Building Back Better after COVID 19: 5 actions to keep the foot on the Climate Change pedal

on 06 Jun, 2020

For the last over 2 months, almost all of human thought and concern has been about COVID 19. And rightly so because this is the first time several generations of humanity have seen and been directly impacted by such an upheaval in their lifetimes as they stand by helplessly. But as the curves have begun to flatten out in many of the most affected parts of the world (India is still a distance from that point), the other big agenda of our time – Climate Change – has begun to re-emerge from the shadows. 

The big question of course is, will COVID 19 accelerate our quest for a zero-carbon-emission world or has it set us back big time? There are a number of folks out there who believe that COVID is good for the climate change agenda and point to the evidence that they believe proves their point. 

My position is simple. I believe that the lessons of COVID will not automatically or axiomatically rub-off of on the Climate Change agenda and the first part of this piece argues why I believe this to be the case. A set of deliberate, strategic actions must be taken by institutions and individuals who believe in climate change to ensure that it is taken very seriously and that constitutes the latter part of this piece. 

Positive impacts of COVID on the Climate Change agenda

Much has been written about the positive rub-offs of COVID on the climate change agenda. On the clean environment front, there is little argument. Delhi – the city where I live and where AQI levels sometimes go beyond the 999 that the meters record – has seen these drop to two figures and early 100s is almost the norm. Perhaps the most evocative was the photograph of the Dhauladhar range of the Himalayas seen from Jalandhar over 200 km away. Citizens have begun to realise that bad air quality is not a fait accompli and clean air is a distinct possibility.

The advantages of a digitally connected world were not new – the millennials had long ago discovered this and have been living in this virtual world for a while. To many, especially in formal institutions, the lockdowns have shown that physical face-to-face meetings are no longer critical and meetings on Zoom, Teams, BlueJeans and the like are as effective. Companies such as IT major TCS has even announced that its work-from-home arrangement will cover 75% of its employees by 2025. All this, combined with the fact that most people will be wary of flying for a while will mean a lower Scope 3 carbon footprint, though the increased use of personal transport instead of public transport and the less efficient home air conditioning might nullify these impacts somewhat.

There is also every reason to believe that supply chains will get shorter and off-shoring of production of physical goods will significantly reduce. Labour costs usually trumped transportation costs when companies built their supply chains but with COVID bringing business continuity well and squarely centre-stage (though climate change proponents have long been arguing this case), this is likely to become the norm, accelerated by the growing unpopularity of China as the global manufacturing hub.

Finally, the matter of risk. COVID has demonstrated the extent of disruption – human and economic – that can result from a shock of this kind. To many, climate change represents a similar risk as it is also global and potentially as disruptive. Also, the responses to both these crises are similar – they have to be science-based, requires global coordination and building long-term resilience to deal with risks is key. Despite the obvious differences between the two, especially when it comes to timescales, the fact that the impacts of climate change are more predictable and hence risks are easier to assess may provide the necessary fillip and sense of urgency to the climate change agenda.

Reasons for optimism

All of the above impacts provide reasons to be optimistic that the climate change agenda will hold. Additionally, there are other announcements that bring cheer.

A S&P Global report says that several companies have made climate related pledges during the pandemic including Microsoft (reduced land-use), Royal Dutch Shell PLC (a new net-zero emissions target), Bank of Montreal (100% of electricity usage from renewables), Morgan Stanley and Citigroup (both of whom committed to stop funding coal-based power plants).

The EU is already set on delivering a green stimulus. A BBC report quoted the chief of the  Commission’s Green Deal (which commits the EU to net-zero emissions by 2050), Frans Timmermans as saying that every euro spent on economic recovery measures after the COVID-19 crisis would be linked to the green and digital transitions. Though there has been some disquiet amongst a few EU members on the new emissions trading scheme in the light of COVID, a spokesperson was quoted as saying: “While our immediate focus is on combating Covid-19, our work on delivering the European Green Deal continues. The climate crisis is still a reality and necessitates our continued attention and efforts.” The French government’s bail out to Air France conditioned on using more energy efficient engines and a shift to sustainable fuels is another example of a government committed to building back better.

A reality check

Despite these positive signals, history and economics provide a counter narrative. Carbon emission data trends seem to suggest that crises do result in a dip but these soon recover. For instance, after the 2008 financial crisis, global carbon dioxide emissions from fossil fuel combustion and cement production fell 1.4% in 2009 but with economic stimulus resources disproportionately allocated to polluting industries, emissions rebounded to 5.9% in 2010. Thus, if history repeats itself, economic recovery post COVID could remain carbon intensive and the fact that effects of climate change are staggered could tempt governments to deal with what appear immediate threats first. It is yet unclear if the indefinite postponement of COP 26, where countries were expected to announce enhancement of their Paris commitments, has derailed this process or not.

Though the EU is strongly committed to the Green Deal as mentioned earlier, it is not without opposition in the light of COVID. The Prime Minister of the Czech Republic has urged ditching the Green Deal while a Deputy Prime Minister of Poland has suggested that the emission trading scheme be put on hold. According to a BBC report, Markus Pieper, an MEP from the centre-right German CDU party suggested that a post-COVID economy made investments in clean technologies unviable.

Other countries too seem to be sacrificing the environment in general and climate change in particular at the altar of COVID recovery. China has indicated that it will relax environmental oversight of companies and satellite images seem to suggest that the air pollution that fell during the peak of the outbreak has started to come back as factories resume production. The US EPA announced “new less stringent” GHG standards for passenger cars and light trucks and also said it would not penalise companies for not complying with federal monitoring or reporting requirements if they could attribute their non-compliance to the pandemic. The Brazilian federal environmental agency announced it is cutting back on its enforcement duties, which include protecting the Amazon from accelerating deforestation. 

The position that India and several developing countries have taken in climate change negotiations has been that its mitigation actions will be subject to availability of finance and technology coming from the western world whose historical carbon emissions have occupied much of the carbon space left to ensure that temperature rise remains well below 2°C. In a post COVID world where many of the developed world is likely to see zero to negative economic growth in the coming years, and where funding social safety nets is likely to be prioritised, availability of finance for climate change will be a huge constraint. This again could prove to be a setback for GHG mitigation efforts.

And finally, the matter of oil prices. These have already plummeted to historic lows on account of reduced demand. At the same time, the major oil producers have also reportedly announced plans to expand production, perhaps in a bid to monetise their assets to counter future climate change regulations. If prices continue to remain low, then this will adversely impact the growth of low carbon sectors.

Maintaining the Climate Change momentum – a plan of action

Soon after the 2008 global financial crisis, Rahm Emmanuel, President Obama’s Chief of Staff was quoted as saying: “You never let a serious crisis go to waste. And what I mean by that is it’s an opportunity to do things you think you could not do before.” COVID potentially provides such an opportunity but it needs to be leveraged to be effective. What needs to be done? I believe there are 5 sets of actions.

Nudge governments into a low carbon recovery path

There is a global consensus that the economy has to restart, and quickly. What is less clear is what technological pathway this should take. As was mentioned earlier, there is a strong temptation for governments and corporations to prioritise the immediate, believing that climate change can wait. This should be discouraged.

As was mentioned earlier, the EU as a bloc and France have demonstrated a clear commitment to leverage this opportunity to build back using a low carbon path. Commentators have spoken about numerous ways this could be done, ranging from economic stimulus programmes that prioritise investments in low carbon pathways, assistance to businesses conditioned on drastic cuts in emissions and financial industry bailouts that require banks to invest less in fossil fuel and more in climate change mitigation and resilience efforts. All this tied in with enhanced disclosures used widely accepted frameworks such as that recommended by TCFD and the Indian Business Responsibility Report now under revision. Resilience has to be the key message.

Governments and policy-makers may have to be nudged into this course of action and this calls for a concerted and coordinated advocacy effort by a wide range of climate change champions – NGOs, think-tanks, academia, activists around the world. Media – mainstream and social – and people action would be critical allies in this transformation as would the financial services community and companies that have shown climate change leadership and commitment.

Make climate change a people’s movement

So far, the climate change narrative has tended to include only policy-makers, scientists, academia, NGOs, activists and business with the public only peripherally involved. Part of the reason is the technical nature of the debate and also its relative lack of urgency, certainly compared to COVID. This has changed dramatically in the recent past with the Greta Thunbergs being able to capture the imagination, especially of the generation that will be most impacted by it. 

It is time that the climate change agenda got off its pedestal and waded into the messy, complex space of a people’s movement. The logic is very simple. People, especially young people, need to contribute to the solution, not just by participating in protests, but also by their own personal behaviours. And it is people as consumers and employees that can persuade companies to go down a low-carbon path and provide the “business case” for climate change and it is people as activists and voters who can get governments to take it more seriously. Easier said than done of course but its time has come.

The renewed respect for science that COVID has triggered provides the building blocks of such a people’s movement. IPCC’s work has been outstanding but its messages must go out in language and ways that are simple, understandable and imaginative, leveraging the shifts in behaviour and mindsets that COVID has brought about. Correlation between consuming low carbon products such as EVs and renewable energy and clean skies and breathable air could be a powerful and positive message. The likely increase in the incidence of infectious disease outbreaks, and hence the risk of future pandemics, if climate change action is deferred is another useful link that can be drawn.

Once again, climate change champions – particularly the NGOs, think-tanks and activists – have their work cut out for them. Not only should they create imaginative messages and campaigns to inform the public but also provide them with the tools to act, individually and collectively. Their natural allies in this are grass-root NGOs and the media.

Strengthen the “business case” for climate change

Though businesses understand climate science, it will be useful to reiterate the risks that climate change exposes them to, based on the lessons of COVID. For instance, COVID has brought home the fact that potential disruptions to global supply chains is no longer a theoretical or isolated construct but a reality which, science tells us, that climate change will also pose. The gains that work-from-home has brought about is clearly demonstrates that not only are these effective and efficient but also reduces costs while contributing to climate change mitigation.

Investors and lenders have a huge part to play in this, simply because as providers of capital and first claimants on assets, they have to be acutely aware of the risks, many of which have been magnified by COVID. Indications are that most are currently engaged in protecting their existing equity and loan portfolios but it is very likely that they recognise the risks that climate change poses and will use their influence with their investee companies to focus on resilience. Insurers too, who are looking at a once-in-a-thousand-year event like COVID might become more risk-averse which could raise the costs for those businesses who take insurance cover unmindful of their adverse impact on the climate.

Again, there is a clear-cut set of actions that climate change champions can take to push this agenda, both directly with companies but perhaps more effectively though the influential financial services sector.

Build a national consensus on long-term low carbon strategy

The response to COVID has demonstrated both the need and the possibility for political parties to align to an objective and the broad pathways, even if there is disagreement on the details as there should be in a healthy democracy. Climate Change actors should work to ensure this momentum is carried to the climate change agenda as well by the different countries, including India. The development of long-term low greenhouse gas emissions development strategies for India, in line with the Paris Agreement, that TERI has embarked on will be a useful instrument to build such a consensus.

Given the long-term nature of climate action, building a national political consensus in a democracy is absolutely critical for success so that objectives stay steadfast even as different political parties run provincial and national governments at different points in time. The fact that the UK and the EU have been able to agree to the goal of net-zero carbon by 2050 demonstrates that this is possible while the US is a notable exception. 

This is an agenda that must be taken forward by think-tanks and advocacy groups in the climate change space who are skilled in political advocacy. Engaging directly with the leadership in political parties at the national and regional/provincial levels is critical. The role that individuals play as citizens, especially young people, cannot be over-emphasised.

Strengthen international cooperation and institutions

The institution designed to provide technical support and coordination to tackle a global pandemic like COVID is the WHO. However, it must be said that its reputation has been somewhat tarnished, with several countries and commentators questioning its efficacy. Further, the search for a vaccine appears to be a rather scattered and private-sector driven enterprise with little signs of any global cooperation. This, taken along with the criticism of the WTO and the UN system in general in the past, does not bode well for the role of international institutions.

It is in this context that getting a global consensus in climate change must be seen. It is also obvious that to address the spatial aspects of a global challenge such as climate change, there is a need for a global institution to anchor the process. The UNFCCC has played this role for a long time and is the natural institution to continue to do so. It is, therefore, in the interests of all those who take climate change seriously to strengthen the UNEP and the UNFCCC. The postponement of COP 26 in 2020 was expected in the light of COVID but the first action all governments, cities, NGOs and businesses must take is to quickly announce a date and work on their enhanced NDC commitments.

Written by Shankar Venkateswaran, Operating Partner & Head ESG, ECube Investment Advisors. The views expressed here are personal.

(A shorter version of this piece titled “Recovery must take into account the climate crisis” was published in Hindustan Times dated 2 June 2020)