COVID-19 crisis could transform the global energy sector

Between the coronavirus outbreak and the Saudi-Russia oil price spat, global greenhouse gas emissions have plummeted as global economic and urban activity slows down worldwide. NASA satellite images illustrating significant reductions in nitrogen dioxide levels over China during the country’s lockdown have provided a sliver of hope that the climate can yet be saved. Similar images showing declining emissions have been seen in European capitals, where enforced quarantines have switched off the lights for entire industries and ground cities to a halt.

However, the International Energy Agency has warned that such reductions in emissions may only be temporary unless we take measures to ensure a sustainable low carbon energy transition. A reduction in economic activity could actually hamper the development of clean energy technologies.

As demand plummets and economies are disrupted, “policymakers may divert attention away from clean energy to more pressing concerns,” said BloombergNEF in the introduction to a study on the potential impact of COVID-19 on renewable power, energy storage, electric vehicles, heating, cooling and the circular economy.

Without government measures, the sharp decline in oil prices may also hamper the clean energy transition if policies for energy efficiency are put on the backburner to prop up polluting industries, including the oil, gas and aerospace sectors.

Randolph Bell, Director of the Global Energy Center at the Atlantic Council, warns that “if policymakers do not act to use their massive economic stimulus plans to support the low-carbon transition […] the remarkable satellite images of pollution will return to the way they looked before.”

As governments worldwide pledge trillions of dollars in the form of emergency stimulus plans, they are offered an excellent opportunity to address the long-term challenge of a clean energy transition.

Large scale investment to boost the development, deployment and integration of low carbon energy, such as wind, solar, hydrogen and batteries, will both boost economic activity and encourage an energy transition. The IEA has reported that governments are responsible for more than 70% of global energy investments – directly or indirectly – and therefore are in a prime position to shift those investments into sustainable energy solutions.

Advances in renewable energy technologies combined with low interest rates could also make the financing of clean energy projects more attractive. According to David Hobbs, Senior Fellow at the Global Energy Center at the Atlantic Council, “channeling the energy of state intervention […] may end up accelerating the energy transition by developing technologies for generation and storage that do not require massive fiscal support for deployment.”

Leaders can take advantage of the current crisis by ensuring that clean energy technologies lie at the heart of their stimulus packages, and seize the opportunity to accelerate the decarbonization of the world economy.

Image credit: NASA