How will energy-climate scenarios evolve in times of pandemic? In a positive direction, one could argue, if one considers the clear skies, breathable air, cars missing from streets, declining energy consumption, and a significant drop in climate-altering emissions. But this perspective does not hold.
Once we will exit from the emergency and the recession, as everyone hopes we will, things will likely go back to the way they were before. As they did after the 2009 recession. The experiences we have lived through during the lockdown (smart working, for example) might shift the course of some things, but they won’t manage to decouple growth from energy emissions. What we have experienced has shown us how much work we still have to do in order to mitigate global warming, especially through the “energy transition” that should cut the use of fossil fuels (today, 80% of total primary energy supply) in order to limit warming within 2°C. To do so, we need: a lot of resources; a revolution in production/consumption models; drastic changes in our daily behaviours.
The world set itself the goal to limit warming within 2°C with the December 2015 Paris Agreement; however, the agreement was not followed by significant changes in the dynamics of global energy consumption and emissions. COVID-19 has made things worse. For one indisputable reason: the crisis into which it has thrown the energy industry. From one hour to the next, energy demand has evaporated, opening up an abyss for the entire energy world.
The oil market has been the most affected, with futures prices for the West Texas Intermediate reaching negative $37 per barrel. This unprecedented price was caused by senseless speculation, but also by excess supply on the physical market. A litre of petrol in New York now costs less than a pint of beer. All energy sources and markets have suffered from this trend. The drop in revenues, cash flows, and profitability have exacerbated the tendency of energy-related businesses to reduce investments, estimated to fall this year by $400 billion. It is an obvious thing to say, but without investments there will be no energy transition.
Overall, it would require strong and willing actors, able to manage energy markets, to stabilize markets enough to guarantee a harmonious development of investments. This could only be possible in the presence of strong international cooperation, especially with regards to emerging countries, whose economic growth will inevitably lead to increased emissions. If emissions won’t grow due to economic stagnation, it will be little consolation. Climate change must be fought at a global level: acting alone will not take us anywhere.
The European Union’s unilateral decisions, most recently the European Green Deal to achieve full carbon neutrality by 2050 – and be the first world region to do so – will clear consciences (at a high price) but will reduce global emissions only by a few decimal points. This is why international cooperation is essential. In this regard, during the coronavirus pandemic, it was striking to witness the complete absence of any international attempt to negotiate shared policies that would prevent the collapse of energy markets, apart from the triangulation between the key players in the oil field (the US, Saudi Arabia, and Russia) aimed at curbing production and preventing a complete price collapse.
Retracing almost 50 years of history of the G7 Summits, one can notice the fundamental role played by the “energy factor”. The need of major industrialised countries to curb the effects of interlinked events such as the oil crisis by coordinating their economic and energy policies has arisen precisely from the difficulties they had encountered in managing them individually. This is precisely what happened on 15 November 1975 during the first G6 in Rambouillet, France, chaired by Valery Giscard d'Estaing.
Today's crisis is much worse than the crisis that we experienced back then. It is worse despite the fact that, between energy importing and exporting countries, there are no simmering conflicts but rather converging interests. And yet it is worse, because three crisis fronts have opened up simultaneously: the need to fight a global pandemic, the need to fight the worst economic crisis since 1929, and the need to fight climate change. These three fronts would require a multilateral effort that is not occurring, whilst divisions, contrasts and national interests still dominate the scene. That something positive could come out of the next G7 would be highly desirable, but also highly unlikely.