Riccardo Maria Mantero

While the word lockdown may well end up as word of the year in 2020, we might be locking-in our world into a devastating climate crisis. Many countries across the world are slowly easing the coronavirus lockdown restrictions, without realizing that an even bigger crisis is awaiting us. Oxford-economists are pointing towards the dramatic consequences that will arise due to the COVID-19 crisis for progress on climate change and are doing rightly so. They conclude that progress on climate change will significantly depend on how governments are going to deal with policy choices in the coming six months. It does not come as a surprise that the economists are mentioning governments here, because the COVID-19 crisis has shown us the enormous changes needed to at least have a chance at reaching net-zero emissions by 2050.

 

Greenhouse gas emission developments

Global emissions have been declining due to the COVID-19 crisis. The International Monetary Fund is projecting a decline in emissions of 5.7% in 2020, while the International Energy Agency is even estimating a fall in emissions of 8% this year. These are numbers we have never seen before regarding declines in carbon emissions. Of course, these estimations do not take into account a possible second lockdown if the COVID-19 virus gains momentum again. But there is a painful truth behind these numbers. Because if we want to reach net-zero emissions by 2050 and reach goals such as making Europe climate neutral in 2050 as proposed in the European Green Deal, these record declines in global emissions have to be repeated, year after year. This will not be an easy task and not surprisingly, this might be one of the most consequential lessons we learn from this pandemic.

Another interesting development is how the global carbon emissions have been growing over the last decades. Diving deeper into the numbers in the figure below, we can visualize the situation we are in. The COVID-19 crisis has pushed us back 14 years in annual global GHG emissions. It is worrisome that such a large crisis, which brought economies to a stand-still, only is able to push emissions back to levels similar to the mid-2000s. This shows how much carbon emissions have been increasing over the last two decades. From these numbers, it does make sense to point towards governments and their policy choices to tackle climate change when we are trying to restart the economies after the COVID-19 lockdowns, as Oxford-economists write in their research paper.

 

Global GHG emissions, in million metric tons per day

Source: Bloomberg; Nature Climate Change

 

Green recovery of the economy

Recently there have been more and more discussions around a “green recovery” after the COVID-19 lockdowns. Indeed, now is the time to think about this and make the correct decisions. A recovery, because the economies around the world are not doing well, to say the least. Economies are hit severely and much harder compared to the financial crisis of 2007-2008, noting a seasonally adjusted GDP decrease of 3.8% in the euro area for the first quarter of 2020, compared to the previous quarter. The prospects for the second quarter of 2020 are not looking good either. Most of the lockdowns in Europe started in March, but this short time frame of lockdowns in Q1 2020 was enough to push us into an upcoming recession.

The economies in Europe still performed relatively well in January and February, despite shocks to the European economies through supply chain effects due to lockdowns in China. These production shocks were shortly followed by demand shocks in line with a significant decline in consumption (e.g. recreation, tourism, restaurants and cafes), explaining a large part of the devastating decline in GDP growth for March.

As countries around the world have been experiencing some sort of stand-still of their economies, we can think of the period ahead of us as a possibility to reset the economy. This reset can be similar to what we have seen after the financial crisis of 2007-2008, where the same polluting technologies have been used to stimulate the economy. During this period carbon emissions fell 1.4% in 2009 but rose 5.9% in 2010. A reset of the economy after the COVID-19 crisis, however, may be able to solve two problems at once. If we have learned anything from the 2007-2008 financial crisis, we should be rebuilding our economies in a way that tackles climate change at the same time. Of course, changing behavior of people such as working more from home, attending conferences remotely and traveling less by plane has a positive contribution to declining carbon emissions. However, this is likely not going to be enough. That is why governments must take their responsibility to prevent a climate crisis happening in the near future.

The stimulus packages from governments in an attempt to prevent unemployment numbers skyrocketing and mitigating the effects of the crisis are massive. Oxford-economists are reporting that the size of these stimulus packages are not only necessary to prevent GHG emissions rising after the crisis; the packages may very well be enough to tackle climate change altogether. This is a unique opportunity to have a green restart of the economy, but we also have to capitalize on it. We will be keeping an eye on how governments will follow up on this opportunity to not only invest us out of the COVID-19 crisis, but that the massive stimulus packages are used in such a way that prevents us from locking-in ourselves into an even worse climate crisis.