Emissions set for a record fall due to Covid-19 this year. But it’s not a good sign

A new report by the International Energy Agency (IEA) has two important revelations about the impact of Covid-19 on energy demand.

It said that all fuels, except renewables, will record a decline in demand in the coming decades. The agency also said that global carbon dioxide (CO2) emissions this year are set for record fall, six times larger than the fall recorded after the 2008 financial crisis and twice as large as all previous reductions since World War II.

The record fall in CO2 emissions is not a good sign as it is a clear indicator of a massive economic shock and the fall may be temporary followed by more investments in dirty fuel, experts who drafted “Global Energy Review 2020” released on Thursday said.

“Resulting from premature deaths and economic trauma around the world, the historic decline in global emissions is absolutely nothing to cheer,” IEA Executive Director Fatih Birol said in a statement. “And if the aftermath of the 2008 financial crisis is anything to go by, we are likely to soon see a sharp rebound in emissions as economic conditions improve. But governments can learn from that experience by putting clean energy...” he added.

Daily data for this year till mid-April shows that countries in full lockdown are experiencing an average 25 per cent decline in energy demand per week and countries in partial lockdown an average 18 per cent decline. Global energy demand has already declined by 3.8 per cent in the first quarter of 2020, with most of the impact felt in March when lockdowns were enforced in Europe, North America and others.

The report projects that energy demand will fall six per cent in 2020 - seven times the decline after the 2008 financial crisis. The IEA said, “The decline is unprecedented - the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer.”

Depending on the duration of restrictive measures, developed countries are expected to see the biggest fall in energy demand - by nine per cent in the US and by 11 per cent in European Union.

The energy landscape has already changed because global coal demand in the first quarter fell by eight per cent compared to last year. This was mainly due to China, a coal based economy, which was hardest hit in the first quarter. Oil demand fell by five per cent in the first quarter mainly because of restrictions on transport and aviation. But renewables recorded a growth in demand, driven by larger installed capacity in the first quarter.

The IEA said that renewables receive priority in the grid and are not asked to adjust their output based on demand which insulates them from the impacts of lower energy demand. This resulted in renewables grabbing a higher share in the energy mix with record-high hourly shares in Belgium, Italy, Germany, Hungary and eastern parts of the United States. The IEA also stated that demand for renewables this year and in coming years will increase due to low operating costs.

As a result of these trends in fall in oil and coal demand, global energy-related CO2 emissions are set to fall by almost eight per cent in 2020, a record drop. It will be six times larger than the one recorded in 2009. “The coronavirus pandemic has triggered a macroeconomic shock that is unprecedented in peacetime... these restrictions (lockdown) represent a challenging combination of a supply and a demand shock,” the report concluded.

The impact on energy demand in India is yet to be seen. In the first quarter, energy demand in India increased by 0.3% in comparison to last year. As the lockdown continues, the impact on energy demand will be much larger in the second quarter.

Experts said that Covid-19 comes with an important opportunity. “The current pandemic has brought the world to its knees. While countries are facing a public health crisis in the near-term, the world has an opportunity to show resilient character in how it deals with the issues of climate change in the long term,” said Karan Mangotra, associate director, The Energy and Resources Institute (TERI). He added, “We are all privy to the clear skies and ‘very good’ AQI numbers during the lockdown period. However, to sustain this we would need to ensure that our recovery is green and sustainable lest we have a negative rebound. How do we ensure that the construction, aviation and the automobile industries are equipped to make greener transitions? Can our recovery for some of the polluting sectors be conditional to being green and sustainable? These are some of the important questions that need to be thought through lest we let go of this opportunity.”

“In the short term, the drop in power generation from coal and gas has transported power systems several years into the future, with the share of renewable energy setting new records. The longer-term impact depends on government policies,” said Lauri Myllyvirta, lead analyst at Centre for Research on Energy and Clean Air (CREA).

“Above all, this is an opportunity to close down polluting and outdated capacity, and speed up the development of renewable energy as a part of the economic recovery packages being prepared around the world. Renewable energy played an important role in job creation and economic recovery after the global financial crisis and this can be true of the recovery from the Covid-19 crisis as well. In India, it’s vital to align the power sector bailout package that is being prepared with the shift to clean energy, by closing down old, loss-making thermal power plants, upgrading grid infrastructure and accelerating renewable energy development,” he added.

“Drop in carbon emissions is a side effect that doesn’t offset the damage especially because a short-term drop in CO2 is not useful as far as climate change is concerned. Only sustained changes in emissions are relevant here. In terms of a rebound, I expect almost all of these gains to be reversed. On the bright side, it’s plausible that some of the technology we have started using might normalise more environmentally friendly practices. For instance, flying for meetings could plausibly be reduced since it has been shown that video conferences can often work well,” said Anant Sudarshan, South Asia Director of the Energy Policy Institute at the University of Chicago.