Four Reasons Why the Coronavirus and Oil Shock Could Be Positive for Climate Investment
It’s certainly no secret that the ongoing coronavirus pandemic is a national emergency of such immense proportions. Many people and nations have been tragically affected by the virus, markets have become volatile, and oil prices have drastically decreased.
Throughout history, low oil prices would negatively influence the transition to a net zero economy; however, there is also the chance that oil price wars and the virus could actually have a more positive impact on climate change itself. This is because the overall positive feedback loop of policy, market forces, and consumer patterns are actually increasingly supporting the path to decarbonization. Additionally, renewable energy and all related technologies are all properly positioned for growth.
Here are four reasons why the coronavirus and oil shock could actually be positive in terms of climate investment.
*One reason why the coronavirus and oil shock could actually be positive for climate investment has to do with the virus’s effect on the oil industry itself. As a result of the worldwide pandemic, the overall economic downturn in places such as China and other locations around the world has effectively dampened the overall demand for oil. By starting to localize production, this could result in us seeing a form of deglobalization that could end up reducing global transportation needs. As a result, this would affect industries such as fleet, aviation, and shipping, all of which play a role in pollution. This could also cause many governments around the world to consider choosing more sustainable solutions in times of market turbulence.
*Another reason why the coronavirus and oil shock may actually be positive for climate investment involves overall consumer behavior. Recently, many consumer patterns have changed due to many unsustainable economic models, as buyers are seeking out more sustainable products in order to help further protect the planet. For instance, lease purchase is now considered to be the top model in terms of purchasing new vehicles in more developed markets, which is something that works more in favor of electric vehicles, which have a higher upfront cost despite having a lower total cost of ownership.
*One other reason why the coronavirus and oil shock can actually be more positive for climate investment has to do with batteries and renewables. Thanks in large part to both innovation and economies of scale, the overall costs of batteries and renewables are decreasing while, at the same time, increasing in terms of efficiency. For instance, research shows that solar and wind technologies produce seven times more energy for the same cost as opposed to oil trading at $60 per barrel. As costs decrease, renewables will always continue to gain more market share.
*Another great reason why the coronavirus and oil shock could actually be more positive for climate investment involves policy, more specifically those that work to support both decarbonization and deploying clean transportation. For example, many cities are opting to ban internal combustion engines and choosing to instead regulate fleet carbon emissions. Policies that support deploying clean energy and transportation draw inspiration not only from climate change, but also from the human health and economic costs of severe local air pollution. It can also be assumed that governments can also increase low-carbon fiscal stimulus to counteract the economic downturn caused by the coronavirus as well.