This is how we can make a global green recovery – that also boosts the economy

wind mill_

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Charlotte Edmond, Senior Writer, Formative Content


  • Targeted policies and investment in renewables and energy efficiency could boost the global economy by 1.1%, according to a report from the IEA.
  • Its Sustainable Recovery Plan would also save 9 million jobs a year and reduce energy-related greenhouse gas emissions by 4.5 billion tonnes.
  • Achieving this requires a global investment of $1 trillion annually over the next three years.

Now that many nations are gradually re-emerging, governments are desperately seeking ways to inject life into torpid economies. But how do they do that while maintaining the environmental boon that lockdown provided? And where can they start on the road to a green recovery? A report from the International Energy Agency (IEA) has some ideas.

Changes in global energy demand.
Changes in global energy demand.
Image: IEA Sustainable Recovery Plan

 

A sustainable recovery

Targeted policies and investment between 2021 and 2023 could boost global economic growth by an average of 1.1% a year, the IEA estimates. Its Sustainable Recovery Plan would also save or create around 9 million jobs a year and reduce energy-related greenhouse gas emissions by 4.5 billion tonnes globally, according to analysis conducted in co-operation with the International Monetary Fund (IMF).

The measures would also accelerate progress towards the UN’s Sustainable Development Goals, bringing clean cooking capabilities and electricity access to millions of people in low-income countries.

Achieving this requires a global investment of $1 trillion annually over the next three years – or around 0.7% of today’s global GDP.

The plan lays out the most cost-effective approaches based on individual country circumstances, existing energy projects and current market conditions.

coronavirus, health, COVID19, pandemic

What is the World Economic Forum doing to manage emerging risks from COVID-19?

The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.

As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.

To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications – a companion for decision-makers, building on the Forum’s annual Global Risks Report.

The report reveals that the economic impact of COVID-19 is dominating companies’ risks perceptions.

Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.

Buoying up the job market

The IEA estimates that of the 40 million people directly employed by the energy industry, around 3 million, have lost their jobs, or are at risk of doing so, as a result of COVID-19. Another 3 million jobs are affected in related areas.

Employment and jobs at risk
COVID-19 has forced millions of people out of work.
Image: IEA Sustainable Recovery Plan

A large number of jobs could be created through retrofitting buildings to improve energy efficiency, according to the IEA plan, with another swathe coming from the electricity sector, particularly in grids and renewable energy. Energy-efficient parts of the manufacturing, food and textiles industries would also benefit from increased employment, along with low-carbon transport infrastructure and vehicles.

Balancing demand and security

Investment in the energy sector is set to plunge 20% in 2020, which raises serious concerns around energy security and the transition to renewables, the IEA says. Investment in electricity grids, upgrading hydropower facilities and extending the life of nuclear plants would help in this regard by lowering the risk of outages and boosting flexibility.

Improvements would also put power systems on a stronger footing to withstand natural disasters, severe weather and other threats.

Passing the point of peak greenhouse gas emissions

Past financial recoveries – for example following the 2008/09 crisis – have been matched with rebounding global carbon dioxide emissions. Along with bringing projected emissions in 2023 significantly below where they currently are, the sustainable recovery plan would also see air pollution improved, reducing health risks around the world.

Air quality.
Changes in air quality.
Image: IEA Sustainable Recovery Plan

Increased efficiency and lower carbon energy generation, as laid out in the plan, have the potential to make 2019 the “definitive peak” in global emissions, putting us on a path to achieve longer-term climate goals, including the Paris Agreement.

Given the currently low oil and gas prices, the process of reforming inefficient fossil fuel subsidies could also be accelerated without overly hurting consumers.

Abatement costs for selected measures.
Ways to reduce carbon emissions
Image: IEA Sustainable Recovery Plan

A shifted focus

The focus for governments needs to be on delivering resilient projects that can be up and running in a short space of time. This also includes developing a pipeline of support for distressed industries such as the automotive sector. In this way, large amounts of private capital will also be mobilized alongside public funding.

International cooperation will also be key to ensure countries’ actions are aligned and global supply chains are re-established.

“Governments have a once-in-a-lifetime opportunity to reboot their economies and bring a wave of new employment opportunities while accelerating the shift to a more resilient and cleaner energy future,” says IEA executive director Dr Fatih Birol.

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Comments

  1. nice post. thank you

  2. samir sardana says:

    Yes ! Pakistan has just hiked its Petrol prices by 20%

    The hike in Petrol etc.,can be calibrated and differentiated by the IRP.In COVID times – the IRP (Islamic Republic of Pakistan),can raise resources,from only 5 sources

    Hike in Taxes of fuel and liquor
    Hike Rates of Power
    Hike in Import Duty on Edible Oil
    Cutting govtt staff costs
    Cutting Govtt costs

    The Public will not tolerate any other tax hike.dindooohindoo

    Since there is a demand drawdown (id.est.,the absolute demand has reduced),so the post hike rates, might be even more than,the pre-Covid cost,to a retail user

    Had the IRP locked into the Oil futures on BMD/NYMEX/CBOT – it would have been a party for IRP (id,est., not deliverable forwards – as there is no storage capacity in the world on tankers or in bond).BMD is controlled by Mahatir – the ally of IKN.

    People are needlessly abusing IKN (Imran Khan Niazi).This man will FREE the Kashmiris from the yokels of the Kaffir genocide.He is the man – and providence,has got him to that seat

    News anchors crib about the rates of fuel in EU and USA,and link it to the Purchasing Power Parity (PPP).Oil is sold in USD – and so, the downstream oil products have to be compared on USD terms.PPP is irrelevant. THE FACT is that the price of petrol and diesel in IRP,is the lowest in the SAARC,and is also lower, than many nations,in the EU.

    However,if like in IRP,there are local refiners – then also,we have to look at the FOB rates of petrol and diesel,as there is an opportunity cost of export. IRP oil refineries are making a profit at these rates – and the tax on that profit,is going to the IRP. ONE COULD ARGUE that the Oil PSUs can sell at Marginal Cost of refining,plus some Fixed cost recovery (FCR)- so that the burden on the retail, is MINISMISED.

    The ethical reason for the above,is that that IRP oil refiners,are listed on the KSE.So if an Oil PSU makes a profit on the misery of the people of IRP – and then speculators punt on it,and also earn quarterly dividends on it – which 98% of the people of IRP cannot avail of – that would, PROBABLY,be against Islamic business principles.Hence,the Oil PSU has to sell on the basis of Marginal cost,plus some FCR.

    The moral reason,is that an Oil PSU in IRP,in the COVID market,SHOULD not make windfall gains,at the expense of the people of the IRP,based on inventory gains.This requires no ACUMEN or intellectual angulature.

    If the Oil PSU is selling the Oil to the distributors,and there is no clause in the agency or dealership agreement,to return to the IRP,the windfall profit earned – that would be criminal.

    For the news anchors of IRP – take the case of Gold.The price of RAW Gold (prime ingots and bars) all over the world,is the same – net of all taxes.The difference of 2-5%, is due to Air freight,assay cost,FX volatility(not translation) and traders margin.Similarly the price of petrol and diesel,is the SAME ALL over the world – net of taxes AND SUBSIDIES,with a margin of 5-11%,to account for differential freight and profit margin.

    However,instead of hiking the rates en masse,on an ad vaolorem basis – IKN should have done the following :

    Imposed a 1 time,1 year tax,on all private luxury cars,using Diesel (based on deemed fuel usage)
    Imposed a 1 time,1 year tax,on all private cars using,Diesel (based on deemed fuel usage)
    Imposed a 1 time,1 year tax,on all private luxury cars,using Petrol (on an adhoc basis)
    Imposed a 1 time,1 year tax,on all private cars,using Petrol (on an adhoc basis)

    Government vehicles can be exempted,as it is just a transfer pricing mechanism for the state . The Result will be that,the people will stop using the cars,and the 2nd hand market for the resale,will disappear,and new car sales,are in any case,in a slump.

    W.r.t. diesel pumps in farm areas – the price should stay constant,or the IRP can give free power for pumping.The Marginal cost of making diesel and stocking and transporting it to farmers,is far beyond the MARGINAL COST OF FREE POWER,to the farmer.The Marginal Cost of transporting power,is only the T and D loss,PLUS the Marginal Cost of generation.In a case of falling power demand – the high cost power plants will be shut down – and the marginal cost of hydel is ZERO,and that of the other fuels,will be Rs 2-5 per unit

    W.r.t agri transport – there are 2 parts.For the cost of transportation to the farmer – the propreitor has to pay a 1 time tax,based on expected fuel usage.For the transportation from the farmer to the City etc., fuel dumps in those demarcated areas,CAN REDUCE the COST OF DIESEL only – so that the lowered logistics cost,of farm output – will offset the hike in logistics costs,of farm inputs.Farmers in IRP are exploited at the point of sale of produce – and so,it is key that the output logistics costs,are kept,as low as possible.

    Make the Oil PSUs of the IRP ensure,that NO WINDFALL profits are earned,by the PRIVATE SECTOR oil distributors,in the IRP

    If the Oil hike CANNOT BE rolled back – then the INCREMENTAL PROFIT earned by the OIL PSUs,can be passed to the Marginal sections,in terms of free power in some geographies and power loads, a 50% hike in interest rates in small saving schemes and a 1 time bonus to marginal sections on insurance policies

    Net Result

    Aam junta will get diesel and petrol,at the old rates
    Farmers will be insulated,from fuel hikes
    Farmer rise in input costs on logistics,can be offset by the IRP,by higher Farm gate prices or free power or cash subsidies
    IRP will save on tax administration,as a 1 time tax will be collected
    Money saved by Aam junta on diesel,can be spent,in part on rise in food etc

    When all options are exhausted – then the retail prices can be hiked en masse.There are still, many cards in the shoe.

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