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The SARS-CoV-2 pandemic has had a dramatic and unprecedented
impact on the world. At the peak of the global lockdown,
consumption of gasoline, diesel, and jet fuel combined was 40%
lower than usual. For the year, combined demand for these three
fuels is expected to average 15% below 2019 levels. Nearly 450,000
people have died from the disease so far and the global economy is
lurching towards recession. Against this backdrop, policymakers in
Europe are trying to balance the need to respond to the current
short-term crisis and continuing to make progress against the
longer-term threat of climate change.
<span/>The coronavirus
(COVID-19) pandemic could certainly be regarded as an impediment
towards progress on climate change, since society's collective
attention - and resources - is understandably focused on the
pandemic. However, it <span/>could very well serve as an opportunity to
institute - as part of economic recovery packages - transformative
green agenda policies. This is certainly the outlook of the
European Commission, whose recently-proposed recovery plan aims to
rebuild European societies on a greener foundation. Among other
things, the plan calls for the creation of a €750 billion "Next
Generation EU" recovery instrument and increasing climate spending
to 25% of the overall 2021-2027 budget (see figure 1).
Figure 1: The European recovery plan: Three main
pillars
Despite the unprecedented nature of the times, old patterns and
alliances have so far persisted. Those countries that were already
supporters of climate action prior to the COVID-19 crisis are in
support of a greener recovery plan, while those that are pushing
back against the European Commission's proposal now, were already
skeptical of aggressive policies before this year. The pandemic
also reinforced existing trends at the societal level, accelerating
climate action in climate-conscious countries and slowing it down
in less climate-conscious ones.
However, dynamics could evolve, and those countries that seem to
lag today may drive change tomorrow, depending on their individual
economic recovery and societal change. Moreover, those countries on
the side of the Commission's proposal have, together with several
business and industry leaders, formed the Green Recovery Alliance
to press their cause (see figure 2).
Figure 2: Europe - Green recovery alliance
Likewise, the CEOs of the Oil and Gas Climate Initiative have
recently reiterated their commitment to accelerating the transition
to a low-carbon future in an open letter. So far, at least in
Europe, the COVID-19 pandemic is looking more likely to provide a
tailwind to climate policy than serve as an impediment to
progress.
Understand changing dynamics in the oil refining and marketing
value chain around the world with IHS Markit energy refining and
marketing outlooks, data and analysis: Learn
more.
Dr. Britta Daum is a senior research analyst for
European oil markets, midstream & downstream at IHS
Markit.
