COVID Recovery Could Boost Clean Energy, or Lock in Fossil Fuel Losses

October 22, 2020

Governments worldwide are planning stimulus packages to boost the economy following the disruptions caused by the COVID-19 pandemic. So far, more than $12 trillion USD have been pledged in such packages. This response is three times larger than the 2008-2009 global financial crisis recovery spending, and represents around 15 percent of global gross domestic product (GDP).

A new analysis published today in Science, led by researchers from Imperial College London, Climate Analytics in Berlin, and the Electric Power Research Institute in the United States, shows that if just a tenth of this money was invested each year over the next five years in climate-positive recovery plans for the global energy system, the world could be put on track to meet the goals of the Paris Agreement.

The Paris Agreement aims to limit the average global temperature rise this century to well below 2°C above pre-industrial temperatures and to pursue efforts to keep it at 1.5°C. This will require a reduction in the use of fossil fuels, a shift to low-carbon renewable sources of energy, such as solar and wind power, and large improvements in energy efficiency.

However, current efforts by governments worldwide are insufficient to reach the Paris Agreement goals. Instead, today’s policies are leading us towards a world 3°C above pre-industrial averages. These higher temperatures will bring greater risks and more severe impacts, such as droughts, flooding and storms.

The new analysis shows that an ambitious path to a 1.5°C world is well within reach if just a fraction of COVID-19 funding is invested in a ‘climate-positive’ recovery, with the dual aims of stimulating the global economy and accelerating the deployment of low-carbon energy supply and energy efficiency measures. This could be achieved, for example, via direct stimulus and investments as well as via supporting policies such as incentives and rebates.

Senior author Dr. Joeri Rogelj, from the Grantham Institute—Climate Change and the Environment at Imperial, said: “Our findings show that investing in solutions to limit warming to 1.5°C is well within budget. In fact, the increase in low-carbon energy investments required over the next five years to move the world on track to meet the Paris Agreement targets is about eight times smaller than the total current COVID-19 stimulus.”

Or, we can continue to throw good money after bad by shoring up dirty energy..

Bailout Watch:

Oil and gas companies account for a growing portion of loans made through the Main Street Lending Program, a key part of the federal government’s response to the pandemic, highlighting the industry’s financial distress and validating its lobbying this spring to ensure fossil fuels could access the money.

Federal Reserve-backed loans to the industry more than doubled in September to $181.6 million — about 15% of the program’s new lending — from $83 million, or 7% of lending, the month before, according to an analysis of Fed data by BailoutWatch, in partnership with Public Citizen and Friends of the Earth.

The growth of fossil energy in the program comes after a successful push by oil and gas lobbyists and allies to make the loans available even to companies with deep financial problems.

The loans are part of the Fed’s Main Street Lending Program, which aims to help bridge the economic downturn for mid-sized businesses that were healthy before the pandemic. The loans are originated by banks, but the Fed buys them — and assumes the risk they will fail — if banks adhere to strict guidelines regarding borrowers’ finances.

The Fed initially proposed rules that would have excluded many oil and gas companies already struggling with heavy debt burdens and repayment deadlines. The fossil fuel industry pushed back in letters to the Fed from the Independent Petroleum Producers Association and Texas Senator Ted Cruz. They acknowledged that many drillers were on the brink of failure for reasons unrelated to COVID, but said companies still should be cushioned from record-low oil prices.

The Fed yielded on April 30, opening the program to more heavily indebted companies and those that would use the new loans to repay old ones. Energy Secretary Dan Brouillettte later said he had worked with Treasury and the Fed to increase drillers’ access to the program.

In its third month of operation, the Fed’s Main Street Lending Program has bought $2.3 billion in loans, more than doubling its size from August. Fossil fuels have received 24 loans totaling $265 million, about 11.5% of the total loan book.

By comparison, renewable energy companies received just six loans totaling $59 million and made up about 2.5% of the loans, little changed from August.

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