.


In the near term, the main priority must be in response to the health emergency. At the height of this health emergency, the priority must be is to slow down the epidemic, to ensure the continuity of services that are essential to the functioning of our society. As of early April, the coronavirus has now caused more than 10,000 recorded deaths in France, 30,000 persons hospitalized, and more than 7,000 people are in intensive care. Limiting the number of people affected by Covid-19 and treating those who are is the absolute priority today.


However in the near future, an economic recovery plan will be needed to ensure that this crisis health is not coupled with a lasting economic depression. For each month of containment in France, the OFCE estimates that a third of global GDP is being lost. To counter the looming recession, many including Antonio Guterres, the UN Secretary General, are stressing the need for a recovery plan that encompasses  increasing public investment, stimulating private investment and supporting household demand. Both internationally and in France, although premature for concrete announcements, discussions on what shape the recovery plan should take have already begun. Within these discussions, many are noting that any recovery plan  should also anticipate the growing challenge that is on the horizon: climate change.


Before looking forward, it is also useful to look back – this is not the first crisis that we have had to face. In 2008 following the collapse of the banking and financial system, European Member States put into place an extensive financial and economic package. While most agree that the resulting recovery plan made it possible to speed up economic recovery, some have pointed to the fact that the response did little to help put the European economy on low-carbon resilient trajectory. If we hope that the response to the current crisis will be both pro-recovery and pro-climate, we must learn from the past to replicated the measures that worked – and change those that did not.



In 2008, Stimulus Package of €26 billion in France

The French stimulus plan announced by the President of the French Republic in December 2008, consisted of budgetary and fiscal measures amounting to €26 billion, broken down as follows:


  • €11.6 billion in support for corporate cash flow, notably through tax and fisca measures.
  • €10.5 billion in public investment, shared between the State (€4bn), public companies (€4bn) and local authorities supported by the State (€2.5bn).
  • €2 billion in favour of sectors particularly exposed to the effects of the economic crisis (housing and automotive).
  • €2 billion for measures to support employment and the income of the most modest households.


This plan was then supplemented by other measures, including: the automobile pact, which increased the overall effort to €35 billion; the intervention of other public players; and finally the introduction of additional measures to support consumption or investment (introduction of the RSA unemployment system, reduced VAT in the restaurant sector, etc.).



The missed opportunities of a “roundabout” plan

In the 2008 recovery plan, a small part of the total was devoted to pro-climate activities. The State invested more than €700 millions in low-carbon transport infrastructure and the energy renovation of State buildings. Public companies were also called upon to contribute with an announced effort of nearly €3.5 billion in climate-friendly investments (via RATP, SNCF, EDF, GDF-Suez and the Post Office). But the actual contribution of these companies proved to be four times lower than expected. Above all, these one-off amounts remained low compared to the additional investments that would be necessary to meet France’s climate objectives: between €15 and 18 billion per year according to I4CE’s estimates.


Rather, the remaining vast majority of the plan consisted of infrastructure spending that was neither favourable to climate goals, but  nor unfavourable. There was probably a large number of investments that could nevertheless have been better oriented towards low-carbon sectors, or at the least taken into account environmental criteria. For example, the introduction of a “scrappage premium” certainly helped to revive the automobile industry, but the criteria were too lax that it did not direct consumers towards the purchase of low-carbon vehicles. Today, to help ensure that the recovery package will not repeat kind of bias, it is now possible to rely on the recently finalized EU taxonomy for sustainable activities published by the European Union that lists detailed criteria for qualifying an investment as green.


Another example: nearly €400 million of additional public investment were devoted to road maintenance and to speeding up the implementation of roadway modernisation programmes. It was also on this occasion that motorway concessions were generously extended in return for work commitments by the concession companies. This observation has moreover led some to nickname the 2008 recovery plan as the “roundabout plan”. This is not a very flattering description for works that do not really involve a low-carbon transition, nor have they had the expected economic effects in the short term: the works actually began in 2010 and extended until 2013, with very little immediate counter-cyclical effect.



Aiming at responsive sectors, by mobilising financial intermediaries and local authorities

Drawing on the 2010 assessment by the French auditor court’s (Cour des comptes) assessment of the 2008 recovery plan, a number of useful lessons can be drawn for today:


  1. Take into account the ease of implementation. In the 2008 plan, some measures could be quickly initiative, such as the thermal retrofitting of renovation of buildings – particularly public buildings – while others suffered from delays. In recent years, the observed rapid increase in renovation work (with a tripling in three years of the cases handled by ANAH), the installation of renewable energies and public transport public works all appear to indicate a strong growth potential that can be mobilised in the short term.
  2. Include financial players as accelerators and facilitators. In 2009, French domestic promotional bank Caisse des Dépôts made a “major contribution” by rapidly mobilising funds to address liquidity problems in the banking sector, social security and local authorities; and by stepping up its support for public investment in social housing and transport infrastructure.” Public banks, more generally, can be mobilised again.
  3. Include local and regional authorities. Local and regional authorities have a key role to play in the low-carbon transition, but they were poorly supported in the 2008 stimulus package. The incentive system designed at that time did not work: no local authorities were noted that had modified their investments. New incentives will therefore be needed, to be developed in partnership with local governments themselves – particularly to take into account at times downwardly-oriented budget predictions.


These lessons can and should be taken into account in the design of a pro-recovery and pro-climate COVID recovery package. From I4CE’s perspective, investing in actions supporting climate objectives can be an fruitful and important part of such a plan, capable of combining two objectives: boosting the economy in the short term and investing to prepare for a low-carbon resilient future. But one question remains: where exactly should we invest?


To support these discussions in France, I4CE published in early April a quantified proposal for a public financing plan of an additional €7 billion per year. Building on the French low-carbon development strategy (SNBC), the plan proposes  30 measures, targeting seven key sectors for both the climate and the economy. This plan would trigger an estimated additional €19 billion of public and private investment annually. The proposal is available on I4CE’s website here: “Investing in the climate will contribute to overcoming the crisis”.

To learn more
  • 02/19/2024
    Landscape of Climate Finance in France – Edition 2023

    I4CE’s Landscape of Climate Finance is an overview of climate investments made by households, companies and public authorities. Such investments include retrofitting buildings, purchasing electric vehicles, installing renewable energy, as well as paying for rail, cycling and urban public transport infrastructure.

  • 12/01/2023
    Climate change and residential real estate: what are the risks for the banking sector?

    Residential real estate in France is a key target for transition policies, and a the sector is highly exposed to climate risks. With While housing home loans accounting for almost 85% of outstanding household loans in France, it is legitimate to ask how climate risks are passed on from the real estate sector to banks. This article, written with the Banque de France, explores investigates the exposure of residential real estate to present and future climate risks – present and future – and as well as their transmission to bank the lending activities of the banking sector.

  • 10/19/2023
    Is the transition accessible to all French households?

    The issue of access to the transition for all households, in particular, for low- and middle-income households, has become central to the French public debate, as recently shown by the French President’s speech on ecological planning, when he referred to “an ecology that is accessible and fair, that leaves no one without a solution”. This growing awareness is particularly in response to the yellow vests protests: expecting households to take steps towards the transition if they have no access to solutions (electric cars, public transport, home insulation, heating upgrades) results in a rejection of transition policies and leads us collectively to a dead end

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