Coronavirus and climate change

Consulting Fellow, RIETI

The novel coronavirus that originated in China spread around the world in an instant. There have been a slew of hard curfews and factory shutdowns in Europe and the United States, with governments closing their borders, concentrating on containing the coronavirus within their own countries and propping up rapidly deteriorating economies. Some have begun to suggest that the pandemic will go so far as to trigger the worst economic crisis since World War II. The novel coronavirus has caused a myriad of adverse effects in various quarters. Efforts to combat climate change are also likely to be affected.

The current sharp economic downturn has led to lower energy consumption and a drop in CO2 emissions, which will likely decrease global greenhouse gas emissions in 2020 to a significantly lower level than the previous year. Around February, when China was at the peak of its coronavirus epidemic, the amount of air pollution in the country was considerably less than usual. In the meantime, the water in the canals of Venice, which tourists had completely stopped visiting, was reportedly cleaner. The irony of all this is that a reduction in greenhouse gas emissions was achieved most effectively by a crisis, is aptly summarized in the phrase "An Inconvenient Truth."

This episode of environmental recovery brought about by the coronavirus is, however, only transitory. Once economies recover, greenhouse gas emissions will certainly be on the rebound. However, teleworking, internet conferencing and other forms of work have become widespread due to the crisis. If only these work styles were to remain in place after the crisis has settled down, the rebound could be curbed to some extent.

Environmental stakeholders have become increasingly concerned that the current coronavirus disaster might—to a great extent—impair the momentum of efforts to combat climate change. The year 2020 is the first year in which the Paris Agreement comes into force. The United Nations and the United Kingdom, the presidency of COP26, had been planning to urge participating countries to raise their greenhouse gas reduction targets with a view to achieving the goal of the Paris Agreement to hold the temperature increase to within the range of 1.5°C to 2°C. But against this background, the novel coronavirus began its rapid spread around the world, sweeping aside all interest in the problem of climate change. In the wake of this, on April 2, an announcement was made that COP26 would be postponed until next year.

Even in the European Union, where President von der Leyen had been promoting climate change issues as the highest priority under the initiative of the European Green Deal, Poland and the Czech Republic, which are heavily dependent on fossil fuels and often opposed to the agenda led by Western and Northern Europe with regard to climate change, have called for the European Green Deal to be shelved in favor of their novel coronavirus measures as a top priority. In Germany, the German Association of the Automotive Industry, struggling to cope with a major downturn in earnings, has started lobbying for a postponement of EU CO2 emission constraints, with the ruling coalition Christian Social Union in Bavaria (CSU) proposing the suspension of the renewable energy surcharge and carbon emissions tax in order to stabilize electricity rates.

Efforts made with respect to renewable energy have also flown into headwinds. Fossil fuel prices have fallen to their lowest levels as a result of the double whammy of lower energy demand and the competition between Saudi Arabia and Russia in boosting production, leading to a relative decline in the competitiveness of renewable energy. The supply chain with China, a source of green products—mainly solar panels, is sure to be impacted.

To take a broader view, the scourge of the novel coronavirus will likely damage globalization, which is based on people's freedom of movement, and reinforce not only the importance of the border controls taken by countries, but also the significance of being nation-states. These circumstances could possibly pave the way for the rise of nationalism and unilateralism. The EU has been promoting globalism and liberalism as well as freedom of movement. In the face of the catastrophe caused by the novel coronavirus, EU countries are now putting their own interests first, which is representative of the situations I have mentioned above. Measures to prevent climate change have a strong affinity with globalization and liberal values. It follows therefore that the retreat of globalization through the spread of the novel coronavirus could have a negative impact on solving climate change issues.

But even under these circumstances, there is a strong call not to slow climate change countermeasures. There is even a claim that since so much fiscal spending is available to fight the coronavirus outbreak, emergency measures should be taken to address climate change as well. However, the coronavirus crisis is putting the lives of family and friends at risk and its countermeasures are temporary. On the other hand, the benefits of greenhouse gas reductions are not easily noticeable, and the efforts to prevent climate change will require a long-term approach that spans decades. It would be unreasonable to deal with these two different initiatives in the same manner. People are by nature more concerned about their employment, healthcare, and education than preventing climate change. In fact, the above three issues were the top three concerns in "My World 2030," a U.N. survey that asked people around the world what they value from among the 17 Sustainable Development Goals (SDGs). Here, too, priorities for addressing climate change fell far behind. The current coronavirus catastrophe is indeed a problem that affects both healthcare and employment. It comes as no surprise that the attention of governments and the public is sharply focused on these matters. The Trump Administration in the Unites States put together a $2 trillion-plus emergency rescue spending package in response to the novel coronavirus crisis. The opposition Democratic Party tried to include renewable-energy subsidies and to impose low carbon pledges on the airline companies as conditionalities for the bailout, but these demands were rejected outright with the response, "Now is not the time for that."

Only when the current coronavirus disaster will have been brought under control, with household economies and businesses in crisis bailed out, will countries be able to take a more serious approach to climate change. Even in this "post-coronavirus phase," a package will be needed to rebuild exhausted economies. Such a package should also include clean energy promotions and infrastructure investments that address the prevention of climate change. On the other hand, both the fiscal strength of governments and the financial muscle of the private sector are likely to be significantly depleted in the post-coronavirus environment. For these reasons, these economic measures will need to be more cost-effective than in the past. Assuming that the price of fossil fuels will remain substantially lower than in the recent past, the cost of renewable energy subsidies will be comparatively high. We should be cautious about squandering resources on subsidies such as the Feed-in Tariff System (FIT). Meanwhile, households with less disposable income will also be less receptive to the costs and burdens of climate change countermeasures. Rather than policies placing the highest priority on preventing climate change, we must consider effective measures for rebuilding economies that could also help the prevention of climate change. In the case of Japan, it would be beneficial to replace the aging power grid systems, to introduce smart grids and to promote technology research, developments and demonstration projects for hydrogen and CCUS (Carbon dioxide Capture, Utilization and Storage – meaning the separation and storage of CO2), taking future market potential into account.

April 8, 2020

June 15, 2020

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