I haven’t posted in a while with school and the pandemic, so I decided to go ahead and put up some of the more interesting projects I’ve been doing for school. This is a paper that was suppsosed to be 6 pages or so, double-spaced. Clearly, I went way beyond that. I’ve lightly edited the text.
Introduction
My goal is to explore how COVID-19 has impacted the march toward sustainability. This paper has three sections: the first attempts to overview the “pre-COVID” state of sustainability, especially with respect to the power and transportation sectors. The second discusses the short-term impacts that we’ve already experienced, and the third discusses potential future impacts and the possibility of “green stimulus” (stimulus with a focus on sustainability). Due to the length of this paper, it’s impossible to accurately cover everything in full detail – hence the decision to focus on the power and transportation sectors in particular. It’d be impossible to put everything together in one (small) document, but hopefully this paper can do a decent job of putting together enough puzzle pieces to get a sense of what the overall picture is supposed to look like.
1 | Where were we?
Here’s a breakdown of emissions by source for the world as a whole in 2016 and the US in 2018:
The Sankey chart [1] showing global emissions comes from the World Resources Institute, a pro-climate think tank over in Washington, while the pie chart comes from the US EPA. Note that the US (which is a much more advanced economy than the global aggregate) has a larger share of emissions coming from transportation than the rest of the world.
Pre-COVID, the most important global trend was the link between GDP growth and energy demand growth: to grow the economy, you had to have more energy to do so – energy that usually came from fossil fuels. However, that inexorable trend had finally started to break down. A 2019 article from McKinsey points to 4 key factors: (1) a decrease in GDP energy intensity, i.e. the amount of energy necessary per unit of economic activity, driven by a shift to more service-based economies, (2) an increase in energy efficiency, (3) the rise of electrification, and (4) trends toward renewables as an electricity source.
For brevity, I’ve chosen to leave out discussion on the trend to service economies (though McKinsey notes that the important shifts will come from India and China, as wealthier nations have already mostly shifted) and energy efficiency (while a growing global middle-class will buy more appliances and HVAC systems, the increase in demand will be offset by increased efficiencies in those machines). Overall, the important points are that McKinsey forecasted that “the energy needs per capita at a global level will be 10 percent less in 2050 than they were in 2016, despite the rapid rise in demand from the many households entering the middle class in emerging economies”.
Electrification in the Transport sector
The rise of electrification is pervasive across industries, but nowhere will it be more profound than in the transportation sector – especially due to its large share of the emissions mix in the highly developed countries and regions where EVs will first take hold (China, Europe, and the US). Automakers have an onslaught on new models slated to hit global markets, as this chart from McKinsey shows:
All of this will reinforce existing growth trends in the market: global EV sales have been steadily growing over the past few years at well over 50% per year, and global market penetration rates have climbed accordingly, as shown in the figure below from McKinsey:
While increased public desire to live a more sustainable lifestyle is likely a contributing factor to the growth of EVs [2], decreasing manufacturing costs (especially from the battery, which accounts for a significant part of the EV powertrain cost) are likely the main driver. However, the price differential in cost of ownership between EVs and traditionally-powered vehicles is also likely to be a contributory factor; it's possible that the fall in gas prices may effect sales moving forward (at least in the short-term).
A Shift to Renewable Electricity
Complementary to the shift toward EVs is a shift toward renewable power generation, which accounts for 30% of global emissions and 27% of US emissions (as shown in the charts above). Especially since electrification will occur in places other than just the transportation sector, electricity demand both in the US and globally is forecasted to grow. The chart below from the EIA’s 2020 Annual Energy Outlook plots out forecasted electricity generation through 2050, and the IEA also anticipates global growth in electricity generation:
Long-term projections from the EIA. Click to expand.
Long-term projections from the IEA. Click to expand.
Rising electricity demand is only one part of the story. As the graphs above indicate, the second (crucial) part is a shift in the electricity mix, the sources from which we generate electricity. Renewables (especially wind and solar) are set to grow exponentially over time, as coal demand (especially in developed economies) wanes. This is predominantly driven by pure economics: renewable options such as wind and solar will become the cheapest source of electrons nearly everywhere in the world within a few years:
Indeed, in countries such as the US, the electricity mix has already begun to clean itself up: the chart below (from 2017) shows what the emissions from the power sector would have looked like had the status quo from 2005 kept its course.
This chart actually highlights the trends we’ve seen over the past few years: lower demand growth from increasing efficiency (and a more service-based economy than we’ve seen in years prior), a change in the energy mix (natural gas has exploded, coal has declined), and a shift in favor of renewables.
To be clear, there are also other trends in the sustainability movement, e.g. the rise of ESG investing; investment into renewables in general; and the development of fake meat (see: Beyond Meat, Impossible Foods). Nevertheless, most trends in the world were positive ones (whether these changes would have been “enough” to hit some arbitrary threshold is a point I choose to leave out for brevity).
2 | What’s Happened so far?
Having discussed pre-COVID trends in sustainability, we now turn to some of the effects that the pandemic has had on the environment. Of course, these are inextricably linked to the state of the economy – as economic activity increases/decreases, so too do emissions outputs. As of May 8, unemployment in the US reached 14.7%, worse than any point since the Great Depression. China’s GDP contracted 6.8% (Q1 2020 vs. Q1 2019) and the US’s GDP fell 4.8% (again, Q1 ’20 vs. Q1 ‘19). Thus, we might expect to see some beneficial effects – and while they are there, there have also been some negative ones. The main theme: COVID-19 has been mostly good, though not perfect for the environment as a whole.
Starting off with some good news: in the electricity sector, demand for coal (the dirtiest of fossil fuels) is expected by drop 8% globally in 2020 versus the previous year [3], according to forecasts from the IEA. This number is more severe in developed nations, where coal was already on the decline: the IEA expects a 20% drop in coal demand in Europe and a 25% drop in the US. Meanwhile, renewable energy generation continues to grow, since these sources operate with near-zero marginal cost. Several regions across the world have experienced year-over-year declines in power demand [4]:
Above ground, the decline in air travel has already reduced CO2 emissions by 10 million metric tons – according to older data from mid-March. The total decline is likely much higher and growing by the day. On the roads, COVID has reduced congestion: data from TomTom indicates a near 60% drop in traffic congestion in Mumbai, and a near 30% drop in London. In the US, StreetLight Data created a map of the decrease in daily vehicle miles traveled:
Adding these effects from reduced economic activity together, the IEA forecasts that emissions in 2020 will be 2.6 billion metric tons of CO2 lower than in 2019 – about an 8% year-over-year drop. In usually polluted cities, there’s also been a drop in particulate matter: Los Angeles, Delhi, and Mumbai are all experiencing a roughly 50% drop in PM2.5 compared to pre-COVID.
That’s all good news (even if it stems from an unfortunate cause). However, not everything is sunshine and roses: single-use plastics and paper products are on the rise in an attempt to reduce disease spread, and cratering oil prices (itself the result of lower demand from COVID) have resulted in the price spread between recycled and virgin plastics widening (which will in turns shrink demand for recycled plastics among firms that haven’t truly committed to sustainable processes). Indeed, the fall in gas prices may have contributed to an undesired shift in which vehicles are selling: in the US, pickups are now outselling passenger sedans [5].
3 | Future impacts, moving forward, and “Green stimulus”
Any discussion of the long-term effects of COVID-19 is likely to be reasonably-informed speculation at best, so I primarily rely on the opinions of experts in this section.
As far as electricity demand goes, the US EIA publishes their forecasts in the Short-Term Energy Outlook (previous released on April 7th, though the next update is tomorrow on May 12th). Highlights include (1) a general decrease in electricity production over 2020 and 2021; (2) coal being particularly hard hit in 2020, while renewables continue to grow healthily; and (3) an expectation of delays in bringing new capacity (predominantly renewables) onto the grid. I was unable to find any high-quality recent forecasts from reputable sources for the global community, though I’d wager that other developed regions (such as Europe) will likely experience similar trends.
While lockdowns may subside in the coming months, it’s unlikely that end-consumers will rapidly revert to pre-COVID behaviors. While this may spell trouble for restaurants, bars, and theaters, it’s worth contemplating whether in-person meetings will fully recover (and since business customers are often the most profitable consumer segment for airlines, they’re in trouble, too, though the impacts on emissions are less clear: fuel prices are a huge cost driver for airlines. In any scenario, air travel only accounts for about 2% of emissions). Additionally, health concerns (along with cheaper gas, at least for now) have driven heavier hits in public transit ridership than private car driving: Apple reports that in Berlin, driving is only 28% below normal, while transit use is down 61%. Similar patterns have emerged in Ottawa, Madrid, and other large cities, as shown in the chart below:
As job losses mount and consumer preferences shift, the question for governments and agencies around the world becomes one of recovery: what are the next steps to take? What values and priorities are top of mind? Which policies are most beneficial? An Oxford Smith school survey I came across from May 4th surveyed “231 central bank officials, finance ministry officials, and other economic experts from G20 countries on the relative performance of 25 major fiscal recovery archetypes across four dimensions: speed of implementation, economic multiplier, climate impact potential, and overall desirability.” Highlights include (1) a consensus that unconditional airline bailouts would be not only a poor use of stimulus funds, but also be likely to have a negative environmental impact; (2) consensus that clean energy infrastructure investment and clean R&D spending would be highly positive for the environment, though slow to kick in and not particularly stellar at stimulating the economy [6]; and (3) consensus that some rescue-type policies such as liquidity support for households and small businesses, temporary wage increases direct cash transfers, and direct provision of basic needs (funds to help produce and distribute necessities such as food and medicine) would be fast-acting, highly economically-effective strategies (if not necessarily the best for the environment). The results from the survey are summarized in the chart below:
It’s impossible to know just yet if governments will enact these policies, though recent stimulus packages by the US government such as the CARES Act included provisions to assist airlines ($58 billion), individuals (estimated $560 billion), and small businesses ($377 billion).
Conclusion
Before COVID-19 hit, the world was making progress on cleaning up two of the highest-polluting sectors both globally and domestically: power generation and transportation [7]. COVID-19 has greatly slowed down the economy, which in turn has created a temporary reduction in emissions, especially in the power and transportation sectors. As the world recovers from the impact of the virus, however, the environmental impact is less clear: an increase in personal vehicle usage may counteract any drop in emissions; thankfully, short-term forecasts in the US seem to indicate the electricity sector will continue to progress. Green stimulus has been presented as a means of supporting both the economy and the environment, though what actually ends up happening is a great unknown.
[1] One of my absolute favorite data visualization tools.
[2] I didn’t want to waste words on this topic, but some quality reports from the ICCT and the UCS outline the lifecycle emissions differences.
[3] The “magic number” is 7.6% - we’d need global emissions to fall by 7.6% per year over the course of the 2020s to be on a 1.5-degree pathway [Source: page XX of this document]. For better and for worse, the IEA thinks we’ll do it in 2020.
[4] Interestingly enough, I tried analyzing load data from ERCOT, which operates the grid that most of Texas runs on, and didn’t find any drop in electricity demand, at least when I averaged hourly loads across the month. I’m not sure why exactly electricity demand from Texas hasn’t changed that much, since I’m comparing April to April, though at least anecdotally I feel like there’s been more temperate weather than normal.
[5] This may just be a reflection on ongoing trends. Passenger sedan sales were already falling pre-COVID, and it’s possible that the economy is hitting the consumer base for passenger sedans more than pickups – presumably, commercial sales represent some portion of pickup sales, and this segment of demand is potentially less likely to be effected by the state of the economy.
[6] An excellent example of this is the story of how Texas became one of the largest wind electricity generators in the world. This article from Texas Monthly does a masterful job of storytelling.
[7] It’s worth noting that increased efficiency in conventionally-powered vehicles has had a much larger impact on emissions than EVs have. I didn’t really focus on this topic as much since EVs and power generation play hand-in-hand, though I’d certainly be remiss if I didn’t at least mention the improvements in fuel economy across automotive fleets as a whole.