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March 31, 2021
Christopher Searle
Amidst the trauma of Spring 2020, media outlets around the world clung to one positive news story; the drop in emissions and reduction in air pollution as a result of global lockdowns. Indeed, a 17% decrease in daily carbon emissions was observed at the peak of the confinement measures in early April compared to the same period in 2019. The greatest drop in emissions was in the surface transport sector, accounting for 43% of the global reduction. Other major contributors were the power sector and the industrial sector (including the manufacturing of products and materials such as cement and steel). Together, these three sectors were responsible for 86% of the drop in daily emissions during confinement. The aviation sector saw the largest drop in activity (around 60% globally), but only accounted for 10% of the drop in emissions.
Perhaps the most notable feature of these emissions reductions was their inadequacy. If society needed a wake-up call to the scale of the climate crisis, this was it. Having halted mobility and induced the biggest recession since the Second World War, the total global reduction in emissions for the year was a measly 4-7%. The UNEP estimates that emissions must fall this much (7.6%) every year for the next decade in order to limit warming to 1.5C. Even starker is the revelation that 2020’s total daily emissions were similar to those observed in 2006. The fact that the world emits as much, under conditions of strict confinement, as it did 14 years ago under normal conditions, underlines the rapid growth in our emissions in recent years.
There is another problem with 2020’s emissions reductions; they are not permanent. Predictably, emissions have risen rapidly after respective global lockdowns, in some cases reaching higher peaks than before; the Carbon Monitor initiative found that CO2 emissions were 0.39Mt higher in the UK in November 2020 than pre-pandemic in January 2020. Similar rises were detected in Spain (0.24Mt), France (0.3Mt), Germany (1.08Mt) and Italy (0.3Mt).
2020 was billed as the year we would solve climate change. With COP26 and a host of other international conferences cancelled, the pandemic has already had a significant impact on this promise. Added to the realisation that emissions drops were relatively inconsequential, it would be easy to feel that our environment has been yet another victim of the pandemic. This would, however, be a premature conclusion. The pandemic has fundamentally affected all aspects of society, and its lasting impact is yet to be determined. Along with many commentators, we at iClima Earth believe that the pandemic could end up being the catalyst for successful action against climate change, allowing us to leave peak emissions behind in 2019.
‘From the Covid Frying Pan into the Climate Change Fire’
Before outlining why we think that Covid-19 will be net-positive for climate change, it is first worth exploring the alternative reality, captured by the above quote from Hepburn et al’s (2020) landmark paper. Without strong leadership, it is of course entirely possible that societies will seek quick-fix recovery options, aiming to turn the economy round in the fastest possible manner. Given the short-term horizons of political and investment cycles and the availability of such recession-induced suffering, this would not be a huge surprise. Already, the Energy Policy Tracker Initiative have found that G20 countries have pledged 40% of their stimuli to fossil fuels, compared to 38% for clean energy. The UN secretary general has criticised developed nations for committing 50% more of their recovery budgets to fossil fuel based holdings than renewable energy. Furthermore, according to the ‘Greenness of Stimulus Index’ from Vivid Economics, only $1.8 trillion of $14.9 trillion in global stimulus has been utilised in a sustainable manner, compared to $4.6 trillion pumped into environmentally damaging sectors. Around the world, governments, the support for many of whom lies in so-called populist origins, are beholden to populations who feel like they’ve suffered enough. Decisions not to bail out airlines, or not to offer lifelines to community supporting coal plants, therefore entail major political risk.
Shifting Outlooks and Transferrable Lessons
In his 2015 book, ‘Don’t Even Think About It: Why Our Brains Are Wired To Ignore Climate Change’, communications specialist George Marshall highlights the psychology behind our historic inability to sufficiently engage with, and then tackle, climate change. Many of his insights are rooted in behavioural economics, particularly the work of Daniel Kahneman, and are eminently applicable to financial trends. Covid-19 has influenced our collective psyche, and it is possible that this has impacted our perceptions of the climate crisis. Here, we outline five key examples of where behavioural changes could catalyse market shifts.
First, the visible reduction in pollution, well publicised emissions drops and much shared revival of biodiversity could reduce the psychological distance of environmental change. The idea of ‘psychological distance’ is the most widely cited barrier to action on climate change; encapsulated by the ‘Giddens Paradox’, it argues that the issue is too intangible to merit action until it is too late. In essence, people view it as affecting spatially and temporally distant populations. Visible environmental changes, combined with the shock of such a deep crisis, could override our tendency to believe that bad things won’t happen to us (our well documented optimism bias) and mobilise action against climate change.
Second, Covid-19 could shift our agency deficit. Feelings of powerlessness are commonly reported in psychological studies of climate change perceptions. Such feelings are typical components of collective action problems and can lead to motivated reasoning which justifies inaction. Here, Covid-19 could have a significant impact on climate action. Citizens have seen their personal actions – reduced mobility, reduced interpersonal contact, and personal hygiene behaviours – successfully combat a global scale LP-HC collective action problem just like climate change. A ready-made template for upscaling the personal is now available.
Third, Covid-19 could influence key instances of trust. Trust is a significant predictor of response to collective action problems and has been shown to impact climate change conviction, support for mitigation policies and willingness to take personal action. The pandemic has demonstrated the importance of trusting and following expert advice at a time when public trust in science was declining. Scientists had been warning of the dangers of pandemics for years, and of Covid-19 itself months before substantial action was taken. Both the public and private sectors have felt the brunt of ignoring this advice and should now be more likely to respond to scientific warnings about climate change.
Fourth, the pandemic has opened our eyes to the interconnectedness and vulnerability of the global system and the inequalities it contains. Never before has this system so intruded on our daily lives. Debates over resource allocation, heightened by the global spread of the Black Lives Matter movement and globally contrasting political strategies, forced people to engage with political debate. Compassion was widely evident, from national employment support schemes to individual flexible working conditions, from campaigns supporting health workers to the simple act of staying at home to protect more vulnerable populations. On an international scale, China and Germany sending help to Italy and Portugal offer just two of many examples of successful international cooperation during
the pandemic. Together, these forces could shape a new, more global and more compassionate, consciousness from which climate change would be a certain beneficiary.
Fifth, a number of pandemic induced behaviour changes could help cut emissions. Walking and cycling grew in popularity during the pandemic, encouraged by many planning authorities. Boston, Oakland, New York, San Francisco, Barcelona, Rome and Paris all took measures to become more conducive to cycling, from banning cars, to widening sidewalks and bike lanes. Indeed, sales of bikes rose 60% in the UK in April. Concerns over health and food production alongside meat-price rises led to more people trying vegan or vegetarian diets. Disruption to global supply chains, alongside an awareness of struggling local businesses, led more people to shopping locally. All of these behaviour changes could lead to permanent emissions reductions.
The Opportunity of a Lifetime
Perhaps the biggest opportunity for Covid-19 to have a positive impact on climate change will come as countries look to rebuild their economies after what was, for the UK, the biggest recession on record. As of October 2020, global economic recovery packages amounted to $12 trillion. This far exceeds the amount of money needed to be spent on climate change in order to meet the Paris Agreement targets. Research has shown, furthermore, that money spent on climate positive recovery strategies is synergistic with economic goals. In a landmark paper, Hepburn et al (2020) noted this general synergy and identified five fiscal recovery archetypes that perform well on both economic and climate impact metrics. These were physical infrastructure, building efficiency retrofits, investment in education and training, natural capital investment, and clean R&D.
Lockdown induced demand-falls for oil have seen oil-majors filing for bankruptcy and asking for government bailouts. Coal and electricity industries were also hit as energy demand dropped. Furthermore, the US generated more energy from renewables than fossil fuels before June, and the UK burnt no coal over six days in June – both unprecedented occurrences. Indeed, Khanna (2020) has highlighted the potential for a period of ‘creative destruction’ where reduced demand sees older, less profitable technologies replaced by more advanced ones, in this case renewables over fossil fuels. Both public and private finance now has the opportunity to consolidate this shift and ensure that new fossil fuel infrastructure is not built.
Having learned from the pain of 2008, few governments are pursuing austere recovery policies, with large-scale investment the favoured path. The investments made by both public and private finance at this time, when unemployment is rife and polluting industries are among those struggling, will to a large degree determine the path we tread between prosperity and a climate catastrophe. The EU, for example, has published an updated version of its Green Deal to incorporate its Covid recovery stimulus. Sectors expected to benefit most are clean energy infrastructure, EVs, building retrofits and agricultural systems. Despite positive talk, the ‘greenness’ of stimuli has thus-far been questionable. As COP26 looms, pressure mounts, and governments are given a vaccine-induced moment to step back and think longer term, we must hope that this will change.
A Wake-Up Call
When considering climate change as an issue, perhaps in conversation with sceptical friends, when choosing how to vote, or contemplating the makeup of a portfolio, it is important to remember that climatic and ecological collapse also means societal collapse in a very real and tangible way. There will be no Armageddon, no sweeping global tidal wave or super-storm, but there will be intense conflict, a monumental migration crisis, large-scale water shortages, more epidemics, a lack of food and perhaps even a climate-apartheid. There is little hope for a prosperous world system under these conditions, and all nations will be intrinsically destabilised. Covid-19 has shown that we can mobilise to protect the vulnerable, to reduce inequality and to drastically re-shape our daily lives – all we need are the right triggers. Climate change is no more distant, no less threatening, and no less human. We must use this existential wake-up call and act in unison, for the goals of nature, of society and of profit have now, beyond any doubt, aligned.
At iClima Earth we have developed a fact-based, data-driven methodology to vet the companies that have the potential to contribute towards decarbonising the planet. We believe that the time has come for the world to quantify CO2e avoidance, and we hope to contribute to this task by providing our own framework of potential CO2e avoidance.
To this end, we created our iClima Global Decarbonisation Enablers Index, a tool that quantifies the CO2e avoidance that each of the 158 companies in our Index can generate from annual sales. We look at the solutions to assess those that are transient, and those that are based on products with a long useful life, with avoidance that can have an impact over the long term. In a time where Climate Change should be a top priority, we believe that CO2 e avoided emissions will become a metric that is widely referred to.
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