When the first cases of the novel coronavirus, or Covid-19, started emerging from Wuhan, China, few would have imagined the havoc it would wreak on the world. Despite China flattening the curve domestically, the highly contagious virus has become a global pandemic with cases reported from 165 countries. At the time of writing this, 198,426 cases and 7,987 Covid-19 deaths have been reported worldwide. To make matters worse, fears of a global recession akin to the 2008 financial crash triggered by the pandemic have compounded the health emergency. The global outbreak though, also offers a peek into what climate action at the requisite scale might look like, and a chance to correct our current economic path.
As the number of cases reported worldwide escalates and industries stall due to uncertainties in supply chains, the dents are beginning to show in economic growth projections for the year. According to the UN, the pandemic could cost the global economy at least US$ 1 trillion, and potentially up to US$ 2 trillion. Earlier this month, the Organisation for Economic Cooperation and Development (OECD) downgraded estimates of global growth in 2020 from 3% to 2.4%. Just a week later, a decline in energy demand, owed in part to the spread of the virus, triggered a crash in oil prices to below US$30 per barrel. With public gatherings prohibited in several countries, conferences, concerts and sporting events have been cancelled en masse. Widespread travel restrictions and general uncertainties have resulted in a massive shock to the aviation industry with an estimated 50 million travel and tourism jobs at risk from the pandemic. Despite an uptick in measures such as video conferencing and working from home for a range of urban white-collar jobs, losses in employment are likely to get much worse if the virus is not contained considering that the vast majority of jobs even in developed economies cannot be done remotely.
Unfortunately, the shock to conventional industry has not translated to a fillip to renewable energy and electric mobility. In fact, factory closures in China, coupled with a global drop in demand, has resulted in cuts in projected growth in the two sectors for the current year. Just this week, Bloomberg NEF (BNEF) downgraded its forecast for solar demand to 108-143 GW from its earlier projection of 121-152 GW, which it said would mark the first annual fall in solar capacity additions in at least three decades. The BNEF forecast also underlines the risk a prolonged outbreak holds for the wind energy sector and the likely downturns in demand for EVs and batteries.
From a climate perspective, the chaos caused by the pandemic has resulted in deep uncertainties regarding the fate of this year’s crucial COP 26, to be held in Glasgow in November, while other conferences have already been rescheduled or affected. The costs of the Covid episode are also expected to dent climate finance as governments put together stimulus and bail out packages for affected industries. But as the world hurtles towards an economic recession, the global outbreak has also brought to light the deep link between economic growth and carbon emissions. In the first month of the outbreak, while China effectively locked down, emissions from the country had inadvertently dropped by 25%. A similarly drastic reduction in pollution levels in Europe’s worst affected country, Italy, also currently on lockdown, has been reported. Assuming an improvement of 2.5% in carbon efficiency, in line with the trend over the past 10 years, carbon emissions may decline by 0.3%- the first fall in emissions since the 2008-09 financial crisis.
Despite the UN warning that carbon emissions need to be halved by 2030 to avert catastrophic climate change impacts, any fall in emissions due to the Covid-triggered recession is likely to be temporary. If the recovery from the financial crash of 2008-09 is anything to go by, emissions are likely to rebound over the coming years and erase any reductions achieved this year, as governments aggressively push through energy-intensive stimulus packages to revive the economy. The Covid episode though does offer a glimpse into what it would take if climate action of the requisite scale were to be taken today. The outbreak has forced companies and governments to take cognisance of energy-efficient modes of work, such as working from home and staggered work hours, but it has also exposed the precariousness of the majority of the workforce, not just in terms of health, but also with regards to climate and the inevitable economic transition. Somewhat fortuitously, it also offers a chance at course-correction.
This year was slated to be a crucial year for climate negotiations as governments are supposed to submit plans to decarbonise by 2050 and also set shorter-term 2030 targets which include higher ambitions in terms of cutting carbon emissions through expansion of non-fossil fuel energy and improving industrial energy efficiency. Despite the UN warning that carbon emissions need to be halved by 2030 to avert catastrophic climate change impacts, experts warn that the pandemic might hurt the transition if previous responses to economic recessions are emulated.
The timing of the pandemic though also offers governments with the opportunity to realign economy and climate, and move towards a sustainable balance increasingly necessitated by worsening climate impacts.While history tells us that economic slumps are followed by a spike in emissions, the current outbreak could represent an inflection point as governments scramble to devise revival plans. If governments deviate from the conventional path of pumping funds towards fossil fuel-intensive growth plans and instead pivot towards renewables and prioritise a balance between growth a climate, the covid pandemic could indeed be the unlikely but much needed shock needed to spur global climate action. Whether this happens though, depends on big economies such as the US, China and India to enact green growth policies and move beyond simply propping up fossil fuel industries.
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