The current global pandemic is hitting many economic sectors hard. Faced with this situation, exceptional emergency activities are required to protect our economies, and many countries have already begun putting provisions in place to support those in critical need. This is likely to be an essential measure to protect businesses, jobs and livelihoods.
However, it is important that these decisions take stock of previous experience and that we do not lose sight of our other impending global crisis: climate change.
Global carbon emissions may have temporarily fallen, but there is no indication this will continue after the crisis. In fact, experience tells us that post-crisis, economic activities accelerate at pace during recovery, along with emissions. So reductions we see now are likely to be relatively negligible.
The climate crisis, which has fallen down the media and political agenda, is still an ever-pressing reality and will be even more alarming as time passes. It carries within it the seeds of a future world crisis, even more powerful than this one.
“Revenge pollution” as these post-recession hikes in emissions are termed, might be the biggest threat we face to our efforts to avert the climate crisis. But our current pandemic presents us and our leaders with an opportunity to stimulate change.
Falling emissions due to COVID-19
We are faced with an unprecedented situation. As a consequence of lockdowns across the globe, it is estimated we will witness a global drop in annual CO2 emissions of between 5 and 7%. Given that many parts of our economies are at a standstill, this puts some perspective on the level of effort needed to achieve the objectives of the Paris Agreement and the entreaty from scientists to limit global warming to 1.5 degrees centigrade above pre-industrial levels (we are already at 1.1oC and rising…).
Achieving this goal requires a reduction of emissions by 45% between 2010 and 2030 or 7.6% per year until 2030 … so we are far from the mark!
Revenge pollution and lessons from the 2008 financial crisis
In the years that proceeded the 2008 global financial crash, there was a frantic race to make up for “lost time”. The 1.3% drop in annual global CO2 emissions experienced as a consequence of the crisis was eclipsed by a 6% rise in emissions in 2010.
As we are learning, timing is a critical factor when it comes to taking effective action. There is an urgent need for economic recovery but also an urgent need to avert the future crises of climate change. The time is now to prevent “revenge pollution”, build climate change into the post-COVID world, and mitigate its impacts.
Everything will hinge on political will.
Leaders have an opportunity here to build future resilience into their decision-making. Corporate financial aid must therefore be allocated on the condition of climate-related actions and performance. Two principles should be built into state-backed loans: firstly; an indexation of loan rates according to the climate performance of a company; and secondly a staggered release of funds or reduction in rates based on the achievement of pre-defined objectives (publication of carbon emissions data, commitment to a emissions reduction target, for example).
Adding extra-financial conditions to government bail outs for corporates would provide a new and powerful mechanism to reward and protect the climate leading companies, while benefiting the environment and society.
We are facing an unprecedented and tragic crisis today, but let’s keep in mind that we now have a unique opportunity to avoid the crisis of tomorrow.
