Decline in Emissions During Pandemic has not Reduced Climate Risks, says Rhodium

Medium Monday, July 6th 2020

This article by Jeffrey Ryser, Senior Editor at S&P Global Platts, originally appeared in  newsletter.

■ Analysts say ‘not on target for decarbonization’

■ Economic slowdown not best way to cut carbon

While the coronavirus pandemic has slowed demand for coal-fired power, as well as for gasoline and jet fuel for transportation, the decline of greenhouse emissions has not significantly reduced the overall risk of “physical climate change,” according to climate economists from the Rhodium Group.

“There is still uncertainty as to the depth and length of the impact of COVID-19,” noted Rhodium’s Emily Wimberger during the June 22 webcast. “The spoiler alert,” she said, “is that while US emissions have fallen under the COVID-19 lockdown, we are still not on target for decarbonization and will continue to face physical damages associated with climate change for the foreseeable future.”

Of the two energy sectors that have long been the major contributors of CO2 emissions both in the US and globally — the transportation and power sectors — it has been the transportation sector that has been the hardest hit by the impact of COVID-19, according to the group’s economists.

At the height of the pandemic, in mid-April, demand for petroleum products was down 30%, with demand for gasoline down 46% and for jet fuel down 70%, year over year. Demand for power fell 17% in March and 20% in April, but the decline in demand hit coal-fired generation the hardest.

Costly CO2 reductions

According to data provided by Rhodium analyst Hanna Pitt, between April 15 and May 15 coal fired generation declined to 15% of the total, compared with 20.9% of the total in the same time period in 2019.

At the same time, gas-fired generation went up to 35.8% from 33% the year prior, and generation from renewables went from 10.8% to 14%. Carbon-free nuclear generation remained about even at 22.3%.

According to Pitt, CO2 emissions from the transport sector fell 31% between April 15 and May 15, while the power sector saw emissions fall 16% between March 15 and April 15, and by 11% between April 15 and May 15.

However, cutting CO2 emissions via an economic slowdown is costly and not sustainable, they noted.

When the size of the GDP drop is factored in, the estimated cost of the CO2 reductions during the height of the pandemic comes to between $2,500 and $3,000 per metric ton, “an extraordinary sum,” Pitt said during the webcast hosted by the Dynamo Energy Hub.

Vulnerable Assets

The Rhodium analysts pointed out that COVID-19 “does not get us off the hook” when it comes to climate change.

Emily Grover-Kopec, Rhodium’s director for energy and climate, said the global average temperature has risen 2 degrees Fahrenheit since pre-industrial levels and more than 1 degree over the past few decades.

She said that “economic impacts vary significantly by geography,” and was asked what asset classes she believes are the most vulnerable to climate change. She said that coastal areas are obviously vulnerable to increases in sea levels, and that the Gulf Coast is perhaps the most vulnerable to high water and hurricanes.

Asked what needs to happen with climate change after COVID, Pitt said a “lot of change will still need to happen.” She noted that some of the emission decline numbers are already feeling the impact of a rebounding economy. But, she said, after COVID-19, “people will still have the same cars, the same factories.”

— Jeffrey Ryser

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