Turning the page on the age of oil

Turning the page on the age of oil

on October 11, 2020

Governments have a choice: stimulate fossil fuel industries or invest in a more resilient recovery, powered by renewable energy.  This is a once in a generation chance, write Achim Steiner and Francesco La Camera.

Achim Steiner is Administrator of the United Nations Development Programme; Francesco La Camera is Director General of the International Renewable Energy Agency 

April was a difficult month for oil. Faced with an abrupt drop in demand caused by the COVID-19 pandemic, some producers – quite literally – have nowhere left to put it. Reports have emerged of a flotilla of supertankers idling at sea, with at least 160 million barrels of crude in their vast holds. The drop in the price of oil was so precipitous that for a moment — for the first time in history — a loaf of bread was more expensive than a barrel of the ‘black gold’.

With more than half of humanity on lockdown during this pandemic, a decline in energy demand was inevitable. Air traffic was down 60% and road traffic by nearly 50% by the end of the first quarter of 2020. Global demand for coal is projected to fall by 8% in 2020. At some point soon, however, societies and economies will get back to work. The danger is that they will get ‘back to normal’. ‘Normal’ was a world steeped in the climate crisis, riddled with inequalities, with entire economies pegged to volatile oil prices, and seven million people dying each year from polluted air.

As governments determine how to invest tax-payers’ money in their social and economic recovery from this pandemic, they have a choice to make: stimulate fossil fuel industries — a short-term band-aid that will reinforce the collision course with nature — or invest in the future: in a more resilient recovery, powered by renewable energy. Energy contributes 73% of global emissions. This is a once in a generation chance to set things straight. And there are blueprints to draw from.

Consider the Middle East and North Africa, which saw a ten-fold increase in solar and wind power capacities in the past decade, and a doubling of capacities in the past two years alone. This was by design, not by accident, aided by political decisions and market-based mechanisms that lowered solar costs, reformed subsidies, and created dedicated government institutions and renewable energy development zones, creating the potential for more jobs and more stable economic growth in the region.

Decarbonization is not a painless prospect; oil exporting countries in Africa, for example, depend on hydrocarbon proceeds to balance their books. Angola and Nigeria, who derive 90 percent of export earnings and more than two-thirds of government revenue from oil sales, could lose up to US $65 billion in oil-related incomes as a result of falling oil prices exacerbated by the COVID-19 pandemic. Oil-importing countries, particularly Least Developed Countries and Small Island Developing States, may experience a short-term benefit from lower oil prices, but a COVID-19-induced recession will damage their social and economic prospects and threatens to push millions of people back into poverty.

This illustrates why an extended debt standstill for all vulnerable countries, as called for by the United Nations, is so important. Countries need to flatten their debt curve to create fiscal space for the COVID-19 response. Recovery measures must simultaneously respond to the pandemic and focus on building back better. Therefore, even as this pandemic is unfolding, here are five energy choices decision-makers should consider:

Invest in renewable energy as the economical choice: Taking health and education benefits into account, the savings accrued by decarbonizing the global economy by 2050 would be eight times the cost, according to new research from the International Renewable Energy Agency (IRENA), and the socio-economic gains would be massive. Cumulative global GDP would grow by USD 98 trillion above business-as-usual between now and 2050 and renewable energy jobs would quadruple to 42 million. Transitioning to renewables does not mean turning off the fossil-fuel tap overnight. But for a continent such as Africa, where necessary electricity-generating infrastructure is yet to be built, the cost per kWh of renewable energy could be the most effective option – not a burden, therefore, but a net benefit. Policymakers should keep this positive energy horizon firmly in sight in designing stimulus packages.

Use climate agreements as part of the agenda for recovery: As part of the Paris international climate change agreement, nearly every country in the world developed a Nationally Determined Contribution (NDC) – a plan to reduce emissions and increase resilience to climate impacts. Right now, as we help countries to prepare, respond and recover in the face of COVID-19, the United Nations Development Programme (UNDP), IRENA and other partners are simultaneously working with 110 countries through our Climate Promise to deliver on these plans. NDCs offer a ready-made, publicly backed framework of solutions to help countries find a path through this pandemic – with international partners and financing already committed to support.

Design bailouts that work for the environment: Investing to expand the fossil fuel supply infrastructure is short-termism. Some countries are already using COVID-bailouts to design a greener future. The Austrian government, for example, made state aid for Austrian Airlines conditional on support to climate policy targets. All stimulus and recovery packages have the same potential to address the current economic downturn and climate crisis simultaneously.

To read the full article please follow the link below to the EurActiv website

Turning the page on the age of oil