Coronavirus pandemic offers chance for sustainable recovery - IEA

Author: Tom Brown

2020/06/18

LONDON (ICIS)--The economic collapse caused by the coronavirus pandemic and the government investment programmes to galvanise recovery offer a “once in a lifetime” opportunity for policymakers to push global greenhouse gas emissions into decline, the executive director of the International Energy Agency (IEA) said on Thursday.

Integrating energy policy into government plans to reconstruct economies in the wake of the pandemic has the potential to realign the trajectory of global emissions levels without sacrificing economic  growth, according to Fatih Birol.

Carbon dioxide (CO2) emissions have risen each year since world leaders signed the 2016 Paris Agreement intended to keep global temperature growth within two degrees centigrade, compared to pre-industrial levels, casting doubt on whether policymakers' will was strong enough to meet the goals.

As seen in the 2008-9 financial crisis, emissions are expected to drop this year compared to 2019 as a result of production shutdowns, substantial falls in road and air travel, and sharp drops in industrial output.

Source: IEA

The extent that the pandemic has frozen the global economy, and the vast pool of stimulus freed up by governments looking to accelerate the reconstruction, offers a rare opportunity to shift economic growth on to a more sustainable path, an opportunity that was ignored in the last crisis, said the IEA director.

“We have received several calls from governments asking us what sort of role the energy sector can play,” he said, speaking at a press conference.

“When you look at the 2008 financial crisis we have seen that the global emissions in 2009 declined because of the global economy going down, but in 2010 it increased much more than the decline in 2009,” he added.

Conditions for more sustainable policy are currently better than a decade ago, according to Birol, due to the sharp falls in the cost of clean energy technology, the extent of the decline in emissions this year, and the growth of sustainability issues in public and government consciousness since then.

Built around investment in renewable energy, the development of innovations such as green hydrogen as a fuel source, increased market share for electrical vehicles (EVs), improved electricity generation infrastructure and improved efficiency are all part of IEA’s sustainable recovery roadmap.

The measures would cost around $1trn per year, but would increase global economic growth by 1.1 percentage points per year from 2021-23, with emerging markets standing to benefit the most from investment, according to IEA chief energy modeller Laura Cozzi.

“We are expecting a huge [emissions] decline in 2020, but that is nothing to be happy about,” she said.

“It comes at a huge cost in terms of economic, social [impact], and human lives.”

Direct government expenditure is expected to account for 30% of the investment the IEA envisages, but the other role governments have to play is in providing the right conditions to catalyse private sector investment, Cozzi said, including making regulatory approvals easy to maintain, co-funding investments, providing long-term contracts, and utilising central bank capital.

Measures such as the proposed EU Green Deal, a huge stimulus package intended at using the recovery as an opportunity to redraw the map on clean energy and sustainability, represent important steps, but the EU remains a small part of global consumption, according to Birol.

“The EU is taking an important step in right direction, being an important role model for other countries, but is responsible for 8% of global emissions,” he said.

In an update last month, the IEA noted that investment in clean energy is expected to fall this year, while the number of new coal-fired power projects receiving approval in Asia has climbed dramatically in the first half of 2020.

The shift towards cleaner energy is likely to impact on oil demand over time, Birol added, stating that countries reliant on the commodity should move to now to reduce dependence.

"The oil industry will be surely affected by the clean energy transitions, no company will be unaffected by the clean energy transitions, sooner or later," he said.

"For oil-producing countries it is high time for diversification."

Front page image: Wind turbines in Germany 
Source: imageBROKER/Shutterstock 

Focus article by Tom Brown

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