Climate change may be the most intractable psychological-sociological challenge that humanity has ever encountered. It has been occurring for decades if not centuries, yet we do not view the threat as imminent, and are thus failing to address it. This is the “climate kaleidoscope” that David Wallace-Wells describes in The Uninhabitable Earth: “we can be mesmerized by the threat directly in front of us without ever perceiving it clearly.”
Climate change also divides the left and right. The left yells and screams for their governments to take the problem seriously, to little effect. The right either paints climate change as a globalist hoax or argues, not incorrectly, that China is the real problem. The center, meanwhile, tries to arbitrate, recognizing that a rapid transition to clean energy would cause short-term economic pain.
Into this toxic mix comes COVID-19, another psychological-sociological challenge that requires sacrificing wealth for health. Like climate change, governments are unsure how much to shutter their economies to stem the virus. COVID-19’s human and environmental destruction will, however, force us to de-globalize and to move, trade, and consume less of everything. These habits will endure, will inherently reduce carbon emissions, and will reshape the global energy system.
Global oil demand drop
The global economy depends on oil to move goods and people. Since COVID-19 has disrupted both, oil demand has plummeted. I opined one month ago that the virus could cause oil-demand in China to plateau, which now seems embarrassingly limited and narrow. I wasn’t alone. Around that time, the IEA predicted that oil demand would still grow by 825,000 barrels per day (bpd). It has since revised its prediction to a decline of 90,000 bpd. IHS Markit sees a 3.8 million bpd decline for 2020.
The decision by Russia to end its cooperation with OPEC to limit oil supplies, meanwhile, caused prices to swoon, settling in at $25 per barrel, for now. In past environments, lower prices have stimulated demand, but no one is moving. Global shipping still depends on oil, as does global air travel. The figures for oil demand decline will likely be much higher than analysts are projecting.
It is hard, moreover, to see how we pick up right where we left off, even if the virus is “contained”. Humans will travel less between countries and within them going forward. The work-from-home movement will also not disappear overnight. The forced reduction in movement will mean lower demand for oil demand and other fossil fuels, a significant portion of which are internationally traded. The transportation sector has depended on oil for over a century, but de-globalization means less dependence on transport.
Locally generated electricity will be king
The corollary of de-globalization is, of course, localization. Rather than importing energy for power generation, COVID-19 compels us to generate more locally and find alternative, Internet-based solutions to re-globalize.
This means, on the one hand, more renewables and less coal, 21% of which is traded internationally. Countries may turn to coal for short-term recovery only because they have it, but new coal is no longer commercially competitive with new renewables. Carbon Tracker predicts that even existing coal plants will be uneconomic by 2030. Last week, in a sign of the times, a contract for coal was more expensive than both oil and gas.
Renewables, moreover, continue to see their costs falls. They may even offer more competitive returns on investment than oil and gas, especially given the latter’s expected volatility and lower-price horizons. Internet-based solutions will supplant work that requires movement and presence. This means more energy will be needed to power data centers and online connections. Renewables serve these purposes well.
A post COVID-19 world
Fossil fuels powered globalization, wealth accumulation, and carbon emissions for two centuries. These trends have, in fact, accelerated. We released more carbon into the atmosphere from fossil fuels since 1989 than prior to that year. We were, in other words, already flying too close to the sun in terms of climate. To be sure, the pandemic-induced global economic recession will slow urgency to reduce emissions. But the pandemic forces us to prioritize human security over economic wealth in a way that climate change hasn’t.
Pandemics change the course of history. Plague precipitated the fall of the Roman Empire in the sixth century. The Black Death weakened the hold of the Catholic Church and launched the Renaissance and Age of Exploration. COVID-19 will rewire the global energy system. It will bring us into the future more quickly than we would have otherwise through the imperative to localize or connect globally through remote means. This, in turn, will decrease our carbon footprint.
Photo credit: pxhere.