The COVID-19 pandemic that brought the world economy to a three-month halt also brought down CO2 emissions to an unprecedented level. Experts have announced that the drop in greenhouse gas emissions associated with the pandemic is 6 to 10 times larger in comparison to the aftermath of the financial crisis of 2008, and the International Energy Agency reported a 6% decrease in global energy use for the year of 2020 (BBC, 2020; IEA, 2020). Although these numbers might seem significant, the effect of these drops alone is nearly not enough to achieve the 1.5°C target set by the Paris Agreement. So how can we look at the pandemic as an opportunity to step up the fight against the climate emergency? The answer lies in the response to the global economic crisis and in the stimulus packages offered by governments throughout the world. Collective and aligned action by states, in the form of fiscal policy, can be used to develop low-carbon sectors and restructure the oil and gas industries, pathing economic structures into a greener future.
With COVID-19, the closure of polluting industrial complexes or of CO2 intensive businesses, which had been a seemingly inconceivable demand from climate activists, suddenly became possible overnight (Bloomberg, 2020). With the pandemic, the absence of public policy rapidly translated into swift and harsh repercussions for populations; hence, government intervention was crucial, immediate and decisive. However, when it comes to climate change, the consequences are not so visible or immediate, although they are as probable. In the past, this has resulted in an impediment for impactful or decisive public policy that tackled climate change. The economic crisis brought by the pandemic, conversely, changes the paradigm. On the side of the private sphere, oil companies experience the consequences of an intense demand shock, sinking prices and excess supply (Barbosa et. al, 2020; World Economic Forum, 2020), while on the public side, governments are presented with the opportunity to lead an aligned green revolution as an addendum to extraordinary fiscal policy (Mendiluce and Siri, 2020).
The economic crisis brought by the pandemic represents an interesting opportunity for states to commit to a green new deal in unison, greatly advancing the climate cause. Olson (1971) showed that it is empirically impractical for rational, self-interested agents to act collectively to achieve a common interest when they find themselves in a large (latent) group, even though all of the actors acknowledge what the good is and how they can achieve it. The issue lies with the economic concept of a public good, which is by nature non-excludable and non-rivalrous. The benefits derived from the achievement of such a good cannot be directly attributed to one individual or to an exclusive, specific group. There is rarely a common interest in paying for the costs that the achievement of the public good brings about. Climate change fits properly as an issue that requires collective action by a large latent group. As Harris (2007) puts it, it is a problem of collective action “par excellence”. However, the pandemic has innocently changed the game. Most countries in the world now require a large fiscal stimulus, meaning they all must incur a cost by injecting millions into their economies, even though this might not have seemed an option before. The only question becomes how national governments should distribute the money. If nations consider the need for swift policy in the climate field, collective action by countries worldwide can be achieved, as carbon-intensive companies would feel the urge to transition to low emission alternatives in order to rip the benefits of these stimulus packages. The status-quo of the energy market can then be reversed in favour of renewable energy through the creation of selective incentives.
By focusing on green initiatives, nations all around the world can help eco-friendly firms surpass the obstacles they often encounter when attempting to enter or compete in the energy markets, which are mostly dominated by the low-priced solutions offered by fossil fuel companies. With the economic crisis, governments are now in a stronghold position. They are able to demand low emission targets from carbon intensive industries who require ‘bailout money’ from the stimulus packages. States can also legitimately buy into or incorporate carbon-intensive firms in order to supervise, or even cover, their environmental spill over.
This would benefit the economic recovery of the countries into a more sustainable future, virtually more so than simply financing pre-existing fossil-fuel companies. Reports from the University of Oxford (Hepburn et al., 2020) and the World Bank (Bacon and Kojima, 2011) have shown how the development of novel industries associated with renewables create more and higher paying jobs than their fossil-fuel counterparts. In the short run, the renewable energy industry can be the solution to high unemployment rates stemming from the pandemic, and in the long run, new infrastructure and green technological revolution can develop the economy further and generate even more employment (Quiggin, 2020).
There are at least three things that COVID-19 has already shown us. We must trust science; international crises demand international action; and when imperative, governments do put humanity ahead of the economy. This pandemic has levelled the ground for the world’s largest polluters and given us a chance to rebuild our economies. It is now our job to restructure our energy markets in a more climate-conscious, sustainable way. This is possible if all countries commit to this goal and, once more, recognise the need for urgent action, prioritising the future of humanity instead of larger profits. Now is not the moment to bail out carbon intensive industries or airline companies that have no plans to commit to low emissions, net-zero targets or clean energy investments. This is the moment for change. We have been given an opportunity and we must recognise it.