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Study: Green government investments drive quicker and bigger rewards than spending on fossil fuels

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Public investments in clean energy and energy efficiency create more jobs and boost the economy faster than government spending on fossil fuels infrastructure, according to research published today by the Smith School of Enterprise and Environment.

Researchers from the University of Oxford institution parsed more than 900 papers on the economic characteristics of green spending before concluding there is “strong evidence” that green investments outperform fossil fuel investments in terms of job creation.

The study also found that investments in energy efficiency and clean energy bolster energy security far quicker than investments in coal, oil, and gas projects.

Alongside strong economic benefits, the research notes that there are also greater ‘co-benefits’ to green investment than so-called ‘brown’ investments, including improved health outcomes, reduced environmental degradation, and a stabilised climate.

Brian O’Callaghan, lead author and head of the Oxford University Economic Recovery Project, urged governments around the world to steer their investments towards renewables projects and energy efficiency upgrades in response to the global energy supply crunch.

“We suggest, if governments are going to spend, green energy makes a far smarter investment than fossil fuel,” he said. “Put bluntly, most public spending on new gas will be too slow to matter. Energy efficiency and green energy measures are much faster. So far as public investment goes, energy efficiency measures are some of the fastest to influence the energy supply-demand balance. Clean energy follows behind. Gas investment can be significantly slower.”

Published as an advance article in academic journal the Annual Review of Environment and Resources, the study was described by the authors as the world’s first systematic review comparing economic outcomes of green and brown government spending.

It comes as governments around the world have increased their investments in fossil fuels in the wake of Russia’s invasion of Ukraine and the resulting soaring oil and gas prices, arguing such investments are needed to reduce their reliance on fossil fuel imports from Russia.

Campaigners and energy exports have warned that such an approach is short-sighted because it will lock in consumers’ and economies’ exposure to international oil and gas prices for decades to come.

Alongside plans to accelerate renewables and nuclear development, the UK has announced a new tax break for fresh fossil fuel exploration in the North Sea as part of its response to the gas price crisis, and last week approved the Jackdaw Gas Field that had previously been rejected on environmental grounds.

O’Callaghan stresed that oil and gas markets were inherently unpredictable, and as such urged policymakers to take action to reduce their economies’ exposure to fossil fuels.

“While military crises are not always predictable, volatility in oil and gas markets very much is,” he said. “Our future prosperity will depend on how quickly and how uniformly we can move away from fossil fuels.”