As India’s clearing skies suddenly made Mount Everest visible, the Covid-19 pandemic offered us a glimpse of a less-polluted world that is less reliant on fossil fuels—but the path towards sustainable energy still faces complex challenges. Given this window of opportunity, our transition to a lower-carbon energy sector needs to be strategic, cooperative and inclusive.
‘The world had to get sick before it could get better,’ may be the way we look back on the Coronavirus pandemic. The halted global economy extinguished a billion or more combustion engines—most of them powered by fossil fuels. Countries like Great Britain closed down their last few coal-burning power plants, ending an era of carbon power that dates back to the Industrial Revolution 1. After a single week of lockdown, India recorded a 20-year low in aerosol pollution 2. All over the world, the sudden curb in fossil fuel use showed immediate effects to the environment: skies cleared, oceans brightened, residents in big cities breathed easier, wildlife thrived 3. The world got a taste of life with fewer carbon emissions and the possibility of ending our addiction to fossil fuels.
The Shock and the Aftershock
In its 2020 report, the International Energy Agency (IEA) confirmed that, ‘the global oil industry is experiencing a shock like no other in its history’ 4. The collapse in demand was compounded by nearly a year of uncertainty during which oil prices fell, the global economy contracted, and both consumer and investor spending on energy dropped to an all-time low.
The multi-fold aftershocks affected mines, oil and gas fields, power plants and refineries, as well as a complex web of connected industries, from pipelines and distribution, to labour markets and the communities they inhabit. But the most devastating aftershock may be how quickly investor capital is abandoning the fossil fuel industry. For example, an international group of faith-based organizations recently declared their divestment from all fossil fuel industries 5. Not long after, the state of New York announced it was divesting its USD 226 billion pension fund away from oil and gas companies that are not ‘moving fast enough to reduce emissions’ 6. Meanwhile, the Tel Aviv stock exchange just introduced a fossil-fuel free stock index, dropping 16 companies from their roster 7. The message from investors is clear: when it comes to long-term growth, fossil fuels are bad business.
A Complex Moment
Not driving our cars may have cleared up the smog, but do these reduced emissions represent a turning point? ‘The shutdown of big fossil fuel power plants is largely reflective of the economy slowing down,’ shared Dr. Leo Martinez, co-author of the recent book, Building a Resilient Tomorrow: How to Prepare for the Coming Climate Disruption. ‘Now that we have vaccines and the prospect of beating Covid-19, most analysts expect our emissions levels to bounce back close to pre-pandemic levels.’ 8
The exception is the transportation sector, which accounts for the largest losses in the fossil fuel industry and points to more permanent behavioural changes as both business and tourist travel (and commuting) are all affected. ‘A lot of people in the market are preparing for that eventuality,’ Dr. Martinez told The Habtic Standard. Investors have locked their sights on this rare opportunity, ‘The challenge of climate change is still as urgent as ever. It may not be the end of fossil fuels, but its effects on the oil industry are real and the larger challenge remains: How do we decarbonize the energy industry?’ 9.
That question seems to be the impetus behind a new wave of investment activity which has seen the price per megawatt for solar and wind energy drop by nearly 75% 10. Renewables are now cost-competitive with fossil fuels, indicating the biggest challenge to transitioning away from fossil fuels are not necessarily market-based, but regulatory and policy-based.
What Coal Teaches Us?
During the pandemic, through short-term stimulus ‘Governments shielded their consumers by offsetting the real costs of energy production, notably by subsidizing the fossil fuel industry and delaying critical decisions,’ says Dr. Mattia Romani, a London-based economist specializing in sustainability 11. This was a momentary reprieve, but as the economy buzzes back into motion, certain sectors are not coming back.
‘Coal is dead,’ Dr. Romani informed The Habtic Standard, pointing to China and India as the only markets where coal-based energy still powers industrial growth and even then, only as a transition fuel. In the United States, the pandemic merely accelerated the death of a dying industry 12. American coal companies continue to go bankrupt as the high production cost of coal-burning power makes it one of the least competitive energy sources available 13. While demand for natural gas increased by 1%, nuclear energy demand dropped by a modest 2% – meanwhile, the Energy Information Agency projected a staggering 30% reduction in coal use this year 14. Representing half the carbon emissions of coal, natural gas seems to be taking the place of coal, but it is still a fossil fuel with a limited future.
The death of Big Coal underscores bigger issues that arise when transitioning away from fossil fuels.
For companies and governments, accelerating our transition to green energy is no longer in question—it’s a must
says Dr. Romani, ‘The big worry here is speed. The acceleration to green energy will be surprisingly quick, but that kind of rapid structural change will leave people behind’ 11.
Ending fossil fuels will marginalize millions, reaching far beyond the proverbial unemployed coal miner and affecting skilled and unskilled workers 15. Whole careers and niche markets will be stranded, jobs will become obsolete, and the developing world could drop further behind.
‘We have to bring these people along,’ counsels Dr. Romani, if only because mass inequalities left by an obsolete industry could derail the transition to a more sustainable energy sector. In planning ahead, the reality of human social collateral must neither be underestimated nor overlooked. As companies pursue new technology and new markets, they must incorporate effective designs to transition their labor force and maintain sustainable well-being for employees. When it comes to fossil fuels, there are simply too many people involved.
Despite the many challenges, the past year has witnessed significant milestones towards reducing emissions. For example, the Australian state of Tasmania met its goal two years early by achieving 100% renewable energy (primarily through hydro and wind power) 16. The European Union reached two of its three 2020 climate goals by reducing emissions to 1990 levels and supplying a 20% share of their energy consumption from renewables – a trend that reflects the decreased demand, as well as the incentive of the EU’s $265 billion green stimulus (the largest green investment fund ever) 17. But even with such large-scale government intervention, the transition away from fossil fuels reflects changing attitudes and growing support in the marketplace 18.
When BP announced a 10-year plan to reduce oil and gas production by 40% – while pivoting $5 billion dollars per year towards developing renewable energy like wind, solar, and hydrogen – their share price jumped by more than 7% 19. Simply put, in the post-pandemic economy, big money is backing renewable energy, full stop 20.
A Rare Opportunity Requiring a Balanced Approach
The pandemic provides an unexpected opportunity to move away from fossil fuels and build a cleaner and more sustainable world. Some experts believe this may be our final chance, before we are condemned to extinction 21.
Looking forward, investors and governments must focus on improving energy efficiency, lowering costs of hydrogen production and driving down the cost of large-scale storage of renewable energy. A global solution will require global cooperation and working out tricky details (such as trade agreements with emissions violators). ‘Managing the political economy of change will be the most challenging piece to figure out,’ says Dr. Romani 10.
The Covid-19 pandemic has showed us how denial and slow reactions to adapt and cooperate can lead to devastating global consequences. While some governments ignored the warnings and science, others invested in stopping the spread or developing and distributing vaccines. Similarly, the moment to pivot away from fossil fuels has now arrived – and that moment will pass.
Mixing metaphors, coal is the dead canary of the fossil fuel industry – an omen of things to come unless we invest in change. Companies face a very real choice to either take part in the transition to cleaner energy, or to become increasingly irrelevant and uncompetitive in the vibrant new economy of promise.
Andrew Evans is an author and travel writer. A veteran of National Geographic, he has reported live from over 100 countries and all 7 continents. He lives in the Blue Ridge mountains of Virginia.
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