Drastic Covid-19 Slowdown May Hinder Any Green Recovery

Source: By Breanna T Bradham, Bloomberg • Posted: Wednesday, July 1, 2020

A new study models the effects of an extended economic slowdown for energy investment.

The coronavirus cut global carbon emissions more than any other event in the last century. But the pandemic-induced slowdown may ultimately hamper efforts to curb climate change.

“If we end up in a deep recession, that will cut emissions in the short term. But in the long term, the increase in emissions from less clean energy investment could easily outweigh those short-term reductions,” said Kenneth Gillingham, associate professor of economics at Yale and lead author of a new study on possible climate outcomes from the virus.

Daily U.S. carbon emissions dropped 15% overall from March to early June, according to the new study. Energy use from jet fuel was halved while gasoline fell by 30%, but Gillingham noted there are cheaper ways to reduce emissions than an economic slowdown.

The researchers model two possible paths forward. In one, Covid-19 is controlled soon and the economy is completely reopened by the end of the year, (the best-case scenario). In another, the virus continues to spread, causing a global recession (which the researchers consider more likely). In the latter scenario, the researchers estimate an additional 2.5 billion metric tons of CO2 would be emitted by 2035, or the equivalent of 6.8% of 2019 CO2 emissions from energy.  The IPCC has set a goal of halving global emissions by 2030.

While emissions would drop in the short-term under the likely scenario, the economics of the situation would lead to a larger rise over the long time. Long-term investment in the energy sector would lag, and low electricity costs could draw funds away from renewable energy. Sales of electric vehicles would also suffer, and there’d be less new infrastructure for charging them.

The research team concluded permanent energy consumption would need to be reduced by 4% to offset their projected delay in investments.

Government response, however, is “the wild card that can change everything,” according to the study. The emergence of the virus initially drew the world’s focus from climate issues. Now, as governments inject money into their economies, many are making sure those funds have green strings attached. The European Union, United Kingdom, Japan and South Korea are all considering stimulus bills that include a focus on clean energy, according to Gillingham and his co-authors.

There are a myriad of ways the U.S. government could back green initiatives with its stimulus funds, but the $2.2 trillion CARES act passed in March was stripped of green earmarks. Oil companies took advantage of nearly $2 billion in tax benefits provided by the bill.

House Democrats on Tuesday unveiled a 500-page climate plan, including a goal to achieve net-zero emissions by 2050. The House is also considering a $1.5 trillion stimulus bill that would include $100 billion for transit issues (including electric buses), $70 billion for electric vehicles and grid improvements and $4.5 billion for zero-emission postal trucks. The legislation faces dim prospects in the Republican-controlled Senate.

The researchers used data from the U.S. Energy Information Administration, Environmental Protection Agency and Federal Highway Administration, among others, and looked at the effects of the 2008 recession to model the potential effects of delayed clean energy investment and emissions, focusing on vehicle fuel economy and renewable electricity.

— With assistance by Eric Roston