Covid-19: The Low-Carbon Crisis. My latest for @BloombergNEF is a deep dive into the implications of the pandemic on the energy and transport transition. TLDR: it changes everything: about.bnef.com/blog/covid-19-…
At the end of last year I predicted that energy-related CO2 emissions would peak and then drop by around 5% by 2030. Never before has one of my big predictions been proven quite so right, so quickly – albeit for entirely unforeseen and tragic reasons. about.bnef.com/blog/covid-19-…
I don’t feel particularly comfortable speculating about the impact of Covid'19 on the low carbon transition, given the scale of the human tragedy that is unfolding. But there is too much talk of quick recoveries and oh-so-clever green stimulus programs. about.bnef.com/blog/covid-19-…
If you think this will be over in a couple of months, I have some luxury cruise tickets to sell you. There have been 4 global recessions since WW2: 1975, 1982, 1991 and Great Financial Crisis of 2009. The Covid-19 Recession of 2020 might well top the list. about.bnef.com/blog/covid-19-…
We could end up in a few months on a 2-speed world, in which some countries and states have all but eliminated the virus, but in others it rages out of control. A humanitarian catastrophe. And the global economy would remain in deep recessionary territory.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
A vaccine is the only thing that really puts a stop to all this. A few dozen groups around the world have been working on one, several already beginning human trials. Maybe one will be available for general use before the end of the year. Here’s hoping!
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
And then there's the oil price collapse. With the message sinking in that the world is looking at peak demand within two decades, perhaps a fight for market share at some point was inevitable - but it could not have come at a worse time.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
Saudi Arabia tried something similar in 2014/15, no reason to believe this time will end differently: it can boast of its $9/bbl extraction cost, but its fiscal breakeven is around $80/bbl – think of the whole country as a massively inefficient producer. about.bnef.com/blog/covid-19-…
A sustained $30 oil price might drive U.S. shale producers into bankruptcy, but most would restructure and remain operational under new owners. Russia can survive low oil prices for a decade. But Saudi Arabia can last only 2-3 years before suing for peace.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
Spare a thought for poorer oil-producing nations, which are facing the dual catastrophe of a cratering oil price and an uncontrollable pandemic. Hard to see countries like Venezuela, Angola & Nigeria get through the next 24 months without extreme pain. about.bnef.com/blog/covid-19-…
In summary, it looks like the combined impact of Covid-19 and the oil price war could be on a similar global scale to that of the Great Financial Crisis. Never before have I described a scenario and so much wanted to be proven wrong.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
The clamor for a “green stimulus” has already begun. But pouring billions of dollars into electric vehicle charging stations, renewable energy projects or solar rooftops over the next few months will not keep people, safe, fed and employed (even if idle).
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
As soon as the immediate crisis has passed, however, and attention moves to reflating economies, that is the time to ensure that clean energy, transport and smart infrastructure is at the heart of any longer-term stimulus.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
Some examples. 1) Instead of bailing out car companies with cash, send a wall of demand for EVs their way. Make home delivery companies switch quickly to EVs. Accelerate the electrification of buses & taxis. Mandate public authorities buy only EVs.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
2) No bailout should benefit industries or business models that are not viable in the coming low-carbon world – such as low-cost airlines, coal-fired power generation, or uneconomic operations in shale oil and gas, oil sands and deep offshore oil.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
3) With wind & solar power so cheap, the issue is not making them cheaper. Focus on structural issues that could hold back deep RE penetration into grids: interconnections, storage, smart charging, demand response and electrification of heating & industry. about.bnef.com/blog/covid-19-…
Another idea: buy down the closure of aging fossil fuel plants – but only on condition that they are replaced with renewable-plus-battery combinations, not just as largesse for shareholders of assets that would anyway soon be stranded.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
4) Energy efficiency. You should mend your roof when the sun shines and insulate your building stock when there is excess capacity in the construction industry. But low energy prices will reduce the economic incentives, so we need a policy-led approach.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
And we must think about equity! The Great Covid-19 Recession might wipe $15 to $20 trillion off U.S. household wealth over the coming 2 years. If the bottom 50% are disproportionately hit, the backlash could make France’s “yellow vest” protests look tame. about.bnef.com/blog/covid-19-…
For all the extreme uncertainty today, one thing we do know: the Covid-19 pandemic will pass. Many of the new forms of behavior we are now adopting through necessity are going to prove sticky – and will act as powerful long-term brakes on emission growth.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
We are seeing massive new demand for home-schooling, homeworking, video-conferencing, remote medicine, online shopping, grocery deliveries, etc. Expect to see incredible changes in technology, business models, policy, behaviour and norms. Hold your hats!
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
Hard to think of a sector that won't see changes, all tending to reduce emissions: supply chains will be shorter; uptake of 3-D printing will be accelerating; countries dependent on tourism will be diversifying; food security will be moving up the agenda.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
With streets emptied of vehicles, what's to stop temporary diversion of road space to pedestrians & cyclists? And as we spend more time in and around our homes, won’t we demand our streets be more pleasant, our parks better-maintained, our air cleaner?
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
Covid-19 should also make us think about resilience. We've had a great few decades, but we've been complacent. Maybe now we'll pay more attention to those urging us to respect our planetary boundaries, and a bit less to those pretending they do not exist?
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
In summary: Covid-19 is causing a >20% drop in emissions this quarter; they will remain down until we have a vaccine, and probably a few more years while the economy recovers. Longer term, the crisis will accelerate the transition to a low-carbon economy.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
Also: #COP26 needs to be postponed. It is simply facing too many headwinds, in particular insufficient time to complete preparatory work, all governments distracted, and uncertainty as to whether the next U.S. President will be supportive or destructive.
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
It was certainly correct to push back the Tokyo Olympics. As an Olympian I feel for the athletes who have sacrificed so much to compete this year. But, when this is all over we will be able, like Dante Alighieri, to “leave hell and again behold the stars.”
about.bnef.com/blog/covid-19-…
about.bnef.com/blog/covid-19-…
