Climate change and COVID-19, are you ready for Earth 2.0?

The response to this pandemic is a double-edged sword: it puts climate action out of mind, but it shows us that by making the right decisions we can reshape our economy and way of working

Covid-19 has impacted our lives on an unprecedented scale. Just as the virus wreaks havoc on our healthcare system, the economic fallout will be immensely destructive. This article is not about that, but about the impact on our environment.

It is not surprising that a cohort of pundits consider this pandemic to be a good thing for the environment because we are experiencing a clear and pollution-free environment at the moment. It is a tempting proposition as skies everywhere from Wuhan to Mumbai appear cleaner than seen in decades.

Nasa maps showing NO2 values over Wuhan during January and February. Photograph: Nasa Handout/EPA

Reports show that while the reduction in air pollution in China was partially due to the Lunar new year holidays — when factories operate at reduced capacity — China’s draconian measures to contain the virus caused a 25% reduction in carbon emissions in February alone. According to the Center for Research on Energy and Clean Air that reduction is equivalent to 200 million tons of carbon dioxide, equating to more than half the UK’s annual emissions. Also Lombardy, in the industrial north of Italy, has recently recorded significantly lower N0x emissions.

Average nitrogen dioxide concentrations dropped after the Italian government placed the country under lockdown. Image: European Space Agency

Work hard travel less

All over the world, people have started to commute less. Traveling to work is no longer an option as many of us are asked to work from home. Shopping trips have been streamlined as all but essential shops remain open. And more and more people choose to get groceries home-delivered.

Additionally, global aviation is on ice with most flights now canceled. All of these drastic measures to curb the spread of COVID-19 have resulted in a sharp decline in pollution and carbon emissions; leading to clear skies in previously polluted cities. Furthermore, the average concentration of extremely harmful PM2.5 particles (microscopic particles released by vehicles and power plants) dropped by 71% in one week alone in Delhi. Experts discovered recently that COVID-19 patients exposed for decades to even a moderate increase in these tiny airborne particles were at a heightened risk of dying, so you can see how everything in our economy is interdependent.

Mumbai, India on November 3, 2019, versus March 30, 20202.

As a result of store closures, we consume far less today. Most of us, due to economic uncertainty, keep our money in the bank, at least for now. That means less production of goods, less energy consumption, and less waste.

We should temper our optimism that the current carbon pause is any good

First, this is a temporary situation born out of necessity. What we need are permanent, structural changes while still maintaining the lifestyle and comfort that we have grown accustomed to, though fundamentally reshaped.

At present, air pollution leads to 5.5 million premature deaths per year, according to the American Association for the Advancement of Science. Compound that with the reduced quality of life for those with breathing problems and you have a major impact on health and wellbeing.

By the end of March, coal consumption and nitrogen dioxide pollution returned to ‘normal’ levels in China. Historically the same has been the case for other crises where a break in production led to a small dip followed by a hockey stick rise in its aftermath. There is also the rebound effect to consider where factories try to make up for lost time causing a surge in emissions (Joanna Lewis, Georgetown University 2020).

Losing Climate action momentum?

Meanwhile, the plastics lobby is attempting quite successfully to reverse the ban on single-use plastics. They argue that single-use products are more hygienic and less prone to spread viruses. A couple of US states have already banned or strongly discourage the use of reusable grocery bags. All over the world, with restaurants unable to accommodate guests, the use of takeout and delivery meal packages has skyrocketed. The search for an alternative has triggered a surge in innovation to produce something more environmentally friendly at scale and for a competitive price. Currently, however, biodegradable alternatives are still about three times the price of their plastic counterpart. In short, COVID-19 could set plastic pollution initiatives back years.

Second, we had great momentum built up for climate change. However, COVID-19 is today nearly the only headline you can read. The most important climate conference, the 26th session of the Conference of the Parties (COP 26) was due to take place in November following an unsuccessful summit a year earlier in Madrid. With 2020 dubbed the year for climate action and the European Union presenting their Green Deal plan, the 2020 summit would have gone ahead on the back of a much stronger sentiment. Sadly postponed until next year, Patricia Espinosa, the United Nations’ executive secretary for climate change said ‘we might lose a full year in climate negotiations.’

The risk we now face is that governments and businesses all over the world will focus entirely on economic recovery. Thus, this novel coronavirus poses a serious threat to long-term climate action by compromising global investments in clean energy and weakening industrial environmental goals to reduce emissions.

More fundamentally, we need complex climate transformation action to get us off the path to catastrophe. Yet, China has already modified its environmental supervision of companies to help resume production; even though the Chinese government stressed that it would not relax standards. The prime minister of the Czech Republic has suggested that the European Green Deal should be set aside for countries to focus on their pandemic response.

How incentivized will businesses be to work efficiently with that oil given the 18-year low in oil price? Finance managers will question if it makes sense to purchase a new, more efficient aircraft that uses 20 percent less fuel, or continue with an existing fleet. Added to that, the global supply chain has taken a hit which is bad news for renewable energy projects worldwide.

Oil goes sub-zero

On the 20th of April, for the first time in history, the price of oil plunged below zero. This was mainly due to a technical issue as futures for May were closing. No one wanted to hold futures contracts as oil storage is at maximum capacity. Many recent buyers were not corporate buyers, but financial speculators. This speaks volumes about the current demand for oil, with a lockdown, the demand has vanished. When global lockdowns are lifted, it could take years for demand to return to normal.

Also, this recession could slow the transition towards renewable energy as governments choose cheap oil and gas providers over climate-friendly wind, solar, and electric energy sources. As a major champion for the fossil fuel industry, the US president has already stated he would do everything he can to aid the industry. Would this really make sense without tying transformational initiatives to aiding these industries? The transition will be unstoppable, the choice is then whether to invest government money into the future or the past. Those governments and companies that will do the latter will reap the benefits in the long term.

Certainly, we need to maintain the recent momentum and put pressure on policymakers and business leaders. Luckily, the demand for eco-friendly products and services is stronger than ever. And the related products and services are far more resilient. It gives the impression that we have passed the tipping point in terms of cost/benefit.

The Resources and Climate Change Unit at the Centre for European Policy Studies in Brussels promotes the idea that “boosting economic growth after the coronavirus lockdown doesn’t mean green objectives must be sidelined. New ways of producing and storing renewable energy, hydrogen fuel, and other green technologies might prove more attractive to private investors and governments than traditional industries like coal mines, while the coronavirus shutdown could signal a natural swerve in the direction of cleantech and renewables”.

Radical rethink required

It is vital that we use this period of change to radically rethink how we work and produce. On an individual level, we can already do this. Do we need to fly across the world to a conference or should we simply join a live stream? Do teams need to fly across borders for a workshop that can be done virtually? Do employees need to stand in traffic every day for more than an hour to get to work or can we work more efficiently from home? Do we as travel lovers need to take weekend breaks abroad or can we reconsider how often we choose to fly?

Companies bear even greater responsibility as the recent carbon emission reports make clear that the break in industrial manufacturing has significantly contributed to the cleaner air we currently enjoy. Telecommuting and grounded planes did not lead to the 25 percent drop in emissions but it was the freeze in manufacturing (as estimated by the IEEE). Of course, getting back on track is important for businesses. But now is the time for companies to stick to climate transition innovation, venture building, and improved business models.

The importance of innovation, R&D, and venture building

Recent studies conclude that companies that spend more on R&D during a recession experience growth in EBIT while their ROI pays off in terms of long-term growth and profitability.

As the CEO of VaynerX and VaynerMedia said recently this crisis can also present opportunities for innovation and positive change moving from a mindset of “why” to “why not”? So why not start a climate venture, why not invest more in sustainable business models and policies that are climate positive?

There is an assumption that companies that focus on environmental, social, and corporate governance (ESGs), when it comes to innovation can harm financial results. Yet the opposite is the case. 65% of sustainable funds, for example, rank in the top half of their respective category. Sustainability also offers stability and reduces volatility.

Swimming against the stream pays off

As SARS turned into a pandemic in 2003, it presented a major challenge to China’s economy — including Alibaba’s nascent business. Yet, the shock catalyzed a period of rapid growth for the fledgling company, now one of the most valuable companies in the world. Alibaba benefited from the internet becoming increasingly necessary for doing business during the outbreak, as businesses and consumers were driven online to buy and sell goods.

“Be fearful when others are greedy, be greedy when others are fearful.”

Warren Buffet.

It’s our instinct as individuals and business owners to do what is common practice (cut costs, reduce investments in R&D, etc) yet doing the exact opposite is where the real opportunity lies.

Similarly, Uber and Airbnb emerged triumphant during the financial crisis of 2008 where lower incomes could be supplemented by offering a ride or a room. It is these moments of great upheaval that precipitates innovation.

Thus, companies need to recognize that going back to ‘normal’ would be a mistake as other companies that took this time to build with partners, or through R&D, will set the pace in the long run. The same applies to climate-focused companies.

Can we still afford an energy transition?

Despite the economic standstill, can we still afford an energy transition? Will the over-compensation of economic activity spike when the crisis is lifted? Will the EU take a back seat with their Green Deal, as member states pour funds into relaunching their economies?

Policymakers and politicians should still prioritize carbon neutrality. It is clear that governments are suddenly able to spend tremendous amounts of money. Historically, the financial cost of transitioning to a carbon-neutral society has often been touted as an obstacle. Today, however, we can see just how fast governments of the world can actually come up with vast sums of money, almost overnight.

Let’s take a look at just some of that spending worldwide. Two trillion dollars in the U.S., which is probably just the first tranche of emergency bills. The European Union set aside 500 million euro at the time of writing with discussions to move towards much larger more extensive funding in the coming weeks. Saudi Arabia pulled 32-billion dollars out of the hat. And, China unleashed trillions of Yuan on fiscal stimulus, aimed to spur infrastructure investment, backed by 2.8 trillion Yuan of local government special bonds. India discovered 22 billion they needed to loan for direct cash transfers and food security measures. And so on.

Let’s shape a climate-neutral version of the future

Why have governments not done the same to halt the climate crisis? Especially considering environmental rollbacks are a death sentence to some. But what this crisis made clear is that it’s not about money. Many company leaders and a growing number of citizens are urging us to try sustainability and aggressively pursue the transformation to a carbon-neutral economy. Indeed, governments have considerable purchasing power, as this crisis has revealed. They drive more than 70 percent of global energy investment.

Could the drop in oil prices offer countries an opportunity to lower or remove subsidies for fossil fuel consumption, as the director of the International Energy Agency mentioned? Getting it done would depend on international cooperation. But that’s not beyond reach.

It would be incredibly beneficial for the long-term prevention of acute respiratory conditions. For instance, In China, the two-month lockdown with reduced air pollution saved the lives of 4,000 children under the age of five and 73,000 adults over the age of 70, according to Standford’s Earth System Science department. When we extrapolate this data, it is incontrovertible that health benefits worldwide could be improved exponentially. This version of the future is within reach if we decide that we want it.

Los Angeles had the longest stretch of clean air since 1980, LA curbed

If we decide, on an individual, company and governmental level to focus on qualitative growth that is sustainable for the environment, climate, and society alike, it will be the best thing we ever did. There is no other way.

We need circularity and sustainability with economic and scalable parameters. Frans Timmermans, Vice-chairman of the European Commission argues that “it is a false contradiction to say that the European Green deal, that should make Europe climate neutral in 2050, is a luxury we cannot afford”. On the contrary, we cannot afford the inevitable floods, droughts, forest fires, sea level increases, and desertification!

It is obvious on an individual level, as it is better for our health, our stress levels, job opportunities, and our sense of meaning and purpose. But also at a corporate level, where companies that invest in the long term outcompete their competition on employer attractiveness and branding metrics. They also gain a competitive operational advantage as circularity makes a company more resilient and less reliant on volatile price swings.

On a governmental level, it makes countries future-proof and allows politicians to perform their primary duty of protecting their citizens from existential threats like climate change.

The only vaccine for climate change is action

With the COVID-19 lockdowns, we are experiencing what a world after climate action could look like. We need to imagine it without the terrible virus but with all the freedoms we had before. Now imagine it with seamless mobility, zero carbon, and free of noise pollution. Picture an industrial landscape where waste is reduced, reused, etc. Landfills become a thing of the past. Our food is healthy and our people and companies thrive. All we have to do is decide.

Today is not a time to be fearful and save money on climate and innovation action. Today is the day to renew our commitment and invest with more gusto in climate ventures, R&D, and innovation! It’s impossible for a company to remain competitive if it does not stay ahead of the curve in this regard.

What if individuals were to rethink the consequences of their purchasing decisions and lifestyle choices. What if companies dared to swim against the stream and double down on their climate action.

This crisis can allow us to transform our society. Perhaps COVID-19 is another splash of ice-cold water to the face for sleep-walking governments to take action. What if you tied carbon-neutral goals to emergency financial assistance packages to help governments all over the world fulfill their primary responsibility: protect their citizens and foster a healthy and sustainable economy. How great would it be if the sectors of our economy hit hardest by COVID-19 were to flourish as epicenters of high-potential industries?

This is our chance to reshape the economy for the better.

Let’s stop imagining and start building, creating and executing.