March 31, 2020
This post is part of Smart Prosperity Institute’s Smart Stimulus Project. To see other posts from this project, click here.
Want to receive the latest analysis and insights on smart stimulus for a resilient economic recovery? Sign up for our monthly updates here.
When the tallies are in for 2020, we will almost certainly see a significant dip in global carbon emissions. We’ve never been able to make a projection like that only three months in to a calendar year. Yet the novel coronavirus has had just that effect.
In China, the world’s single largest polluter, emissions were down 25% in the month of February because of declines in industrial activity and transportation brought about by the virus. While data for other parts of the world are still coming in, early studies show reductions in localized air pollution in many parts of Asia, Europe and the US. Indeed, the worldwide drop in air travel, widespread factory closures and dramatically lower car use in some countries has some estimating a global drop in carbon emissions of 1.2% to 5%.
This would mark the first recorded drop in global emissions since the financial crisis of 2008-09, when energy-related emissions fell 1.4%.
But this is nothing to celebrate. Not only for the obvious reason, which is the human toll that COVID-19 is taking, but also because it could damage long-term climate momentum in three important ways.
Three reasons we shouldn’t celebrate:
1. It’s a blip. Blips don’t mitigate climate change.
2. It’s stalling investment in clean technologies.
3. It’s sending the wrong message about emissions and the economy.
The first way is that, historically, short term drops in carbon emissions have been followed by rapid upswings. This was true in 2010, following the global financial crisis, when emissions from fossil fuel combustion had their highest ever jump. And it was true in the 1970s, when emission decreases caused by the oil crisis and then the US savings-and-loan crisis also proved to be blips, with emissions quickly resuming their previous trajectories.
Why just blips? Because they were the result of short-term decreases in energy demand, not the permanent substitution of carbon-intensive energy supply. When demand bounced back, so did emissions.
Blips don’t mitigate climate change. They only distract us from the hard work of inducing the reliable downward curves that do mitigate climate change.
The second reason that a pandemic-caused drop in emissions is nothing to celebrate is that the economic slowdown behind it will stall private investment in the clean technologies needed for more permanent emission reductions. Bloomberg New Energy Finance just cut its 2020 forecasts for solar power and electric vehicle demand because of the coronavirus outbreak. Similarly, the head of the International Energy Agency has warned that the current slowdown will “distract” investors from opportunities in clean energy. Almost on cue, Canada’s Suncor last week delayed the roll out of clean energy projects including its $300-million Forty Mile wind project in Alberta, citing uncertainty around COVID-19 on top of low oil prices.
The world’s transition to clean energy sources needs investment. When markets go quiet and the economy contracts, investors stay cautiously on the sidelines, taking wind out of the sails of the clean energy transition. One potential antidote to this? Renewed government signals, including green stimulus, which is explored in this new SPI blog.
The third reason that we shouldn’t celebrate an emissions drop in 2020 is that it sends the wrong message. It tells us that reducing greenhouse gas emissions and mitigating climate change comes at a heavy cost: jobs, livelihoods, retirement savings, widespread uncertainty and profound economic disruption. Whereas that is simply not the case.
Over the past two decades, some of the world’s biggest economies have been “decoupling” greenhouse gas pollution from economic growth. In the period 2005-2016, the United Kingdom’s emissions dropped 30% while its GDP grew by 18%; the European Union’s emissions dropped 18% while GDP grew 13%; New Zealand’s emissions dropped 5% while GDP grew 30%; and even Canada’s emissions dropped 4% while GDP grew 20%. The list goes on.
It’s these trends that send the right message – that we can fight climate change while growing the economy and improving livelihoods. In fact, many projections tell us of the economic rewards of investing in low-carbon solutions. Like the Global Commission on the Economy and Climate’s projection of USD$26 trillion in economic opportunity and 65 million new jobs created by international action on climate change by 2030.
What we need in 2020, and beyond, is for countries around the world to continue with the arduous work of decoupling carbon pollution from economic growth. That takes a combination of smart government policy, strong economy-wide innovation systems and serious private sector investment. That’s what will bring about reliable downward curves in national and global carbon emissions. Not a coronavirus-induced demand shock.
The 2020 coronavirus “dip” in global carbon emissions will at best be a distraction and, at worst, a problematic signal for markets, private sector investment and global citizens.
When we emerge from this health crisis, let’s turn our minds to a green economic recovery, and to how we can turn a blip into a long-term trend. Until that happens, let’s put the celebratory champagne on ice.