COVID & Climate – Make Money Or Save Lives?

By Ronald Leung 17 April, 2020

We are choosing to save lives over make money with COVID but will we do the same for climate change? CWR's Leung examines

With all eyes on COVID-19, climate change has unfortunately taken a back seat – from the postponement of COP26 to the funding reduction for renewable energy.

With all eyes on COVID-19, climate change has taken a back seat…

…the 5% emissions drop is not expected to last as the world reverts back to ‘normal’

Conversely, many have cheered at the good news of 5% drop in carbon emissions, the biggest drop since WWII, which is attributed to current draconian lockdown measures. However, it is likely that the emissions will revert to “normal” when the virus recedes, especially since oil is cheap and businesses are desperate to get back on their feet.

Still, amid the grim outlook, it is a relief to witness most governments prioritising human lives over money, by shutting down non-essential businesses and activities to ensure social distancing. Here, some have acted more swiftly than others and are seeing reward in “flattening the curve”.

However, on the whole, it is evident that the world was not prepared for this pandemic. There was no proper plan; just like we don’t have a proper plan for climate change. There is the Paris Agreement, which is a good start but is not comprehensive or good enough to achieve a 1.5ºC world.

Clearly, we are not good at planning ahead for inevitable far-off crises that will bring about significant losses in lives and the economy.

Yet, with climate change we will likely battle more viruses

This does not bode well with climate change that will not just bring more hurricanes, floods & droughts but also the chances of us battling more pandemics will increase – from closer human-wild animals contacts (CDC estimated that 3 out of 4 new infectious diseases come from human-animal contact) to the release of pathogens from melting ice.

As the old saying goes, ‘one simply cannot put a good crisis to waste’ – so with us social distancing at home and the planet enjoying some respite from lower carbon emissions, here are some thoughts on lessons learnt from COVID-19 and how they can help governments and industries better prepare for climate change.

Long-term & holistic preparation is key to crisis management

COVID-19 is a good testimony to how sufficient and long-term government investment can weather countries through crises.

Consider Italy and Singapore. At the beginning of the outbreak, whereas Italy has struggled to lower new cases and death rates, Singapore has been hailed as one of the best countries to contain the outbreak. Their performances, however, should not be a surprise given their differences in long term healthcare investments. In the last decade, while Singapore has almost tripled their annual health expenditure from S$4 billion to about S$12 billion, Italy has, on the contrary, cut more than EUR37 billion funding to the National Healthcare Service.

Long-term investment & planning shown as key in this battle…

…still, those most prepared, like Singapore, are finding one small missing piece can have a big impact

Singapore has done well on long-term investment but unfortunately it’s still not holistic enough. As of this Wednesday (April 15), the country recorded its highest single-day 447 new cases, among them 68% are linked to foreign worker dormitories where people live in close proximity and poor condition. Although the government has pledged to improve the hygiene of the dormitories (which are now in lock-down), this shows how missing out only one detail can impact the whole community. It also demonstrated a golden rule for crises – the poorest people are usually the most vulnerable. This is especially applicable to the growing concerns of pandemic outbreaks in refugee camps.

The long-term & holistic preparedness for climate change is also important, if not more, as climate mitigation (from renewables to carbon pricing), as well as adaptation (from sea walls to reservoirs) like major healthcare investments require years to implement. Here, Singapore is again in the lead – despite no significant typhoon risks, it has recognised the threats from sea level rise to its island economy and has set aside SGD100 billion to fortify its coastal areas in the coming century. It has also fast-tracked its carbon transition with the implementation of mandatory carbon tax system in 2019 of SGD5 per tonne of emissions – the first in South Asia.

Climate change also requires long-term investment & planning but yet we are not doing nearly enough…

Only time will tell if the Singapore government’s long-term plans will help save Singaporean lives and livelihoods or it misses the most vulnerable community in the country again, but at least they are trying to prepare. Perhaps such options are only available to “richer” countries but then again, many developed nations do not have such forward mindset to plan for far-off crises.

Despite science-backed warnings of pandemics and climate change, the US closed the pandemic preparedness office of the National Security Council in 2018 and left the Paris Agreement in 2019. Long-term good appears to be traded for short-term money making and re-election victories, again.

The US has even shut its pandemic preparedness office & left the Paris Climate Agreement

But is it all about making money? When push comes to shove, New York, the money-making capital of the world, is choosing lives first in this pandemic. After COVID-19, perhaps the US will now reconsider being prepared for future crises by reopening its pandemic preparedness office and reinstating its plans to build a sea wall – the one abruptly cancelled after President Trump ridiculed it as ‘too expensive’.

What happens in Yangtze matters globally … Wuhan is there

As the ground zero of COVID-19, Wuhan has been on strict lock-down, as had Hubei, the province it is in. As a national and global manufacturing hub with over 350 manufacturing infrastructures, many companies, such as Robert Bosch GmbH, Honda and Nissan, had to shut their facilities in Wuhan, which led to production delays.

What happens in Wuhan, China, also really matters globally

Basically, what happens in Wuhan matters inside and outside of China. Wuhan is one of the 5 city clusters in the Yangtze River Economic Belt (YREB), which China has slated for green development. Such industrial reorganisation along the entire YREB will send the same, if not stronger shocks to global supply chain and businesses – the YREB accounts for 47% of China’s export value. To stay ahead of this, catch up on YREB policies and related transition risks in our article or report: Yangtze Water Risks, Hotspots, and Growth.

Beyond Hubei, China’s implementation of a nationwide lock-down over its most culturally important and vibrant Lunar New Year in late January led to the cancelling thousands of events. Surely this signals a “lives-over-money” approach – economic losses in January and February are estimated at US$196bn.

But make no mistake, COVID-19 is not the first avenue where the Chinese government prioritises lives over money.

COVID-19 is not the first avenue where the Chinese government has prioritised lives over money

As early as 2011, China pursued the “most stringent management” (“Three Red Lines”) of its water resources by setting water use caps and targets that already pointed to a slowdown of its economy. By 2014, there was a war on pollution on various sectors and the concept of “Beautiful China” was reinforced with the government emphasising ecological civilisation over economic growth, as seen with the “Water Ten Law” in 2018 and the property rights system for natural resources in 2020. China also has long term plans to achieve circular & clean production. With all this China is clearly sending out strong signals, and more than that it is also deprioritising GDP as a target, all in exchange for a more ‘Beautiful China’.

Clearly companies will be impacted from China’s new priorities and they will need to diversify their supply chains to reduce exposure to this but also the massive disruption from COVID-19. Actually, some supply chains have come to a standstill with COVID-19. Fashion is one of these, we look more at the impact to fashion and a new future in another article this month.

Some companies are already diversifying as part of navigating the US-China trade war and rising environmental costs in China. But this has brought rising pollution to other countries with laxer environmental standards – should such practices continue? Surely, there’s now a global opportunity to trade in short-term profits and transform supply chains into sustainable ones; ones that take into consideration climate change and long-term planning.

From no one flying to no place to land

With governments basically banning all cross-borders travel, the airline industry has taken a tough hit and stands to lose as much as US$314 billion. Many airlines have publicly sought government bailouts to avoid bankruptcy.

Surely, no one wanting to fly or being banned from flying are nightmare scenarios for the industry, but what if planes are instead not able to land as there is no runway? Resource Watch’s study (released this year) suggested that by 2100, 80 airports around the world will be submerged by a 1m sea level rise (SLR). Planes won’t be landing there.

With rising seas & storms, there may not be airports to land at…

…In China’s GBA, 4/7 airports will be flooded by 2030

Also, it is clear that we do not need to wait until 2100 to witness an underwater runway as increasing storm surges (caused by stronger typhoons) plus rising sea level will easily overwhelm airports. For example, our report with CLSA demonstrated that 4 out of 7 Greater Bay Area in China airports will be flooded by a 5.87m storm tide by 2030.

Mitigating the impacts requires massive upfront investments to elevate airports, build sea walls and apply nature-based solutions. On top of that, action must be collective – if Hong Kong makes its airport resilient but no other countries do, the planes are still not going anywhere.

Yet, aviation emissions are projected to grow 10x = 1/4 global emissions by 2050

But then again, airlines are victims of their own doings. The airline sector’s mammoth emissions represent 2.5% of global carbon emissions – if it was a country, the sector will be the 10^th largest emitter, ahead of Brazil, Mexico and UK. Although the emissions could fall as much as 38% during COVID times, it could bounce back when “normal” returns. What’s worse, aviation emissions are projected to grow 10x to account for a quarter of global emissions by 2050.

With IPCC estimating a 1.1m SLR by 2100 that will bring annual flooding damages of at most 9.3% of global GDP, the stakes are high. Surely airline bosses can take this downtime to contemplate whether they want to boom with business-as-usual which will lead us to flooded runways and climate refugees or start transitioning to a more sustainable business model.

Governments should also take this opportunity to green the industry by attaching emission reduction targets to the massive bailouts they are going to give to airline companies. More thoughts could as well be given to greening aviation fuel especially when Saudi Arabia and Russia recently agreed to lead a record multinational oil-production cut which points to a resurging oil price.

Low oil prices – blessing or curse?

Prior to the recent oil agreement, the pandemic has sent oil demand and prices to an all-time low (with some help from the Saudi-Russia price war); some analysts even predict oil prices to drop to only USD10 in 2020.

Post COVID-19, we will likely see emissions surge dramatically…

…companies which are strapped for cash are already lobbying for laxer government regulations

With such low prices today and maybe the future, users are hoarding. There are also consequences for renewables with such low prices. Appetite and support for renewables has decreased during this pandemic. In a post COVID-19 era, we will probably see emissions surge dramatically as countries try to recover losses.

For starters, we can already witness companies which are strapped for cash deprioritising reducing carbon footprints and lobbying for laxer government regulations.

However, if governments and companies decided to weather COVID times with oil-as-usual, they need to remember that energy security also faces climate threats. It was not so long ago when Hurricane Harvey knocked out over 10% of US oil refining capacity in 2017.

It still can evolve into a blessed scenario as the low prices have brought distress to the highly leveraged US shale industry which has made US the largest oil exporter. As producers can only get a break-even at around US$60, many of them have already cut 25% to 50% of spending in March. If the oil prices continue to tank, these companies will run out of cash and declare bankruptcy in the near future.

Low oil prices – not clear yet if a blessing or curse for our recovery

While it’s not clear at the moment whether the low oil prices are a blessing or a curse since governments & businesses have not had time to revise their decarbonisation commitment according to the new prices, the low oil price is a good stress test for banks as they will face a similar scenario if governments start phasing out fossil fuels in transitioning to low-carbon economies. The pandemic could be a wake-up call for banks to be better prepared for such risks – more on this here Metamorphosis! Hard Truths & Unicorns. 

As for us individually, the best we can do is to start small by changing some of our habits such as reducing our meat consumption and walking instead of driving. Oh and support companies who continue to uphold their decarbonisation commitments.

Global preparedness: 404 not found

Despite the lessons we’ve discussed above from COVID-19, we may eventually not put any of them to good use in handling climate change.

The world wasn’t prepared…

…with human brains wired for the short-term, will we ever?

One reason is that the human brain is wired to process short-term & immediate crises, which explains why it is unrealistic to expect governments to use policies with the same intensity for COVID-19 in dealing with climate change. Systems/beliefs which we have put in place such as a political culture which only focuses on the next election cycle and capitalistic mindsets that puts money over lives also exacerbate this vulnerability.

The political vulnerability is especially significant in this pandemic crisis – from US suspending funds for WHO both US & China making allegations about the origin of the virus. If this trend continues, we will face even direr consequences from climate change as it requires much broader global cooperation in a long-term manner for far-off crises.

Of course, it is wishful thinking to expect the two superpowers work cordially on every front without competition. But in the face of climate change, an old-style cold war is no longer feasible as sea level rise and intense hurricanes will not discriminate against countries.

Instead of pulling out, US & China should find ways to cooperate despite their differences. After-all, climate change is a common enemy and they should understand none of them can mitigate sufficient emissions without the help from another.

But COVID-19 has shown that when push comes to shove, govts will save lives over making money

Still, the pandemic has proven that when push comes to shove, governments are capable of prioritising lives over money-making, which is a good start. What remains is that we need to set aside our differences and start working together in decarbonisation and climate adaptation to avoid the biggest risk that humanity will ever face.

Further Reading

• Metamorphosis! Hard Truths & Unicorns – With blanket disruption globally, we are forced to rethink our future. The pandemic has presented us with a once-in-a-lifetime opportunity to morph toward business unusual, but can we take advantage? CWR’s Debra Tan ponders
• Fast Fashion’s COVID Death & Virtual Revival? – Fast fashion is dying – from broken supply chains and no demand thanks to WFH. CWR’s Dawn McGregor and Debra Tan reimagine fashion’s future – a virtual realm where our avatars attend Zoom drinks and digital supermodels walk the runway
• Medical Wastewater Treatment In COVID Times – Coronavirus can be found in faeces & urine so medical wastewater has to be handled with care. China is taking the lead with new standards & regulations. CWR’s Zhenzhen Xu expands on the hidden battle fought to keep the virus out of water & sewage systems
• Too Big To Fail! Protect At All Costs – Multiple policy innovations have been unleashed to protect the Yangtze River as it is too big to fail – corporates and investors need to get on top of the YREB to avoid regulatory shocks
• Thirsty And Underwater: Rising Risks In Greater Bay Area – How will water & climate risks, including rising sea levels & droughts, threaten the already water-stressed Greater Bay Area (GBA)? CWR’s Tan & Mirando explain in their latest CLSA report and highlight companies’ failure in climate risk disclosures

More on Latest

• Forward Osmosis Tech For Wastewater Reuse – Desalination is power hungry. Dr Xiaodong Wang from Qingdao University of Technology shares with us a hybrid forward & reverse osmosis system that can increase water recovery by 45%, cut energy use and even reuse wastewater
• Raindrops To Energy: The Droplet-Based Electricity Generator – Water contains huge amounts of energy yet harvesting it is not efficient. We sat down with Prof. Zuankai Wang from the City University of HK to learn more about how this groundbreaking tech powers 100 LED bulbs with one drop of rain