2021 approaches; Europe is filled with hope. Vaccines and medicines will help us fight our way out of the pandemic. Unprecedented rescue and recovery packages serve to soften the painful impacts of the Covid-19 crisis and the related lockdowns. After a very tough 2020 with all of its losses and set-backs, relief is in sight.
With respect to global warming there is also a silver lining on the horizon. The EU now aims to increase the goal for the 2030 emission reduction target to at least 55%, in line with its objective to become the world’s first climate neutral continent by 2050. Indeed, with the European Green Deal Ursula von der Leyen is putting climate action at the heart of her political agenda. Even the EU’s carbon market is finally showing some teeth with prices around 30 Euros per ton of CO2. With Joe Biden as President-elect, the US is set to reengage with global climate action. Biden has already promised to re-join the Paris Agreement and lead the US towards net-zero emissions by 2050. With this, he joins a choir of more than 120 countries with similar ambitions – including China, where President Xi Jinping has pledged carbon neutrality by 2060.
Despite these positive developments, the climate crisis is far from over. The recent UN emissions gap report warns that the world is heading towards a temperature increase of at least 3° Celsius. This is far from the global community’s commitment to avoid dangerous interference with the climate system and to keep the warming “well below 2°C”, while pursuing “efforts to limit the temperature increase to 1.5°C” (Art. 2 Paris Agreement). While adequate short- and medium-term policies and measures are lacking, extreme weather events continue to increase in frequency and intensity, destroying lives and livelihoods.
The two crises and the respective policy responses influence each other. How societies react to the pandemic can enhance or erode our prospects of reaching the goals set out in the Paris Agreement:
An immediate effect of the pandemic is the short-term reduction of emissions in 2020. Yet as significant as this effect may appear compared to previous years, it is not a reflection of a targeted transformation towards a climate-friendly future. It is instead the result of the global economy holding its breath and of massive encroachments on a broad range of civil liberties, prominently the freedom of movement. Furthermore, these emission reductions may only be transitory. The global financial crisis, for example, led to emission reductions of 1% in 2009, only to see emissions soar again by 4.5% in the following year.
This is where a second, potentially much larger effect of the Covid-19 crisis on climate action comes in: the recovery packages. Their impact will shape future economies. The EU alone will unleash 1.8 trillion Euro for recovery when counting both the EU’s long-term budget and the NextGenerationEU initiative.
Taking a lesson from the 2010 rebound, we must build forward better this time. We should not invest in yesterday’s technologies and outdated business models, but rather in a climate-proof economic recovery that also delivers on additional aspects like social stability and biodiversity protection.
Renewable energies, which showed remarkable resilience during the pandemic, are climate-friendly and create jobs up-front. This industry needs a further financial boost to deliver on climate protection and job creation. This stimulus could also help to provide clean energy in economically distressed off-grid rural areas. Furthermore, nature based solutions, afforestation and reforestation stimulate employment while being beneficial for the climate. The same holds true for investments in building efficiency, a sleeping giant from a climate perspective. To advance the necessary industrial transformations, recovery funds should also help to decarbonise industry, including through the use of green hydrogen (e.g. for climate-friendly steel production) or potentially carbon capture (for processes where no other climate-friendly solution is feasible).
Beyond these concrete solutions, there are also policy choices that enhance innovation and set incentives for climate-neutral investments. Paramount to these is carbon pricing. When coupled with a reduction of labor taxation, carbon pricing has the potential to reduce emissions, shift investments and boost employment.
The list of opportunities is much longer, but one more element stands out: knowledge systems. Governments should support future-proof skill enhancement and adequate knowledge systems for e.g. easy access to knowledge about markets, technologies and supply chains.
Despite all these possibilities at hand, early analyses of the rescue and recovery packages point out that many governments around the world have so far missed the opportunity to accelerate the low carbon transition, deciding instead to continue to pour money into the fossil fuel economy. Only a handful of players – including the EU with its NextGenerationEurope and some European countries like France, Germany and the UK – have chosen a different path. It remains to be seen how the equation might change when the Biden administration redirects the course of the US and China passes its next 5 year plan. Building on these anticipated developments, 2021 is full of opportunities for Europe in the geopolitical arena: The new year offers unique potential as European countries hold three presidencies: G20 (Italy), G7 (UK) and the British-Italian double presidency of the UN climate negotiations (COP26).
Covid-19 necessitated a postponement of the 2020 climate summit to November 2021. As a result, the international process lost momentum. Now it needs to speed up again with the tailwind of a new US President, the many promises on carbon neutrality and new awareness of the importance of resilience, risk reduction and prevention. COP26 must present significantly more ambitious country pledges for 2030 as well as showcase action and present short-term measures with impact. Moreover, there should be a vivid discourse about socially just, climate-friendly recovery pathways.
The G20 summit at the end of October 2021 could be an important stepping stone in this process. As these crises hit the most vulnerable the hardest, the Italian G20 Presidency already identified recovery, climate, poverty and inequality as core topics. The G20 could also be a place to discuss how countries that are economically-dependent on fossil fuel extraction can transition to a climate-friendly future. In any case, the G20 should definitely dust off their 2009 commitment to phase out fossil fuels subsidies, which amount to hundreds of billions each year of direct and indirect support. The current rock-bottom oil price induced by the pandemic presents a historic chance to act now.
2021 awaits us as a year of promise at a time when the world is in a fragile state. There is much to do – let’s get on with it.