A tale of two crises

Newsletter - March 18, 2020

The shock doctrine: A global recession aggravated by the Covid-19 pandemic could have major and long lasting effects on climate action | Photo: Kyodo News

A tale of two crises

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.

Climate Science

Red flags: India battled record temperatures last summer along with one of its wettest monsoons, which is a cause for concern, according to the WMO | Photo: The Financial Express

WMO report raises concern over extreme weather in India

Extreme heat in India along with its erratic rainfall pattern, and extreme cyclone season in the Indian Ocean last year were among some of the major concerns that found a mention in the World Meteorological Organization’s (WMO) report titled ‘Statement of the State of the Global Climate in 2019’, which was released this past fortnight. The report flagged the high temperatures reported in the country between May 2019 and June 2019, especially the 48°C recorded at New Delhi’s Palam Airport on June 10. Flooding in western and northern India because of above-average rainfall in the monsoon season – the wettest since 1994 – also finds a mention, as does Cyclone Fani, which made landfall in Odisha last year.

Globally, the report stated that the mean temperature between January 2019 and October 2019, temperatures was 1.1±0.1°C above pre-industrial levels – making the past five years almost certainly the five warmest years on record, and the past decade, 2010-2019, the warmest decade on record.

Ocean heat reached record levels in 2019 as did the rising seas, the report stated. The report also mentions low sea-ice extent was observed last year in both the Arctic and the Antarctic.

1.2 billion people may suffer from heat stress by 2100 if GHG emissions are not curbed: Study

An estimated 1.2 billion people would be exposed to heat stress caused by 3°C of warming annually by 2100 if greenhouse gas emissions are not curbed, a new study published in Environmental Research Letters found. Heat stress is the body’s inability to cool down effectively through sweating and can damage vital organs.

While other heat stress studies tend to focus only on heat extremes, they don’t take into account the impact of humidity on our health. This study found that humid days have become more intense and frequent as a result of global warming and this combined with extreme heat would be detrimental to human health.  

Study identifies reptiles especially vulnerable to climate change

Reptiles with scales, also known as Lepidosauria, such as iguanas and viper snakes, may be particularly vulnerable to climate change, a new study found. These vulnerable species are found in large numbers in Neotropical, Afrotropical, Australian, and Nearctic realms, according to the study. As a possible solution, the study stated that these areas could be looked at as possible targets for conservation efforts.

Climate Policy

Boon or bane? The Indian government’s plan to expedite green clearances has received mixed reviews from environmentalists | Photo: Hindustan Times

Indian govt pushes for faster green clearances

India’s environment ministry has proposed certain changes to expedite green clearances, a move that has not gone down too well with experts and activists. Among the changes proposed in a draft are the implementation of an online system, and decentralisation and standardisation of the approval process.

Environmentalists, however, believe this draft defeats the purpose of having an approvals process, while some believe these changes will bring new projects under green scrutiny for the first time.

India announces plans to cut cooling by up to 40% by 2038

The Indian government announced an ambitious plan to cut down on the country’s demand for cooling by 25-40% by 2038. This move, announced by Minister of State (MoS), Ministry of Environment, Forests and Climate Change (MoEFCC), Babul Supriyo, is in line with the government’s India Cooling Action Plan that was launched in March 2019 and mentions actions such as refrigerant transition and enhancing energy efficiency to help reduce demand.  

Vedanta’s Jharkhand steel plant gets nod despite forest encroachment

India’s environment ministry gave forest clearance for a proposed Vedanta steel plant in Jharkhand, despite allegations of encroachment by the state forest department. The ministry regularised 174 hectares of encroached forest land in Bokaro district.

There are several cases that remain pending in the high court and district court against ESL, which constructed the plant on the encroached land before Vedanta took over the company in 2018. While the official statement from the ministry called the regularisation a ‘resolution involving a reconciliatory view, not a compromise’, an official, who spoke to Down To Earth, on condition of anonymity, said, “Had this been about any other encroachment, things would have been very different.”

India issues draft notification on how to handle its battery waste

A draft notification for battery waste management has been issued by India’s environment ministry. The notification includes regulations for all Schedule-1 batteries that have been split into two categories — primary cells or non-rechargeable batteries (alkaline, aluminium-air, zinc chloride batteries) and secondary cells or chargeable batteries (Lithium-air, Lithium-ion polymer batteries).

The proposed draft included several suggestions such as a battery cannot be sold if it contains more than 0.0005% (5 ppm) of mercury by weight or if a portable battery contains more than 0.002% of cadmium. Used batteries must also be collected by the manufacturer, importer, assembler, and re-conditioner from consumers and dealers by setting up collection centres, as per the draft.

Air Pollution

Lion's share: Over 11% of the total national clean air budget has been allotted to Mumbai to tackle its worsening air pollution problem | Photo: Citizenmatters.in

Mumbai bags biggest share of country’s clean air fund

Mumbai is set to get the biggest share, ₹488 crore of the total ₹4, 400 crore National Clean Air budget, parked with the Urban Development Ministry.  Mumbai’s local bodies will control more funds than the environment ministry’s annual budget of ₹460 crore earmarked for the National Clean Air Plan (NCAP). The Centre, in its 2020-21 budget, allocated ₹4,400 crore to clean air pollution in cities with populations of more than a million.

Forty-two of 50 such cities in states will benefit from the fund. Remaining eight cities are kept out of its ambit as air quality is not a major issue there. The second highest annual allocation is to Kolkata ( ₹385 crore), followed by Bengaluru ( ₹279 crore), Hyderabad ( ₹234 crore) and Patna ( ₹204 crore). Half of the annual grant will be released based on the performance, that will include assessment of the improvement in reduction of particulate matters, PM 10 and PM2.5 (equal weightage of 50%) as calculated in January 2021. The first instalments will be used to build capacity of local bodies.

Covid-19 hampering transition to cleaner BS-VI vehicles, as China shuts down parts market

Coronavirus may badly hit India’s transition to cleaner BS VI fuel compliant vehicles in India as the supply parts from China is disrupted by the virus outbreak, warned the automobile manufacturers’ lobby, Society of Indian Automobile Manufacturers (SIAM). They said many automakers in India import about 10% of their raw materials from China. Therefore any disruption in supplies may critically hamper production across all segments including Passenger Vehicles (PV), Commercial Vehicles (CV), Three-Wheelers (3W), Two-Wheelers (2W) and gravely affecting Electric Vehicles (EVs).

Not just in India, supply of parts from China has hit the global market. Analysts warn of a bigger fear: following the outbreak consumers are losing interest in buying cars and trucks. As the global cases rise and new ones get reported in the US, experts estimate a cut in 2020 sales by nearly 300,000 units in the US alone, which would be the lowest since 2014. Globally 3.5 million units have been deducted from the forecast, more than half of which is attributed to China.

Lung damage from air pollution likely to increase coronavirus death rate

Compromised lungs because of long-standing air pollution in cities are likely to increase the coronavirus death rate, experts have said.  City dwellers and those exposed to toxic fumes are at a higher risk than others. Scientists cited evidence from previous coronavirus outbreaks showing that those exposed to dirty air are more at risk of dying. Analyses of the Sars coronavirus outbreak in China in 2003 found that infected people who lived in areas with more air pollution were twice as likely to die as those in less polluted places.

Anti-air pollution beauty products dethrone fairness creams

Fairness creams have been dethroned by anti-air pollution skin care products – that’s the conclusion of the latest study by Nielson. The global data and research company said that traditionally, fairness had comprised half the ₹7,000 crore skincare category, anti-pollution creams are rising in the double-digits compared with overall skincare, which is growing at 7%. Toxic air quality, depleting ozone layer, and wider climate concerns have all caused a huge shift in consumers’ attitude over the past few years, the study said.


Shockwaves: The Yes Bank crisis could have put up to ₹12,000 crore in loans to renewable developers at risk | Photo: PTI

Yes Bank crisis hits renewable energy finance, projects worth Rs1 trillion at risk

The Reserve Bank of India’s (RBI) moratorium on cash-strapped Yes Bank, one of the largest lenders to renewable energy projects, has sent developers into a panic mode. They say they cannot risk raising finance for almost 30GW of renewable energy projects that are now in the pipeline and will require funds to the tune of ₹1 trillion. 

India’s renewable energy programme will require $80 billion in investments till 2022. Mint reported that Yes Bank’s loan exposure to India’s clean energy sector is expected to be to the tune of ₹12,000 crore.

Renewable energy firms spooked: Will govt extend safeguard duty by 4 more years?

With Covid-19 already impacting project-commissioning schedules, the government has also moved to raise import tariffs on equipment. The domestic solar manufacturers’ lobby (ISMA) has asked the government to extend safeguard duty for another four years on solar imports – it expires on July 29 this year – to protect the businesses of domestic players. The Centre has initiated a probe to decide if it should extend the duty. In July 2018, the government had imposed safeguard duty for a period of two years on solar imports from China and Malaysia. From 2018 to 2019, 25% safeguard duty was imposed, which was reduced to 20% from July 30, 2019, to January 29, 2020, and 15% from January 30, 2020, to July 29, 2020. 

India imported solar equipment worth $1,180 million from China in April-December FY20.

Total value of solar photovoltaic cells or solar cells imports, whether or not assembled in module or panel, stood at $1,525.8 million for the April-December period of FY20, ET reported.

Andhra Pradesh discoms clear dues till Sep 2019, pay wind, solar developers

In a big relief to renewable energy developers, Andhra Pradesh discoms have cleared dues as directed by the court and cut down the practice of reducing purchase of renewable energy. The discoms paid ₹600 crore that they owed to wind and solar developers till September 2019. The court directed the state to pay wind developers at a tariff of ₹2.43 per unit and solar developers at ₹2.44 per unit. The YSR Congress-led government wants to renegotiate solar and wind power purchase agreements signed by the previous administration because it believes the contracts were signed at rates higher than those in other states.

Sop to meet 175GW by 2022? Centre removes upper tariff ceiling, developers celebrate

In order to meet the ambitious 175GW by 2022 target, the Centre has removed the upper ceiling tariffs in future bids for solar and wind projects. Developers are applauding the decision as a “win-win situation” for the industry and the government, Mercom reported. Developers said the decision would make tariffs purely market-driven without artificial caps. They pointed out that it may not make much of a difference to the actual tariffs in solar reverse auctions, which have already touched the ₹2.50 (~$0.03)/ kWh level in the latest bidding. For the wind sector, this decision may mean higher tariffs. The Centre has asked central implementing agencies such as SECI and state discoms to purchase renewable energy from a single source or a combination of renewable sources, with or without storage as per their buying policy.

Wind sector grew by 38%, but domestic wind equipment manufacturing sector slumped 

The first 11 months of the current fiscal year (2019-2020) witnessed a 38% spike in the wind energy sector. India set up 2,043 megawatt (MW) wind power capacity during this period compared to 1,480 MW added in the last financial year, new and renewable energy minister RK Singh said. The minister said the government has a target of achieving 60,000 MW of installed wind power capacity by December 2022, of which, a capacity of 37,669 MW has already been commissioned as on 29 February of FY20, with 9,236 MW of projects under implementation and 1,200 MW under bidding. 

However,  the introduction of a competitive bidding mechanism proved bad for the growth of the sector. The fall has been attributed to shoddy assessment of ground situations, which adversely affected the manufacturing sector. DTE reported that auctions are carried out, as part of the bidding mechanism, without a time-table; there is no assurance of a take off.

The wind energy sector is growing globally. According to a recent study, the market for global wind turbine materials is forecast to surpass $8 billion by 2029 on the back of an anticipated Compounded Annual Growth Rate (CAGR) of around 7%, backed by an increasing number of wind power installations globally.

IEA warns coronavirus could spell a slowdown in clean energy transition

Covid-19 poses a threat to long-term climate action by undermining investment in renewable energy projects, that’s the warning of the International Energy Agency (IEA). The global energy watchdog expects the economic fallout of Covid-19 to wipe out the world’s oil demand growth for the year ahead, curbing the fossil fuel emissions that contribute to the climate crisis. However, IEA chief Fatih Birol has warned the outbreak could spell a slowdown in the world’s clean energy transition unless governments use green investments to help support economic growth through the global slowdown. He said in the absence of the right policies and structural measures this decline will not be sustainable.

Electric Vehicles

Clean all the way: India's first EV charging stations entirely powered by the sun and capable of charging 30-40 vehicles simultaneously were unveiled this week | Photo: Energy Digital

First solar-powered EV chargers for India unveiled in Gurgaon and Pune

India’s first fully solar-powered EV charging units have been unveiled in Gurugram (Gurgaon) and Pune, as a joint venture between Lithium Urban Technologies and Fourth Partner Energy. The facilities can recharge up to 30 and 40 EVs at the same time, respectively, and the Gurgaon unit will be used by Lithium for its fleet service to American Express and Wipro.

Two more of the facilities are planned for Delhi NCR by 2021, and one each for Mumbai, Bengaluru and Hyderabad.

Delhi to get second e-cab service, NTPC to deploy electric buses in Andaman

Delhi NCR will soon see the launch of another electric cab service — Evera, by Prakriti E-Mobility Pvt. Ltd. — which will have 500 electric Tata Tigors in its fleet. The service will be app-based, and Prakriti will also set up 30 slow chargers and five fast chargers across New Delhi. Delhi’s first e-cab service, Blu-Smart, was launched back in January 2019.

Meanwhile, NTPC’s wholly owned subsidiary, NVVN, will launch 20, nine-meter electric buses across Andaman and Nicobar Islands from August 2020. It will support the initiative by installing public charging facilities. NTPC is India’s largest coal power producer, and the project could be an indication of the slow but steady progress towards e-mobility in India.

GM’s new soft-shell batteries could beat Tesla’s at 400 miles per charge

General Motors (GM) has reportedly developed a new EV battery that would power an electric car for up to 400 miles (640km) on a single charge, and thus potentially outpace Tesla’s superlative batteries by about 10 miles. Called Ultium, GM’s batteries also come as a soft pouch that would allow for more assembly shapes than possible with flat bed arrays of cylindrical cells.

However, the biggest outcome could be that the new technology drags EV battery prices down to below $100/kWh — which is often touted as the threshold for EVs to be truly cost-competitive with conventional cars.

Fossil Fuels

Doling out cash: Japanese and Chinese banks named as biggest bankrollers of coal projects in the world by new Bloomberg report | Photo: Greenpeace

Chinese & Japanese banks account for 50% of global coal finance

A new report by Bloomberg says banks from China and Japan together account for 50% of the world’s continued support to coal mining and coal-fired power. The aggressive consumption of the fuel in Indonesia and Vietnam and the cash flow from Australia’s coal exports are among the factors pulling financiers in, says the report, and the sector has now evinced interest even from private equity firms.

Some of the biggest names to enter the fray are the Industrial and Commercial Bank of China and Japan’s Sumitomo Mitsui, apart from JP Morgan and Caterpillar Financial. 

Carbon Tracker: 2030 to be the tipping point for renewables against coal in all markets

Carbon Tracker’s new report says that cheaper renewables are putting $640 billion worth of financing to new coal power at risk, and that power tariffs for 60% of the global coal capacity are higher than what could be achieved through clean energy. The report further goes on to predict 2030 as the tipping point for coal power, beyond which power from renewables will be cheaper across all markets.

That would imperil the 499GW of coal power plants currently in the pipeline globally, as it typically takes 10-15 years to recover their capital investments. The worst affected are likely to be China and India, with investments worth $158 billion and $80 billion, respectively, towards a cumulative pipeline of 272GW (planned, or already under construction). 

Global CO2 emissions from power sector dropped 2% in 2019

Research by independent think-tank Ember has shown that global CO2 emissions from the power sector dropped by 2% in 2019 (over 2018) as the world used less coal power. Also, the majority of the drop in coal-fired power output — which fell by 3% in the same period — came from Europe, which used 24% less of the fuel in its transition to renewables. Coal’s share has also been shrinking in the US, as more of its utilities switch to natural gas.

However, even though power from renewables surged by 15% last year, the trend would have to hold year after year, and coal power needs to lose ground by 11% each year, if global warming is to be capped at 1.5°C.

Oil prices plummet over OPEC-Russia standoff, Brent Crude currently at $30/barrel

A stand-off between OPEC and Russia over the issue of cutting oil supplies in response to falling market demand led to the price of Brent Crude plummeting to below $30/barrel this past fortnight. Demand has been falling due to the coronavirus throttling economic activity, but Saudi Arabia-led OPEC has been adamant over cutting supplies, to keep its prices and revenues from being affected too much.

However, Russia — itself a major oil producer — says that it is happy with prices as low as $25/barrel, and has refused to lower its share of supplies. As a result, Brent Crude is currently trading at just over $30/barrel — a far cry from its usual range of $50-$60/barrel. 

Unless the Covid-19 situation is resolved soon, demand could shrink even further and drive down prices down to as low as $20/barrel. That would hurt OPEC as well as Russia, but barring a mutual agreement, neither is likely to concede its position. 

Yet, on a positive note, shrinking activity — especially in the emissions-heavy sectors of aviation, road transport and power generation — will lower CO2 emissions worldwide.

European Commission axes rule on “ghost flights” to rein in emissions

The European Commission has axed the rule for airlines to fly “ghost flights” — flights that are flown nearly empty, only for the airlines to retain their airport slots — after reports questioned the climate impact of the practice. The Covid-19 crisis has severely lowered regional and international travel, but it also forced airlines to dispatch ‘ghost flights’, as agreements on slots with airports meant they had to use at least 80% of them within a calendar year, or lose them to their competitors.

However, the Commission is yet undecided on whether the ruling is a temporary suspension, or if the relaxation will be allowed after the coronavirus pandemic has subsided.