The sweeping economic devastation of the Covid-19 pandemic raised concern that the need for a swift recovery of economies would trump any greening ambitions.
Certainly, the gains of the anti-plastics movement appear to have gone out the window as consumers opt for the convenience of single-use plastics. Similarly, you might think, policymakers would put lowering carbon emissions and other environmental ambitions on the back burner in favour of kick-starting their economies as quickly as possible.
But it’s quite the opposite, as there are already clear signs that Covid-19 will accelerate greening of economies rather than hinder it.
Take Germany for example. The industrial powerhouse, home to iconic car brands BMW, Audi and VW, to name a few, announced a €130bn stimulus package in early June which offered no assistance for petrol and diesel cars. That’s despite extensive lobbying by the powerful automobile industry, which had pushed for assistance similar to what was handed out in the 2008 global financial crisis when purchase subsidies for consumers, known as scrapping schemes, artificially held up consumer demand for vehicles. Instead, the new stimulus package doubles an existing subsidy for buyers of electric cars to €6,000, incentivising prospective car buyers to go green.
Notably, €9bn is earmarked for investment into seriously big ambitions for green hydrogen to help further wean the industrialised nation off fossil fuels.
Beyond Germany, the EU has put its strategy to become carbon neutral by 2050, the so-called green deal, at the centre of its unprecedented €750bn stimulus package, though the plan still requires the unanimous approval of all 27 member states.
It’s not particularly surprising that developed nations that were already moving with purpose towards decarbonisation are accelerating these plans now.
“Globally, we’ve seen some strong announcements from a number of governments about the need for a pivot to a green stimulus,” says Mike Levington, convener of the SA Renewable Energy Masterplan.
“To be honest, most of those governments did not need to pivot, they were already committed to a greener trajectory. What it did do is accelerate what those governments believed would happen over 15 to 20 years. Now you’re talking about five to 10 years.”
But 7,000km away, in China, something interesting is happening too.
Last month, the Chinese central bank removed projects that make clean use of fossil fuels, such as “clean coal” projects, from its green bond guidelines.
According to a report by the Climate Bonds Initiative, in 2018, $31.2bn worth of green bonds out of the $42.8bn issued in China was aligned with international criteria.
Though the world’s largest emitter of greenhouse gas, China also has a booming renewable energy market. By aligning with international standards of what is considered green, it means more foreign investors can participate in that market.
It’s a big deal, says Levington. “You’ve had a lot Chinese EPC [engineering, procurement and construction] companies around the world offering to build ‘clean coal’ on the basis of that green bond programme.
“The fact that they’ve now removed clean coal as a qualifying technology means that coal IPPs [independent power producers] will be more difficult to close.”
But what about developing economies now on the bones of their backsides, SA included?
President Cyril Ramaphosa of late has made passing reference to a new, green, economy. However, with the government’s history of being more talk than action, it’s appropriate to be sceptical.
But once SA borrows money from the likes of the IMF and the World Bank, greening the economy may no longer be a matter of choice.
The IMF, from which SA hopes to borrow $4.2bn, says the scope to implement green recovery plans in the immediate crisis-containment phase may be limited. “However, as countries move from containment and stabilisation to recovery, green recovery plans will likely be reflected in IMF-supported programmes where structural reforms are critical for macroeconomic developments.”
The World Bank sees energy as key to counter the effect of Covid-19 and restart economic growth and job creation.
“As billions of dollars will be mobilised to support developing countries in the coming months, it will be important to recover from the pandemic in a way that benefits long-term inclusive development,” the group says.
As such, the World Bank says it will be important to support investment in the clean energy transition as the world emerges from the crisis and it can provide budgetary support through development policy financing (DFI) to accelerate the adoption of energy transition policies which, it says, can bring high social returns.
DFI funding aside, the consequences of not keeping up with accelerated global greening trends will render SA uncompetitive, Levington explains.
“As Europe, one of SA’s largest trading partners, embarks on a strong decarbonisation and green stimulus road, countries that don’t move far or fast enough on their own transitions to a lower carbon energy mix could find themselves exposed to carbon taxes on their exports to Europe”, he says.
Broadly speaking, the recovery is bound to be greener than any period before it because, this time around, green stimulus is being driven not just by climate change ideology but by pure economics, Levington notes.
And if it is globalisation that brought the devastating Covid-19 pandemic to SA’s shores, the silver lining is that it could bring a green recovery too.
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