LONDON (Reuters Breakingviews) - A savage panic grips the planet just as oil prices collapse. Substitute the coronavirus for the sub-prime mortgage meltdown, and 2020 is beginning to sound like 2008. Twelve years ago, the urgent need to rescue banks following the financial crisis pushed the requirement to cut carbon emissions down policymakers’ to-do lists. The pandemic risks another serious delay.
The lockdown across many western countries is already raising doubts about whether the next United Nations climate summit, scheduled for November, can go ahead. That’s ominous. According to the Intergovernmental Panel on Climate Change, the emissions consistent with keeping global warming to 1.5 degrees Celsius will have been used up by 2030. States need to set tougher targets now.
The oil slump gets in the way. As in 2008, the cost of a barrel has more than halved this year, abetted by Saudi Arabia launching a price war. Cheaper crude incentivises consumers to use more, and makes renewable energy less attractive. The United States might even provide state support for the shale oil industry.
Lower energy costs should theoretically make it easier to tax carbon. As the International Monetary Fund argued in 2015, it’s more feasible to phase a levy in when oil prices fall, because consumers are less likely to notice. Unfortunately, the health crisis means governments are focused on cutting taxes, not devising new ones. The United Kingdom last week scrapped an expected increase in fuel duty and announced big investments in roads.
That said, demand shocks cut global emissions. Mankind produced 31.5 gigatonnes of carbon dioxide at the depth of the post-crisis slump in 2009, 0.5 gigatonnes less than the previous year, the Global Carbon Project estimates. The pandemic, which has prompted airlines to cancel thousands of flights, could have a similar effect.
More broadly, panics can change how governments are viewed. Investors already treat environmental concerns as mainstream: Giant asset manager BlackRock on Wednesday outlined how it will still hold company directors’ feet to the fire over climate and other sustainability issues, despite the virus panic. Carmakers, meanwhile, are investing billions of dollars in electric vehicles.
What has been lacking is acceptance that politicians may need to interfere more in citizens’ lives to prevent climate change. The war footing on which most developed nations have been placed to fight Covid-19 may, in time, expand the role of the state, just as after World War Two. If so, the current crisis may be a dress rehearsal for managing climate change, rather than a disastrous obstruction to it.
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