Event summary by Bianca Pasca
With a lot of uncertainty as to how our lives might change after the pandemic, the hit the economy has suffered could affect the energy transition in many unpredictable ways. The energy transition refers to the transformation from a fossil-fuel based energy system, to one that depends on sustainable, clean energy. The first OCS talk of Trinity Term brought together two distinguished guests to provide some insight into this important issue.
Laszlo Varro is the Chief Economist for the International Energy Agency (IEA), a leading authority on energy, which provides data and analysis and advises governments and industry on energy policy.
Michael Liebreich is the founder of Bloomberg New Energy Finance and the Chairman and CEO of Liebreich Associates, which offers advice on clean energy and transportation, smart infrastructure, technology, climate finance and sustainable development.
How will the economic downturn caused by the current crisis affect the transition to clean energy?
Laszlo started the discussion with a general analysis. He described how, depending on the severity of the restrictions in various countries, economic activity during lockdown declines by approximately 20 to 30% in most countries.
The energy transition can be considered as consisting of 3 important steps:
1. Pushing wind and solar production
2. Electrifying those things that can be cut off from fossil fuels, like cars or heat pumps
3. Have an appropriate plan B (e.g. carbon capture and storage) for those things that cannot be electrified.
Renewable investments will likely remain robust even after the crisis, as a lot of them are based on long-term contracts. However:
Michael warns against thinking that after the crisis there could immediately be a green stimulus to ‘build back better’.
Laszlo said that governments are the only actors that can stimulate economic activity in this situation, creating demand for goods and services.
How might Covid-19 impact COP26?
Laszlo thinks the crisis will have an impact on climate negotiations.
Laszlo mentioned that the risk of mortality in India and some African countries could be lower, given the younger population. Some African countries, having had previous experiences of epidemics, have managed the situation well.
Laszlo remarked that this is a historically unprecedented shock for these industries. Even if the oil industry will see a price spike, the price of capital for the fossil fuels sector will go up, while that for the renewable energies will be lower.
There are 3 different groups to consider:
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