Experts warn that economic stimulus packages aimed at recovery from the impacts of COVID-19 need to focus on clean energy companies to support a green energy transition amid the lobbying battle between clean energy and fossil fuel companies.
The unprecedented spread of COVID-19 around the world has led to a dramatic drop in energy demand, particularly with decreasing oil demand as billions of people are in lockdown in their homes.
The lockdowns, curfews and travel limitations have hit a great number of companies with a fall in global economic activity.
As anticipated, companies are looking for bailout solutions against the damage of COVID-19, while at the same time governments are aiming for quick economic recovery through the control of the spread of COVID-19, which is relentlessly leading to millions of lost jobs.
This raises the risk of governments channeling more economic support to the fossil fuel industry and infrastructure investments similar to the situation after the 2008 financial crisis when these industries were targeted for their ability to provide more employment and a quick economic rebound.
However, this strategy raises the risk of ignoring clean energy investments to transition to a green economy.
According to the latest report by the International Renewable Energy Agency, transforming to a clean energy system could boost cumulative global GDP gains above business-as-usual by $98 trillion between now and 2050. It would also nearly quadruple renewable energy jobs to 42 million, expand employment in energy efficiency to 21 million, and add 15 million in system flexibility.
"The problem is that in general, fossil fuel companies are large and politically powerful. We know that they spend a lot of money on lobbying governments and many of them have very close ties to politicians whereas the renewable energy industry tends to be younger with less political influence," Michael Jacobs, professor of Political Economy at Sheffield University told Anadolu Agency.
According to Jacobs, the fight between fossil fuel companies and renewable companies also extends to a battle for public opinion.
"I think, it is going to be a big battle and it makes the public more important. The public needs to show that they care sufficiently about climate change and do not want all the money to go to fossil fuel industries but green projects," he said.
- Bailout of oil companies proves unprofitable
Jacobs explained that a return to higher oil prices would not necessarily mean back to business as normal.
"Companies need higher oil prices to be profitable but this is a structural problem in the long term. Even when economic conditions get back to normal, these companies will not be profitable but a lot of money will be spent. This is the worst way to spend the money of economic packages," he said noting the tendency in the U.S. to bail out wholly unprofitable industries.
WTI crude oil fell Monday into negative territory for the first time in history. The price of WTI under the futures contract, which expires Tuesday, fell to as low as -$37.63 by plummeting more than -290%, indicating that the massive oversupply against low demand is forcing suppliers to pay buyers to unload their inventory.
However, President Donald Trump, a firm supporter of the oil and gas industry, said he would step in to help these companies out.
"We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future," Trump said in this Twitter account after the historic negative prices were reported.
Jacobs also highlighted that spending money to save the fossil fuel industry is a big threat to the fight against climate change.
He stressed that in addition to the oil and gas industry, several other sectors such as airlines, airports, and car manufacturers are also seeking government bailout packages.
"These companies that are in real trouble will likely be helped out,” he said, but he questioned whether governments would give money to these companies without making any preconditions or the need to have any control over them through taking equity stakes in these companies.
- Governments should not fall prey to short-term lobbying interests
Ronan Palmer, leader of the U.K.-based independent climate change think tank E3G’s clean economy program, said there could be a very acute battle over how the money in stimulus packages gets spent.
"Governments need to think very carefully and strategically about this because otherwise, they will just fall prey to short term lobbying interests particularly the kind of power of incumbents who tend to be fossil fuel incumbents," he said.
Palmer cited examples of some coal companies in Europe that have become very vocal in rallying support. "
"If you look at the existing sectors that are very dependent on fossil fuels, they have moved very quickly to claim their stakes on some of this money," he said, adding that governments need to support long-term energy transition for a net-zero society, which will be in everyone’s national interest.
By Nuran Erkul Kaya