COVID-19 Crisis: Economic Stimulus Packages and Environmental Sustainability

The sight of clear water flowing through the canals of Venice and the improved air quality levels across the globe have hogged the spotlight in the media. Such images are seen as a silver lining to the otherwise grim cloud named COVID-19. To contain the spread of the pandemic, nations across the globe have imposed lockdowns. As a result, there has been a downturn in the global and domestic economies, with ripple effects across a multitude of industries and sectors. But, as human activities came to a grinding halt, nature has resumed its flow. 

A drop in air pollutants has been witnessed across the globe. Carbon emissions in China have fallen by 25% and coal usage by 40% since late January, when the first lockdown was announced in Wuhan, the epicentre of the pandemic (Myllyvirta 2020). Similarly, satellite images demonstrate that nitrogen-dioxide levels have dropped in Italy since it went under lockdown on 9 March 2020 (Watts and Kommenda 2020). Carbon-monoxide levels in New York have stood at half of what was seen in March 2019, according to a research study conducted by professor Roisin Commane of Columbia University to observe pollution levels during the COVID-19 lockdown (McGrath 2020).

The air quality in India has also shown improvement over the past few weeks. The concentration of particulate matter (PM) 2.5 in New Delhi has fallen from 91 micrograms per cubic metre to 26 micrograms per cubic metre in just a week post lockdown to come under the good category (Air Quality Historical Data Platform nd). However, it would be too premature to decide if this reduction in emissions and concentration of greenhouse gases could heal the environment, and to expedite the realisation of sustainability goals. 

Global Crises and Climate Change 

If the data from the past is scrutinised, it becomes evident that when the economy rebounds and recovers from a crisis, the level of emissions soars at a rate faster than the previous levels. Therefore, it becomes significant for the governments across the world to bear this fact in mind when announcing economic stimulus packages after the pandemic to determine the level of emissions. Historically, it has been observed that responses to various crises tend to lead us to higher emission pathways. This had been the case after the oil crises of 1973 and 1979, the fall of the United Soviet Socialist Republics (USSR) in 1991, the Asian financial crisis of 1997, and the global financial crisis of 2008 (See Figure 1).  

Figure 1: Global Annual CO₂ Emissions (1960–2018) (In Gigatonnes)

In 2009, the global CO2 emissions, resulting from fossil fuels and cement, declined by 1.4% compared to previous years, with a positive impact on the environment. However, it was short-lived as emission levels jumped by 5.2% globally the next year, in 2010 (Heath 2020). 

An interesting aspect that emerged post-2008 financial crisis is that the income level of a country plays a significant role in contributing to global emissions. From Figure 2, it is evident that developing countries have been contributing significantly to the global emissions post-2008 financial crisis. In 2010, the share of CO2 emissions from developing countries stood at 50.3% of the total emissions, more than the industrial economies (Clark 2011). The variations in emission levels across countries are the result of the inability of developing countries to absorb external shocks, and hence, to stimulate the economy, they switch to cheaper sources of energy and often overlook environmental concerns (Davey 2016). 

Although the nature of the current crisis the world is going through is different, the outcome could be similar, based on past experiences. Carbon emissions are likely to soar once economic activity picks up and production resumes. Therefore, it would be sheer ignorance on our part to think that the environment would take care of itself, by using unexpected “solutions” like the COVID-19 pandemic. Francois Gemenne of the University of Liege rightly notes that “the climate needs a sustained drop in greenhouse-gas emissions, not a year off” (Economist 2020). 

Figure 2: Annual CO2 emissions (1960–2018) (In Gigatonnes)

At a time when governments across the globe are battling an unprecedented health crisis and trying to keep economies afloat, there is little hope that green technologies could figure in their economic stimulus packages. The slowdown in the global economy could also lead to a delay in the progress of projects promoting cleaner energy. For instance, China has already delayed an auction process for a project that aims to build solar farms across the country (Martin 2020). The countries preoccupied in the battle to contain the virus could postpone their plans to meet the targets in terms of using renewable energy. As a result, securing finances for the installation of green energy projects could prove to be a huge problem. Once finances are obtained, the disruption in global supply chains could hinder the process as, globally, a large share of solar panels and wind turbines are imported from China (Paraskova 2020). Given the bleak scenario, BloombergNEF, a leading research firm on clean energy, has downgraded its projections for the solar battery and electric vehicles market and reduced its forecast of the global solar demand in 2020 by 16%. This fall is the first annual decline in the last three decades (Holder and Murray 2020). 

The types of stimulus packages that governments have been coming up with to offset economic impact have the potential to increase emissions in the long run. In the United States (US), the recently announced $2 trillion stimulus fiscal package, which aims to provide unemployment benefits to individuals, a bailout package worth $500 billion to industries, among others, has clearly set aside climate change as an issue to be dealt with. Similarly, the relief package’s $60 billion bailout amount to the airline industry does not include an earlier proposal to cut down the number of planes to bring down the emissions by half by 2050. While Canada has announced a huge bailout package for the oil and gas industry, China decided to promote construction across the country with a new $3.5 trillion plan pointing out that carbon emissions in the near future are expected to surge.  

The Dangers of Losing Sight of the Climate Crisis 

Dip in oil prices: The drastic contraction of demand for oil shaped by the pandemic has shaken the global economy. The unprecedented global health crisis and the price war among oil-producing nations in the recent past have left the oil industry in a lurch. In such a situation, a question arises whether these shocks would change the discourse on climate change, or will the demand resurface to dampen the efforts in shifting towards greener energy solutions. The answer would depend on the severity of the effects, and the time it takes to get back to normalcy. But, it would be safe to project that, when the dust settles, lower oil prices could depress the volume of electric vehicle sales, and there could be fewer incentives for people to invest in clean energy projects, such as retrofitting office buildings. Lower oil prices could lead to inefficient use of energy, indicating a spike in the emissions in the long term.  

The current drop in oil prices could serve as an opportunity for countries to remove fossil fuel consumption subsidies, and to channelise funds to better use. However, if oil prices increase, the scenario may differ. This uncertainty over oil prices could continue and change according to the ability of Russia and Saudi Arabia to pump cheap oil. Though the production costs are low, yet, there is no guarantee from governments that they would reduce price burden on the end customer, as it would help them to use those revenues to finance their national budgets. 

Cancellation of climate conferences: The 26th session of Conference of Parties (CoP) of the United Nations Framework Convention on Climate Change (UNFCCC), which was supposed to be held in November 2020 in Scotland, has been postponed until October 2021. After the Paris Agreement, agreed upon by member countries in 2015 to reduce global warming to 1.5–2 degree Celsius above the pre-industrial levels, the upcoming event holds significance as it provides an opportunity to review on the past commitments and chart out a course for future discourse on climate change. The event, which is expected to draw 30,000 delegates from around the world, has been aimed at making new pledges and proposing new measures to reduce emissions. With the postponement of the event, it could divert public attention from climate change, and nations would move past the global-warming limit goals. In addition to the above-mentioned conference, the pandemic has led to the postponement of various events on environment sustainability and climate change across the world. 

European Green Deal, a non-starter: On 4 March 2020, European Commission President Ursula von der Leyen presented the European climate law. The European Green Deal, which forms part of the law, would get a consolidated fund of €1 trillion Euros, and mandates the European Union (EU) member states to become carbon-neutral by 2050. It is the world’s first-ever climate law that enforces nations to reduce their carbon emissions. 

However, with the unprecedented pandemic, European Union member states have already pointed out that it would be difficult for them to adhere to the guidelines on carbon emissions. Czech Prime Minister Andrej Babiš has already said that the European Union should completely forget the green deal for now, as it would be too expensive for the post-pandemic economy to handle (Euractiv 2020). Some of the European Union lawmakers have also approached the European Commission to alter the carbon dioxide emission standards for cars in order to protect the automobile industry (Topham and Harvey 2020). Therefore, if governments across the world do not propose environment-centric economic stimulus packages, the discourse on climate change would certainly take a backseat.   

Opportunities for Environment Sustainability 

If the present crisis is not seen as an opportunity for a structural change to deal with the climate crisis,  it would be difficult for us to breathe clean air in the future. There are a few indirect ways that the current pandemic can contribute to environmental sustainability. Changes in personal habits and consumer attitudes can help people make a meaningful shift towards living in consonance with nature. 

For instance, a study at Zurich University has found that people are willing to change their habits with regard to usage of private vehicles for commuting when prompted to do so. Under a promotion programme for an e-bike manufacturer, car owners have been asked to deposit their car keys with the promoters in exchange for e-bikes for free for a period of two weeks. It has been found that those who participated in the study used their cars less once they got back their keys after two weeks. Such simple strategies have the potential to change the mobility habits of people and enable them to embrace sustainable means of transport (Moser et al 2018).  

The Way Forward

While we fight the battle against COVID-19, the crisis afflicting our environment should not be overlooked. There is a need for policymakers to ensure that the post-pandemic economic stimulus packages factor in environmental concerns, regarding the potential rise in the carbon emissions.  

There is a misunderstanding that this pandemic will lead to an automatic reduction in emissions, thereby, solving the climate crisis. It must be understood that if it is taking a global pandemic to reduce the level of emissions, the problem of climate crisis is far more severe than what we perceive. This pandemic will result in loss of lives, jobs, and leave would permanent changes in the lives of people, amidst a slowing global and domestic economies. Like all sectors, this slowdown would also affect the investments in green and clean energy projects worldwide. Hence, policymakers face an uphill of designing economic stimulus packages to revive economies without causing any negative externalities to the environment.