All over the world, people are getting tired of the lockdowns and frozen economies, and yet the virus is still on the rise in many places. As countries and states reopen, carbon emissions are resurging. Here is what that means in terms of the transition between fossil fuels and sustainable energy sources:
As countries begin rolling out plans to restart their economies after the brutal shock inflicted by the coronavirus pandemic, the three biggest producers of planet-warming gases — the European Union, the United States and China — are writing scripts that push humanity in very different directions.
Europe this week laid out a vision of a green future, with a proposed recovery package worth more than $800 billion that would transition away from fossil fuels and put people to work making old buildings energy-efficient.
China has given a green light to build new coal plants but it also declined to set specific economic growth targets for this year, a move that came as a relief to environmentalists because it reduces the pressure to turn up the country’s industrial machine quickly.
These are characteristic approaches. Europe, more than ever, is trying to accelerate the transition away from fossil fuels. The US federal government continues in its denial of the necessity to do so, and China is still vacillating.
But the US government does not always speak for its residents or industries. Four days ago, the NYT ran an article about how climate change is becoming an important consideration in financing projects:
Changes to the housing market are just one of myriad ways global warming is disrupting American life, including spreading disease and threatening the food supply. It could also be one of the most economically significant. During the 2008 financial crisis, a decline in home values helped cripple the financial system and pushed almost nine million Americans out of work.
But increased flooding nationwide could have more far-reaching consequences on financial housing markets. In 2016, Freddie Mac’s chief economist at the time, Sean Becketti, warned that losses from flooding both inland and along the coasts are “likely to be greater in total than those experienced in the housing crisis and the Great Recession.”
Threats of large climate change-induced fires are starting to have similar impacts on the financial industry. As climate change continues to intensify extreme weather phenomena and make them more frequent, it would not be surprising to see more such concern in financial sectors.
Solar, wind and other renewable sources have toppled coal in energy generation in the United States for the first time in over 130 years, with the coronavirus pandemic accelerating a decline in coal that has profound implications for the climate crisis.
Not since wood was the main source of American energy in the 19th century has a renewable resource been used more heavily than coal, but 2019 saw a historic reversal, according to US government figures.
Coal consumption fell by 15%, down for the sixth year in a row, while renewables edged up by 1%. This meant renewables surpassed coal for the first time since at least 1885, a year when Mark Twain published The Adventures of Huckleberry Finn and America’s first skyscraper was erected in Chicago.
Are these changes convincing major energy companies to shift their investments? Not yet:
Investments in solar and wind energy projects by the world’s oil majors over the next five years are expected to reach $17.5 billion, a Rystad Energy analysis finds. But a closer look at the numbers reveals that some $10 billion, or 57% of the amount, is expected to be invested by a single company, Equinor, the only investor whose majority of greenfield capex will be towards renewable energy.
Equinor, the Norwegian state-controlled energy giant, will drive renewable investment among majors, spending $6.5 billion in the next three years to build its capital-intensive offshore wind portfolio. We do not expect this forecast to be heavily affected by the fluctuating oil price or capex cuts, as much of the company’s renewable portfolio is already committed, such as the massive Dogger Bank offshore wind project in the UK.
What about the politics?
Is the world at large (aside from Europe, the US, and China) ready to adapt some of the lessons of the pandemic to try to mitigate the ongoing climate change disaster? Among the 10 most populous countries that make up roughly 60% of the total global population (see my May 5, 2020 blog about their pandemic levels), the loudest anti-climate change mitigation voices are those of the presidents of the US and Brazil. We rarely hear much from the other 8 countries. Most of the mitigation-supporting voices come from the European Union, the UK, and the many small countries that climate change threatens directly.
Our presidential election is scheduled for November. This election will likely decide the US’s attitude to climate change going forward. Please make sure you vote! If the federal approach to the problem were to change, the US could potentially match Europe in its commitment to mitigation.