‘Use it or lose it’: Pandemic recovery a decisive moment for climate action
A new report from global analyst firm McKinsey has found that recovery packages from the coronavirus pandemic will be decisive in putting the world on course to meeting the Paris Agreement, calling for low-carbon technologies and solutions to be prioritised.
The new McKinsey report warns that as nations ease out of lockdown measures, it is a “use or lose it moment” for the global economy and the battle against climate change.
McKinsey is calling for low-carbon stimulus spending to spur economic recovery and job creation, while stepping up climate efforts that put the world on course to limiting global temperature increases to 1.5C.
Just one day after the European Union confirmed that 25% of its €750bn recovery package would be spent on climate action, McKinsey claims that funnelling finance towards low-carbon sectors could deliver economic returns for nations.
McKinsey’s analysis of stimulus options for a European country suggests that ringfencing between €75bn to €150bn could yield €180bn to €350bn of gross value added. It would generate as many as three million new jobs, while delivering carbon reductions of 15 to 30% by 2030.
The job boost is critical. A separate McKinsey report published last month suggests that the pandemic and lockdown could place 60 million jobs in Europe and up to 57 million jobs in the United States at risk, either through reductions in hours or pay, furloughs, or redundancies.
At the same time, the world is on course to witness the largest ever drop in investment in global energy, with the coronavirus pandemic set to restrict spending across renewables, gas, fossil fuels and cleantech.
The International Energy Agency’s (IEA) World Energy Investment 2020 report warns that 2020 will mark the largest ever drop in spending on global energy.
At the start of the year, the global energy spend was on course to grow by 2%, which would have been the largest annual increase in six years. However, the economic slump caused by the coronavirus pandemic and lockdown is expected to create a 20% fall in global energy investment, a fall of almost $400bn compared to 2019.
Many nations are planning to ramp-up production once lockdown measures are eased, meaning that emissions could increase in 2021 as nations race to spur the economy. This has raised calls that governments should only approve rescue packages for industries if they are linked to improved environmental performances.
McKinsey has warned that the global transition to limiting global temperature increases to 1.5C by 2050 is a “daunting task”, that would require unprecedented levels of decarbonisation for key sectors, with the world currently on course to exceed its carbon budget by 2031.
The in-depth report from the firm outlines “rigorous, data-driven snapshots” at how the world can reach the 1.5C ambition of the Paris Agreement, through three different pathways.
A rapid scenario would require all sectors to have abated at least 30% of their 2016-level CO2 emissions by 2030. This rises to 76% for the power sector. Slower decarbonisation transitions are also possible but would require some sectors to go beyond net-emissions and for mass-scale reforestation and carbon capture to offset emissions from hard-to-abate areas.
Keeping to 1.5C would require limiting future net-emissions from 2018 levels onwards to 570 gigatonnes (Gt), and reaching net-zero emissions by 2050, the report notes. However, the world is currently on a trajectory to exceed that target in 2031.