Environmental effects – a ray of light?

In part 1 of a 3 part article series assessing the impact of Covid, the team from Aberdeen Standard Investments take a look at the environmental effects of the Covid-19 pandemic. While the human and societal costs have been huge, there have also been several unintended positives.

A near-term reduction in emissions

Improving air quality amid a collapse in global greenhouse gas emissions has been one of the few positive manifestations of the Covid-19 crisis. Daily carbon dioxide emissions have fallen by around a third in the UK since lockdowns began. Nitrogen dioxide emissions in Chinese cities have fallen by as much as 25%. And in New York, carbon monoxide emissions have been reduced by nearly 50%.

The problem is that those emissions reductions are attributable to an enormous recession that is cutting deeply into people’s living standards. The climate challenge – how to transition to a low carbon economy without sacrificing economic growth in the process – therefore remains as salient as ever.

An opportunity to accelerate progress

The good news is that the recession represents an enormous opportunity to accelerate policy change and ‘green’ the public and private capital spending that will be needed to rebuild the post-Covid global economy. Not only will interest rates remain low for a long period of time, but there is a growing body of research demonstrating that low carbon investment projects have very high fiscal multipliers.

Improving air quality amid a collapse in global greenhouse gas emissions has been one of the few positive manifestations of the Covid-19 crisis.

Moreover, there are already signs that European and some Asian countries are looking for ways to strengthen their climate goals and policies in the wake of the crisis.

Persistent behavioural changes are also likely. For example, businesses may forgo some international travel as video calls become more viable ways to communicate. More agile working patterns could also reduce transportation emissions by lowering commuting travel.

But no room for complacency

That said continued progress cannot be taken for granted. In the US, the federal government is currently taking steps to weaken auto emission standards, while fossil-fuel centric energy firms have benefited more than renewable energy firms from crisis-related loan support.

In Europe, the largest airline association is asking the authorities to waive or at least delay new legislation that would constrain future emissions.

The large drop in oil prices over recent months may increase demand for travel when recoveries begin, counteracting some of the positive behavioural changes.

In addition, more digital communication will not be entirely environmentally friendly. Internet usage, and in particular streaming activities and cloud computing, consume a lot of energy, much of which is derived from fossil fuels.2,3,4

More generally there is a risk that some governments will postpone scaling up their targets and policies as they prioritise short-term growth over long-term sustainability.

To that end the COP-26 climate summit originally scheduled to take place in Glasgow later this year has already been postponed until 2021.

The postponement is not necessarily a bad sign as officials seek to travel less, focus more on the immediate crisis and take time to carefully consider their climate objectives. But given the importance building on the original Paris goals, next year’s summit will be a critical litmus test of governments’ ambitions. This includes strengthening commitments towards a just transition that protects vulnerable communities, particularly in developing countries.

End

References

1 https://www.ft.com/content/46bb05a9-23b2-4958-888a-c3e614d75199

2 https://www.bbc.co.uk/news/av/stories-51742336/dirty-streaming-the-internet-s-big-secret

3 https://fortune.com/2019/09/18/internet-cloud-server-data-center-energy-consumption-renewable-coal/

4 https://www.forbes.com/sites/markbeech/2020/03/25/Covid-19-pushes-up-internet-use-70-streaming- more-than-12-first-figures-reveal/#7f106bbc3104

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