The objective of the proposed report is to support policy makers in designing appropriate fiscal policies for a sustainable recovery from the Covid-19 crisis. The aim of the proposed report is to support policy makers in designing appropriate fiscal policies for a sustainable recovery from the Covid-19 crisis. The report will focus on key discretionary fiscal measures that governments can take in response to the COVID-19 pandemic. It will identify stimulus policies and strategies to combine revenue raising and spending objectives with a more fundamental, long term structural reform on a pathway towards net-zero emissions. Given the pace of the crisis and the need for timely advice, the four chapters of the report will be released individually as they become ready, and then will be compiled in a volume for further dissemination. Emerging findings will also be disseminated through Notes or blogs. The first chapter, The COVID-19 crisis and the road to recovery: green or brown? will review existing evidence on the impact of the pandemic on output, tax revenues, deficits and employment levels in both developed and developing countries. Using information from the IMF policy tracker (which includes 196 economies) and countries economic data, the chapter will discuss: How is this crisis different from others? How did firms and workers adapt to the crisis? What have been the policy responses to address the employment crisis provoked by COVID-19? The chapter will also discuss empirical evidence on the employment impact of brown and green recovery packages from past episodes of recessions and recovery; and it will provide insights to policy makers on how the crisis is being resolved in developed and developing countries and on how fiscal policies could contribute to a green recovery. The second chapter, Environmental fiscal reforms for a sustainable recovery will discuss the appropriate mix of fiscal policies to sustainably recover from the COVID19-induced crisis and create employment. The chapter will compare different tax multipliers, as well as brown and green spending multipliers. It will show that a green fiscal stimulus, funded by environmental tax reforms, can provide an effective boost to the economy and increase employment, while building the foundations for sound, sustainable growth in the future. The third chapter, 'Developing fiscal rules to support the transition to a green economy', will focus on strategies to ensure that fiscal responses to the current crisis – as well as climate-induced crises - preserve the credibility of the fiscal framework. The chapter will discuss: How should governments ensure the credibility of the fiscal framework while revising escape clauses in the event of a crisis? What is the rationale for allowing a special treatment to green public investment – relative to other priorities, such as health care or public education? Finally, it will discuss how other aspects of green stimulus packages (carbon taxation, spending for adaptation) should be considered in the design of fiscal rules. Finally, the fourth chapter Sectoral employment impacts of green fiscal policies in the aftermath of the Covid-19 crisis will discuss (i) the sectoral implications of the Covid-19 crisis and (ii) policy implications of green fiscal packages supporting a recovery in a COVID-constrained economy. By using a multi-regional input-output matrix, the chapter will compare different scenarios: i) an economy-wide carbon tax with no revenue recycling; ii) a carbon tax in combination with a reduction of payroll taxes and social security contributions in low-skill occupations; iii) a carbon tax in combination with green investments. Accompanying tools will be created to facilitate hands-on advice. The primary audience are policy makers, but the report will also serve as a useful resource internally, underpinning WBG engagements on critical issues facing client countries.
