The Coronavirus economic stimulus packages being drawn up by governments around the world should build-in “large scale” spending on clean energy technologies including wind, solar, green hydrogen and carbon capture and storage (CCS), says Fatih Birol, executive director of the International Energy Agency (IEA).
Investment in renewables, said Birol, in a LinkedIn post, should be “a central part” of all national governments’ plans as this would “bring the twin benefits of stimulating economies and accelerating clean energy transitions”.
“These stimulus packages offer an excellent opportunity to ensure that the essential task of building a secure and sustainable energy future doesn’t get lost amid the flurry of immediate priorities,” he said.
“The Coronavirus is turning into an unprecedented international crisis, with serious repercussions for people’s health and economic activity. Although they may be severe, the effects are likely to be temporary. Meanwhile, the threat posed by climate change, which requires us to reduce global emissions significantly this decade will remain.”
Targeted spending on renewable energy would generate long-term gains, said Birol, as “the progress this will achieve in transforming countries’ energy infrastructure won’t be temporary – it can make a lasting difference to our future”.
“We should not allow today’s crisis to compromise our efforts to tackle the world’s inescapable challenge.”
“Governments can use the current situation to step up their climate ambitions and launch sustainable stimulus packages focused on clean energy technologies,” he said. “The Coronavirus crisis is already doing significant damage around the world. Rather than compounding the tragedy by allowing it to hinder clean energy transitions, we need to seize the opportunity to help accelerate them.”
Birol underlined that the costs of investing in wind and solar and storage technologies “are far lower than during previous periods when governments launched stimulus packages”. And he noted that the large investments needed to bring hydrogen and carbon capture up to industrial speed “could be helped by current interest rate levels, which were already low and are declining further, making the financing of big projects more affordable”.
“Governments can make clean energy even more attractive to private investors by providing guarantees and contracts to reduce financial risks,” said Birol.
“Taking these steps is extremely important because the combination of the Coronavirus and volatile market conditions will distract the attention of policy makers, business leaders and investors away from clean energy transitions.
“This situation is a test of governments and companies’ commitment. Observers will quickly notice if their emphasis on clean energy transitions fades when market conditions become more challenging.”
Birol expressed the widely held concern that the collapse of the oil market could undermine the global energy transition “by reducing the impetus for energy efficiency policies”.
“Without measures by governments, cheaper energy always leads consumers to use it less efficiently,” said Birol. “It reduces the appeal of buying more efficient cars or retrofitting homes and offices to save energy. This would be very bad news, since improvements in energy efficiency, a vital element for reaching international climate goals have already been weakening in recent years.”
Birol argued governments could head-off this possibility by “pursuing policies that have already proved successful previously”, such as energy efficiency improvements to buildings, which “create jobs, reduce energy bills and help the environment”.
He said the precipitous drop in the oil price was also “a great opportunity” for countries to lower or remove fossil fuel consumption subsidies, a savings by IEA calculus of some $400bn that could channeled into the energy transition.
“Many subsidies are inefficiently targeted, disproportionally benefiting wealthier segments of the population that use much more of the subsidised fuel,” said Birol. “In practice, the effect of most subsidies is to encourage consumers to waste energy, adding needlessly to emissions and straining government budgets that could otherwise be prioritising education or health care.”
He pointed to IEA figures that show governments “directly or indirectly” drive more than 70% of global energy investments, meaning “they have a historic opportunity today to steer those investments onto a more sustainable path”.
Global energy-related CO2 emissions plateaued last year as the world economy expanded by nearly 3%, Birol highlighted. “We need to make sure 2019 is remembered as the definitive peak in global emissions, and that means taking action now to put them into sustained decline this decade.
“We may well see CO2 emissions fall this year as a result of the impact of the Coronavirus on economic activity, particularly transport. But it is very important to understand that this would not be the result of governments and companies adopting new policies and strategies.
“It would most likely be a short-term blip that could well be followed by a rebound in emissions growth as economic activity ramps back up,” he said.
“Real, sustained reductions in emissions will happen only if governments and companies fulfill the commitments that they have already announced – or that they will hopefully announce very soon.”