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How to make the economic recovery from coronavirus an environmentally sustainable one

Author: Dr Fatih Birol, Executive Director

In just a few short months, the coronavirus pandemic has overwhelmed hospitals around the world, killing thousands of people, disrupting travel and trade, and shuttering economies in an unprecedented global crisis. But while the world’s attention is rightly focussed on these urgent public health and economic issues, we should not lose sight of the global challenge of climate change.

Given the collapse in economic activity around the world, it is all but certain that carbon dioxide emissions will decline this year. This comes after emissions flatlined last year even as the global economy grew.

But I see no reason to celebrate a coronavirus-driven dip in emissions that will likely be achieved on the back of premature deaths, widespread suffering and economic hardship. As economies kick back into gear, emissions will rebound.

Governments will resolve this health crisis. And as they do so, the measures they put in place to help the world economy recover from this extraordinary shock should be designed with our climate challenge in mind. Their stimulus plans should seize the clear opportunities for creating jobs and improving vital infrastructure while accelerating the all-important transitions to cleaner energy.

“ When this crisis passes, the world economy will bounce back. Emissions must not. ”

Dr Fatih Birol

IEA Executive Director

Every country’s energy system has its own characteristics, and the use of public resources needs to be tailored to each situation. But there are five broad areas where governments can act.

5 areas to act on

1

Ignite demand through “cash for clunkers”

Consumer spending tends to fall sharply during downturns, so governments should encourage people to start shopping again for big-ticket purchases like cars and washing machines. Cash-for-clunkers scrappage programmes, with economic incentives focused on improving energy efficiency across a wide variety of major household goods, would boost consumer demand and achieve lasting reductions in emissions.

2

Put clean energy jobs at the centre of stimulus packages

Despite stunning declines in the cost of wind and solar technology in recent years, they have yet to attract the level of investment needed to meet international climate goals. Government-driven support for wind and solar farms is a fast way to create new jobs all along the supply chain. Investing in energy efficiency also has large benefits for employment; previous stimulus plans in the United States and elsewhere supported large numbers of jobs by fuelling demand for the labour-intensive work of upgrading buildings, so they use less energy to keep warm in winter or cool in summer.

3

Build state-of-the-art electricity systems

The coronavirus has precipitated a massive experiment in teleworking and home schooling as millions of adults and children find themselves suddenly confined to their homes. This highlights our societies’ dependence not only on the internet but also on an affordable and reliable electricity supply. Electricity networks are helping us get through the current crisis, but they are not ready for a more electrified future in which wind and solar account for a rising share of power generation. Investment to strengthen our grids and to integrate smart digital technologies in their operation should be a priority everywhere.

4

Develop and scale up the next generation of energy technologies

There is no single or simple solution to tackling the world’s climate challenge. Doing so will require using a wide range of different energy technologies. Three in particular—batteries, hydrogen and carbon capture—are at a pivotal moment where mass manufacturing and deployment could turn them into vital elements in clean energy transitions worldwide. A strong push from stimulus packages can help these technologies reach the scale where they become increasingly competitive on costs, building new job-creating industries in the process. Through investment in energy venture capital funds and targeted research and development, public money can also lay the foundations for new technologies needed to reach the growing number of net-zero emissions targets being set by governments, including in the UK.

5

Bring in more private money

All of these efforts will be far more effective if policy makers establish broader energy plans that provide the long-term clarity that private investors are seeking. Getting price signals right by removing fossil fuel subsidies or pricing carbon, or offering loans and co-investment for clean energy projects, can help reduce many of the risks that have previously deterred private money.

Today, we are seeing the critical importance of government leadership in responding to the coronavirus crisis. This leadership is also needed to advance clean energy transitions. Directly or indirectly, governments drive more than 70 per cent of global energy investments, according to IEA analysis.

We have two curves we need to quickly bend onto downward trajectories. The curve of coronavirus infections, and the curve of global emissions. Neither will be easy. But through smart, timely action and cooperation, governments can ensure we achieve both.

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