COVID-19 and greening the economies of Eastern Europe, the Caucasus and Central Asia

 Introduction

The COVID-19 pandemic is a global health, social and economic challenge. Even as many countries grapple with a second wave of infections, governments around the world have accelerated the implementation of their medium- and long-term national strategies to stimulate the post-pandemic economic recovery. In many cases, including in the region of Eastern Europe, Caucasus and Central Asia (EECCA),1 this effort involves addressing environmental challenges for a ‘green recovery’. However, governments are tempted to adopt policies or approve projects that are more attractive to investors or help address short-term budget deficits during the pandemic, even if they have potential negative impacts on the environment. This creates a challenge. Even before the COVID-19 pandemic, the impacts of climate change were becoming increasingly evident across the region and the world. The risks of climate change will certainly not disappear even if the pandemic has been overcome. Without decisive action on climate change, even greater health, social and economic crises lie in the future. Therefore, it is essential that stimulus measures and policy responses to COVID-19 align with countries’ national environmental goals and international commitments on climate change (i.e. the Paris Agreement, Sustainable Development Goals) (OECD, 2020[1]).

Pandemic-related economic stimulus measures can be an opportunity to invest in the structural transformations and technological innovations needed for sustainable improvements in people’s lives. In addition to providing economic opportunities in the near term, such improvements are essential to enhance the overall resilience of societies. Both short-term and longer-term measures should aim to deliver both economic prosperity and wider well-being, improving productivity, enhancing resilience and decarbonising the economy. The window of opportunity to take strong action on climate is closing fast and short-term economic measures will have a significant impact on the ability to meet global goals.

Greening recovery measures can provide countries with an opportunity to “build back better”, combining an emphasis on restoring economic growth and creating jobs with achieving environmental goals. One estimate suggests a green recovery could create 395 million jobs by 2030 globally (World Economic Forum, 2020[2]). The green transport sector alone could generate up to 15 million jobs, and investment in renewable energy could lead to up to 63 million jobs worldwide by 2050 (UNECE, ILO, 2020[3]; Layke and Hutchinson, 5 May 2020[4]). Investments in green infrastructure can become a central point in climate-resilient economic recovery due to its vast job creation potential. In the short term, however, a green transition will likely affect “brown” sectors negatively (e.g. those with a large environmental footprint) as new jobs may not demand the same skills or be in the same location (OECD, 2020[5]).

This policy paper provides an overview of the environmental aspects of EECCA governments’ responses to COVID-19, starting from the first confirmed cases of the virus in February 2020. The analysis revealed that measures can be categorised in several ways. One way is based on a schematic that categorises policy responses, including on tax policy, by phases of the COVID-19 pandemic (Figure 1).

 

Figure 1. Phases of policy response during and after the COVID-19 pandemic

Source: (OECD, 2020[6])

Phase 1 (immediate response) includes immediate health-related measures. For example, government regulations enforced the wearing of predominantly single-use surgical masks in all EECCA countries. This has led to increased medical waste and put pressure on existing, still underdeveloped, waste management infrastructure. Moreover, some governments in the region (i.e. Armenia, Azerbaijan, Georgia and Ukraine) issued recommendations to wrap the masks in plastic bags before disposal, which led to even more plastic waste. While some of these measures are justified by the health emergency, it is important that they are considered as temporary.

Phase 2 (cushioning impacts and preserving capacity) includes measures to mitigate the socio-economic consequences of the pandemic that may have positive or negative environmental impacts. Examples include providing support to micro, small and medium enterprises (MSMEs), as well as sector-specific support for agriculture and energy. Some measures may have clear positive implications on the environment, such as the “National Greening Programme for SMEs” in Moldova or “Business against COVID-19” training webinars organised in Armenia. However, some measures may have negative impacts, such as subsidising fuel prices for farmers in Georgia and Kazakhstan, prolonging the moratorium on environmental control in Kyrgyzstan and providing tax exemptions to gasoline producers in Kazakhstan.

Phase 3 (recovery) includes measures implemented specifically to ensure a green recovery. Examples include generating employment through afforestation and incorporating green elements in economic recovery packages. In addition to new measures, the COVID-19 pandemic highlighted specific needs that accelerated the development of new programmes, or placed existing ones higher on the policy agenda. These ranged from promoting green financial instruments in Kazakhstan and implementing previously adopted Action Plans that promote environmental activities in Moldova, to the development of a new industrial policy strategy focused on energy efficiency as one of the priorities for economic recovery in Uzbekistan.

Since the main objective of this analysis is to assess whether responses to the COVID-19 pandemic may have positive or negative implications on achieving environmental objectives of EECCA countries, the paper uses the following categorisation of recovery plans and measures:

• The first part of the analysis presents measures with potential positive environmental implications. This includes incorporation of green elements in national COVID-19 economic recovery plans; acceleration of pre-existing environmental policies; and green support to businesses. This part also includes a snapshot of support provided by development partners.

• The second part reviews mixed recovery measures, which include those with positive and negative implications.

• The third part of the analysis presents examples of policy developments likely to create negative consequences for the environment.

Table 1 presents the categories and shows the types of measures implemented by individual countries. However, it may be too early for definitive conclusions on whether a policy will ultimately have a positive or negative impact on the environment and on countries’ progress towards greening their economies. Thus, this review aims to stimulate discussion and to support the EECCA countries in further analysis and actions to make the economic recovery as green as possible.

The information included in the review has been collected using publicly available government sources and online news articles. In addition, it reflects interviews with local experts and feedback from the members of the GREEN Action Task Force from EECCA countries, for which the OECD serves as Secretariat. As the crisis is ongoing and the health and economic situation is rapidly changing, there have been limitations on accessibility and consistency of information. Further work is thus needed to complete this inventory and assessment.

The information contained in this paper is based on the November 2020 data.

 Background

The COVID-19 crisis, which began in late 2019, was declared a pandemic by the World Health Organization (WHO) on 12 March 2020. It inflicted enormous damages on people’s health, livelihoods and well-being globally. The first confirmed cases of the virus in the Eastern Partnership (EaP) countries were reported in late February 2020 and in Central Asia in mid-March (OECD, 2020[7]; OECD, 2020[8]). The most affected countries in the region have been Armenia, Moldova, Georgia and Ukraine with more than 200 deaths per million people (Figure 2).2

 

Figure 2. Total confirmed COVID-19 deaths per million inhabitants as of 30 November 2020 (log scale)

Note: No data available for Turkmenistan

Source: Dataset is sourced from the European Centre for Disease Prevention and Control and maintained by Our World in Data, https://ourworldindata.org/coronavirus-source-data.

The consequences of the pandemic, as well as related restrictions introduced by national and local governments, have put health care systems under strain; disrupted trade; and slowed down production, consumption and investment. They have triggered the most severe economic and jobs crisis in recent years (Annex 1.A).

Early data make clear that the economic and social costs of the pandemic are large. They will be felt in years to come, with severe but heterogeneous impacts on different countries and regions (OECD, 2020[7]; OECD, 2020[8]).3

 Short-term impact of the economic slowdown on the environment: The case of air quality

The widespread lockdown measures have had both positive and negative short-term impacts on the environment.

One of the negative impacts results from the large increase in single-use plastic and plastic waste. Global sales of disposable face masks alone were expected to increase from USD 800 million in 2019 to USD 166 billion in 2020 (UNCTAD, 2020[9]). Estimates show that increased consumption of single-use plastic will roll back global efforts to reduce plastic waste by one to three years. This includes the use of plastic items such as masks, gloves, hand sanitiser bottles and food packaging as well as improper disposal practices.

COVID-related measures have also negatively affected the tourism industry, which might diminish incentives and reduce funding for managing national parks and protected areas. For example, the budget for Georgia’s Agency of Protected Areas in 2020 decreased from more than EUR 7 million to approximately EUR 4 million. To support countries’ protected areas during the pandemic, the Caucasus Nature Fund4 provided EUR 1.2 million and EUR 500 000 grants to Georgia and Armenia, respectively (Caucasus Nature Fund, 2020[10]; Government of the Republic of Armenia, 2020[11]).

At the same time, the lockdowns have had positive impacts in terms of short-term improvements in air quality due to restrictions on mobility (including transport of goods and people) and reduced activity of enterprises. One study analysed the impact of lockdown in Georgia on air pollution in Tbilisi compared to the same period in 2017‑19. Over 17‑27 April 2020, when the movement of automobiles was banned, ambient levels of fine particulate matter (PM2.5), coarse particulate matter (PM10), nitrous oxide (NO2) and carbon monoxide (CO) all decreased, although the levels of ground-level ozone (O3) increased (Amiranashvili, Kirkitadze and Kekenadze, 2020[12]). The Armenian Environmental Monitoring Information Centre reported a decline in NO2 emissions between 1‑16 April 2020 compared to 1‑16 March of the same year, which corresponds to the timing of the lockdown.5 Major cities in Central Asia experienced similar trends (Figure 3, Figure 4, Figure 5).

 

Figure 3. PM2.5 levels in selected major cities in Central Asia during the months of lockdown in 2020 compared to the same period in 2019 (Bishkek, Kyrgyzstan)

Note: Dotted lines represent the periods with quarantine restrictions in the cities.

Source: AirNow US Department of State, www.airnow.gov/international/us-embassies-and-consulates/.

 

Figure 4. PM2.5 levels in selected major cities in Central Asia during the months of lockdown in 2020 compared to the same period in 2019 (Nur-Sultan, Kazakhstan)

Note: Dotted lines represent the periods with quarantine restrictions in the cities.

Source: AirNow US Department of State, www.airnow.gov/international/us-embassies-and-consulates/.

 

Figure 5. PM2.5 levels in selected major cities in Central Asia during the months of lockdown in 2020 compared to the same period in 2019 (Tashkent, Uzbekistan)

Note: Dotted lines represent the periods with quarantine restrictions in the cities.

Source: AirNow US Department of State, www.airnow.gov/international/us-embassies-and-consulates/.

Despite short-term improvements in key indicators and anecdotal evidence of improved air quality in major cities, this positive environmental outcome is likely to be temporary. In terms of climate change, it will have a negligible effect on total CO2 concentration in the atmosphere. Indeed, daily global emissions of CO2 reduced up to 17% due to quarantine restrictions but by June 2020 the levels were already just 5% below 2019 levels (World Economic Forum, 2020[13]). Preliminary estimates of the World Meteorological Organization (WMO) indicate an annual global emission reduction between 4.2‑7.5% in 2020. This reduction is expected to slow the rise of atmospheric CO2 levels by 0.08-0.23 parts per million (ppm) per year. However, the concentration is still rising and the slowing falls within the 1 ppm natural variability caused by annual fluctuations in the carbon cycle and changes in carbon sinks (WMO, 2020[14]).

Reductions in global daily emissions were mainly driven by the 40% decrease in transport CO2 emissions. On the other hand, the power and industry sectors contributed less to the decline with a decrease of 22% and 17%, respectively (PIK, 2020[15]). These findings are supported by a study that assessed the changes in air quality in Almaty, Kazakhstan (Kerimray et al., 2020[16]). The study showed that concentrations of PM2.5 fell by an average of 21% between 19 March and 14 April 2020 compared to the same period in 2018 and 2019. However, they still exceeded the daily limits of the WHO air quality guideline on 18 of the 27 days assessed. At the same time, concentrations of probable carcinogens such as benzene and toluene were two to three times higher than averages recorded over the same period between 2015 and 2019 (Kerimray et al., 2020[16]).6 Since traffic decreased dramatically during the lockdown, these findings point to coal-fired energy production in urban areas that did not cease operations during this period. An analysis of air quality in Almaty by the Ministry of Ecology, Geology and Natural Resources of Kazakhstan during the lockdown further illustrates this point (Skiban, 2020[17]). It showed that 52% of pollution originates from transport emissions and 48% from two coal-fired combined heat and power plants “CHP-2” and “CHP-3”. This was surprising as an earlier ministry evaluation did not find large emissions from power plants and had attributed air pollution mostly to traffic-related sources (Skiban, 2020[17]).

 Existing and planned green measures of the post COVID-19 government recovery plans in the EECCA region

The outbreak of COVID‑19 has forced governments to mobilise resources and channel efforts to safeguard public health and support the economy. As part of these efforts, most EECCA countries have implemented measures that promote greening their economies:

• “greening” COVID‑19 responses (Armenia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan)

• creating green jobs (Armenia, Azerbaijan, Kazakhstan)

• accelerating environmental plans (Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova, Uzbekistan)

• providing green support to MSMEs (Armenia, Georgia, Kazakhstan, Moldova)

• promoting alternative means of transport (Azerbaijan, Georgia, Ukraine)

• supporting green recovery of the agriculture industry (Georgia)

• increasing fines for pollution with medical waste (Georgia)

• incorporating water-related measures in COVID-19 responses (Ukraine, Uzbekistan).

At the same time, some countries have adopted measures that may limit progress towards a green economy:

• rolling back or freezing adoption of environmental regulations (Belarus, Kazakhstan, Ukraine)

• increasing fossil fuel production in economic stimulus programmes (Ukraine)

• providing unconditional tax exemptions to energy-intensive industries (Kazakhstan)

• imposing a prolonged moratorium on ecological control (Kyrgyzstan)

• redirecting financing from planned green investments (Armenia, Ukraine).

The next sections present an overview of existing and planned measures of the post-pandemic government recovery plans that may impact the environment in the EECCA region. A list of all identified measures is available separately.

 Mixed recovery measures

Air quality

The possible link between exposure to air pollution and the risk of developing a respiratory disease, such as COVID-19, provides additional impulse for countries to reduce air pollution (Box 4). Some countries in the region are already taking steps towards these goals:

• Azerbaijan plans to import 300 environmentally-friendly buses that run on compressed natural gas or have hybrid engines to replace old vehicles that contribute to high levels of air pollution in the capital.15

• In light of the pandemic, Kyrgyzstan pledged to revise the items of the Action Plan of Comprehensive Measures to Improve the Environmental Situation in selected regions in 2020‑23 with the focus on reducing air pollution.16

• In Georgia, the mayor of Tbilisi proposed a ban on car travel for two days a week after the end of the national lockdown to prolong its positive environmental effects. To promote alternative transport, City Hall also installed electric scooters and announced its plans to buy bicycles for rental by residents.17

• In Ukraine, the number of cyclists in the capital increased by 2.5 times during the lockdown. To extend this effect after the lockdown’s end, city authorities will continue developing Kyiv’s cycling infrastructure. This will involve increasing the number of bicycle lanes and expanding the “Nextbike” bicycle rental network.18

 

Box 4. Possible relationship between COVID-19 mortality and air quality

There is emerging evidence of a potentially positive correlation between poor air quality and COVID-19 mortality. A number of correlational studies, such as (Zhu et al., 2020[46]) in the People’s Republic of China, show a statistically significant positive relationship between increased air pollution and COVID-19 infection rates. Another recent study in Italy shows that daily new cases are positively correlated with particulate matter levels and the Air Quality Index (Zoran et al., 2020[47]). Specifically, fine particulate matter (PM2.5) – tiny suspended particles with a diameter of no more than 2.5 microgrammes – has been linked to respiratory morbidity and mortality. High levels of PM2.5 are often caused by vehicle exhaust, power plant and industrial emissions. A Harvard study (Wu et al., 2020[48]) has shown that an increase of 1 microgramme per cubic metre (μg/m3) in the long-term average PM2.5 is associated with an 11% increase in the COVID-19 death rate in the United States on a county level (Figure 6).19 Similar results were published in a study of 355 municipalities in the Netherlands. It found that a municipality with 1 μg/m3 more PM2.5 concentrations will have 9.4 more COVID-19 cases, 3 more hospital admissions and 2.3 more deaths (Cole, Ozgen and Strobl, 2020[49]). While more research is needed to better establish causality, this relationship provides countries with an additional impetus to continue pursuing their environmental objectives and improve air quality.

 

Figure 6. COVID-19 mortality rate ratios per 1 μg/m3 increase in PM2.5 and 95% confidence interval using daily cumulative COVID-19 death counts from 18 April to 18 June 2020 in the United States

Source: (Wu et al., 2020[48])

Energy

Most recovery measures in the energy sector focus on household budget support, where governments and utilities have made commitments to reduce financial hardship on the population during the crisis. Support measures include payment moratoria, additional assistance with bills or pledges not to disconnect customers in arrears (Box 5). Such considerations are crucial to alleviate the socio-economic hardship caused by COVID-19. However, they could better reflect the environmental objectives in addition to being well-targeted, means-tested and time-bound. Finally, they should be phased out once people’s livelihoods and the economy are back on a stronger footing.

 

Box 5. COVID-19 response and recovery measures in the energy sector in the EECCA region

Armenia: One measure to address the social consequences of COVID-19 included helping people pay utility bills (electricity, gas and water) in February 2020.

Azerbaijan: The Government Support Programme “100 kWh of Preferential Light Limit for the Population” provided support to residential users of electricity for April-May 2020. The preferential (discounted) limit on the use of electricity by the population increased from 300 to 400 kW/h.

Belarus: The Belarusian government postponed the introduction of the tariff for heat supply and gas supply in the presence of individual gas heating devices for the population outside of the labour force. This measure, planned for 1 May 2020, has been postponed by one year to accommodate the financial difficulties of the population as a result of the pandemic.

Georgia: To alleviate the impacts of the COVID-19 pandemic, the state budget financed utility bills for households with low electricity and gas consumption (March, April, and May 2020). According to the Georgian National Energy and Water Supply Regulatory Commission, the total estimate for this measure amounted to GEL 150 million (USD 45 million). This initiative has been extended to cover the period November 2020 through February 2021 for those who had reduced income during the pandemic.

Kazakhstan: In April and May 2020, the government helped more than 1.6 million people to pay their utility bills. As part of recovery, Kazakhstan has also provided exemptions to producers of gasoline (excluding aviation) and diesel fuel from the payment of excise taxes until 31 December 2020.20

Moldova: No specific direct support measures have been envisaged for the energy sector. However, a regulation banning the disconnection of customers in case of late payment for communal services, including for electricity and heat, has been introduced.

Tajikistan: Until the end of 2020, to reduce production costs of enterprises and prevent increased prices for domestic products, paid services to the population and inflation, the government postponed consideration of an increase in tariffs for services such as electricity, water, irrigation, communications and utilities.

Source: (OECD, forthcoming[50]; ILO, 2020[51])

Agriculture

Support to the agriculture sector has been reinforced in light of the pandemic to ensure food security, operation of regional trade and value chains, and livelihoods of farmers, smallholders and fishers. Some of the measures include discounted price for diesel fuel in Georgia and Kazakhstan and a 50% reduction in tax rates for the use of water resources for irrigation of agricultural land in Uzbekistan (April, May and June 2020). Although these measures are justified given the circumstances caused by the COVID-19 pandemic, they can be better aligned with environmental considerations. The “Plant the Future” programme, launched as part of the economic recovery of the agriculture industry in Georgia, is an example of good alignment. It provided co-financing for purchasing and installation of irrigation system for perennial crops during the pandemic.21 Such crops do not have to be reseeded or replanted every year and thus protect soil from erosion and improve soil structure.

Waste management

With the rise in use of disposable personal protective equipment during the pandemic, countries worldwide have been facing health and environmental trade-offs. To minimise the risk of spreading infection, countries such as Armenia, Azerbaijan, Georgia and Ukraine have issued statements recommending that citizens wrap used face masks in one or even two plastic bags. Increased use of single-use plastic bags puts an additional strain on the environment, as well as on countries that already operate at reduced waste management capacities.

At the same time, some EECCA countries are also taking steps to manage additional waste generated during the pandemic:

• Azerbaijan included measures to improve solid waste management in the Action Plan designed to mitigate the negative consequences of COVID-19.22

• Large cities in Kazakhstan and the City of Osh in Kyrgyzstan installed dedicated disposal containers for medical waste in public places. However, these initiatives were small-scale and did not reach rural regions.23

• The Ministry of Environmental Protection and Natural Resources of Ukraine24 and a nongovernmental organisation (NGO) in Belarus25 issued recommendations to use multi-use face masks to reduce the ecological footprint.

• Georgia has significantly increased fines for pollution with hazardous (medical) waste – by 25 times for individuals and by 10 times for legal entities.26

Water, sanitation and hygiene

Some countries have also started to incorporate water-related issues in their post-pandemic recovery plans. In its state programme, Ukraine includes “Water supply, sewerage, waste management” in the list of priority economic activities.27

In its “Budget for Citizens – 2020”, Uzbekistan allocates additional funds (UZS 10 trillion or USD 940 million) from the Anti-Crisis Fund to implement measures to mitigate the negative economic impact of the pandemic (UNDP Uzbekistan, 2020[30]). This includes construction and reconstruction of water supply and sewerage facilities, as well as irrigation and amelioration objects (approximately UZS 1 trillion or USD 94 million).

 Conclusions and recommendations

The analysis in this paper has provided different examples of measures taken in the EECCA region to respond to public health, social and economic consequences of the virus that might have positive or negative implications on the environment.

The paper clearly shows that several countries have already taken targeted steps to ensure a green recovery by incorporating environmental objectives in their new medium- and long-term strategies. A number of action plans also aim to green economic recovery packages with the support of development partners. Many implemented measures can serve as an accelerator of a green transition.

However, in many cases, measures lack coherence and are contradictory to each other and to broader environmental objectives. Given the high reliance on extractive and carbon-intensive industries in the region, it is imperative that green transition is placed higher on the policy agenda to accelerate economic transformation and meet global climate goals. This, in turn, implies better aligning economic recovery measures with national environmental goals and international commitments on climate change. In such a scenario, temporary jobs can turn into permanent jobs in green economic sectors and grants to businesses are used to invest in energy efficiency and renewable energy technologies.

An analysis based on experience from OECD member countries provides a good baseline for recommendations on how to better align economic recovery measures with national and international goals on climate change, biodiversity and wider environmental protection (Box 6).

While these recommendations are largely targeted at OECD member countries, they are equally relevant and applicable to the EECCA region. Their implementation can help ensure that economic recovery is aligned with broader environmental objectives set within national strategies for sustainable development, green growth and low-emission development. Such strategies should aim to accelerate structural transformation, create green jobs and transition from reliance on hydrocarbons and other commodities. A focus on the transition to low-emission and resource-efficient economies will be a central component of such a process. For example, the investment plans associated with recovery will be critical in setting the environmental pathway for the next few decades, and crucial for global efforts to avoid climate change.

In addition to the general recommendations presented above, the following list proposes more specific actions for consideration in the EECCA region:

• Ensure that moratoria on environmental inspections and monitoring during the lockdown that are aimed to help relieve businesses from additional administrative and financial burden, as well as fossil fuel subsidies, are well-justified, targeted and temporary and are lifted as soon as the health situation improves.

• Incorporate environmental conditions in specific support provided to the agriculture and aviation industries to incentivise firms to transition towards cleaner technologies and fuels, with performance requirements related to environmental, social and governance criteria.

• Ensure strong links between the provision of financial support, including from development partners to strengthen economic recovery measures, and incorporation of green measures by the recipients in their operations.

• Maintain, and where possible, increase commitments to fund green measures, and ensure that funding for environmental agencies and ministries returns at least to pre-pandemic levels soon after health emergencies are addressed. This is particularly relevant for schemes the adoption and stimulation of greener technologies. These tend to demonstrate societal benefits in the medium to long term, and often beyond the remits of their initial mandate.

• Share good practices on effective greening of economic stimulus packages among the countries in the region and beyond.

• Ensure that social and economic resilience to future shocks, including impacts from climate change, is made a strategic priority.

As the COVID-19 emergency evolves, the effects of governments’ stimulus packages are in constant need to be assessed with respect to the long-term environmental impacts. Systematic evaluation of the proposed measures is therefore crucial. This should be an important element of the country decision making and international co-operation processes.