Carbon neutrality and Covid-19 impact

Climate variability has been in the limelight during the past two millennia and has been a subject of intense debates and commitments. The scientists have warned about global warming hitting the point of no return. If this tipping point needs to be delayed or tackled, we must limit carbon emissions to keep global temperature rise to less than 2°C within this century.

Excessive carbon emission from fossil fuels burning for power generation and transportation is the main culprit to this warming. The planet is getting warmer by 0.2°C per decade, according to a report by the Intergovernmental Panel on Climate Change (IPCC) published in October 2018.

Climate change is, perhaps, the greatest challenge we have ever faced, post-industrial revolution. Average global temperatures have risen by almost 1°C because of increased human activities. Levels of carbon dioxide and other heat-trapping greenhouse gases (GHGs) in the atmosphere are at the highest than they have been at any point and are still increasing. Scientists and climate advocates are vouching for a carbon-neutral production. Carbon neutrality would mean zero net carbon and GHG emissions.

The global agreement on the need for climate action is strong and continues to grow. One of the major global frameworks to avoid dangerous climate change by reducing the GHGs was the Paris Agreement (COP21). It was the first-ever legally binding global climate change agreement adopted and ratified by over 190 countries.

The swing away from fossil fuels had begun, however, the progress is far too slow and delayed except for the EU countries. Compared to the 1990 levels, the EU countries have reduced the carbon emissions by approximately 23%. Apart from the EU, very little progress has been seen. The previous COP24 in Poland ended in limbo with the non-participation of the US and the recent COP25 in Spain saw no concrete agreement regarding aggressive targets towards mitigating the carbon challenge, citing funding concerns on article 6 of the accord by the US, Brazil and Australia.

The EU is leading the carbon mitigation resolution with bold and bind targets set by its member countries. The modernisation and transformation towards a climate-neutral world from a power generation perspective would mean parting away from fossil fuel, mainly coal-based power generation.

Global electricity demand increased by approximately 2.5% in 2019 with low-carbon generation expanding 4% to meet a considerable share of the increased demand by more than 50%. Coal remained the largest source of electricity generation and saw an increase of coal-fuelled power generation by 1% in 2019 over 2018.

According to the estimates from IEA, CO₂ emissions remained flattened in 2019 at approximately 33Gt. However, due to milder weather and weaker global economic growth, the emissions from the power sector fell by 1.2% in 2019. The global energy-related CO₂ emissions flattened in 2019, following two years of increase. The power sector now accounts for 36% of the share in the energy-related emissions in 2019 compared to previous 42% in 2018.

The top ten carbon emitters continue to hold approximately 67% of the total emissions, while some countries / regions such as the US, some EU countries such as Germany, the UK, Japan and Saudi Arabia have managed to reduce their fossil fuel emissions post the COP21 agreement. However, the other major emitters China and India had a moderate increase in the emissions, while the remaining South East Asian countries saw strong growth in the emissions on account of robust coal demand.

The carbon prices have declined drastically from an 11 year high of $30.46 per tonne in the summer of 2019 to $16.32 per tonne. Renewable energy had previously overtaken fossil fuels as the most affordable energy source. However, this may be threatened if oil and gas prices remain low. Enterprises are unlikely to adopt renewable energy during a recession, particularly if the price is no longer competitive.

Pollution and GHG emissions have fallen across the continents as countries imposed lockdowns and restrictions to contain the spread of the Covid-19. The drop in the CO₂ emissions can be the largest since WWII but it will not have any impact on climate change. Scientists estimate a 5% fall in the carbon output in 2020. However, without any structural changes, the emission decline caused by Covid-19 could be short-lived and have a tiny impact on the concentration levels of carbon dioxide in the atmosphere.

The countries and cities with the highest Covid-19 impact are witnessing clear and sunny skies. The pollution in New York has reduced by nearly 50% due to the strict measures in place. In China, emissions fell nearly 25% during the start of the year as factories were shut, people were mandated to stay inside and the usage of coal fell nearly 40% on account of six of the largest power plants operated at minimal levels. In Europe, satellite images show a similar story with GHG emissions fading away over Italy, Spain and the UK.

This is not the first time an epidemic has resulted in lower atmospheric carbon dioxide levels, history suggests. The spread of a disease has been connected to lower emissions, even prior to the industrial age. The sudden dip in the emissions are believed to have a short-lived impact and are likely to rebound as the economy recovers. To have a net carbon electricity scenario, the world needs to adopt more renewable generation in the portfolio, improve efficiency standard and part away from coal-based generation.

With the hesitant and restricted efforts from the countries, achieving a carbon-neutral electricity scenario appears distant and faded. There are different models from various organisations, which suggests multiple approaches for a net-zero electricity generation development plan. According to IEA’s Sustainable Development Scenario (SDS), which is in line with the Paris Agreement, renewables should account for two-thirds of the electric supply worldwide by 2040.

Keeping in mind the business as usual scenario, GlobalData estimates that renewables could only be able to source 32% of the world electric supply by 2030, up by a meagre growth of 6% from 2019, well short of the targeted electricity supply by estimated 35% in the 2030 and by 42% in 2040 in comparison to the net-zero scenario.

While we estimate a lopsided achievement of the carbon-neutral power generation by the nations, the EU countries lead the race towards carbon neutrality. Also, this current phase of low crude and gas prices coupled with unaccounted economic recessions are likely to create a deterrent towards this carbon-neutral achievement within the specified time frame. There needs to be a greater ambition on the climate change, channelling significant efforts and investments reallocation towards the energy efficiency and renewables, as well as a stringent plan of retiring half of the global coal-fired power plant capacities.