Global Coalition of Energy, Industry and Finance Leaders Calls for Economic Stimulus to be Invested

The Energy Transitions Commission, a global coalition of leaders from across the energy, industry, finance, and civil society sectors, today outlined some key priorities to both support economic recovery from today’s crisis and underpin the energy transition required to avoid climate crises in the future. 

The COVID-19 crisis has dramatically demonstrated the unpreparedness of the global economy to systemic risks, despite early warnings from scientists. CEOs, Chairpersons and Senior Executives from 40 organizations, including BP, Dalmia Cement, Iberdrola, Envision, Heathrow Airport, HSBC, Orsted, Schneider Electric, Shell, SNAM are amongst those calling upon governments “to spend economic stimulus packages wisely and invest in the economy of the future”.

In a statement released by ETC, “As of May 5, 2020, there have been more than 250,000 COVID-19 related deaths globally and this death toll has not yet been stopped by emergency measures. It has also brought the world economy to a standstill, provoking an abrupt fall in GDP and in international trade. In this unprecedented crisis, the first priority is to protect populations and urgently to reinforce health care systems. The abrupt economic downturn also called for immediate economic crisis response, leveraging monetary and fiscal stimulus to protect businesses, jobs, and households from collapse. As countries start to emerge from emergency, efforts are progressively turning to economic recovery.

Today, we call on governments of the world to spend economic stimulus spending wisely and invest in the economy of the future. We come from global organizations across the energy, industry, finance and civil society sectors. Our companies and organizations have been impacted by the economic downturn. We are acutely aware of the imperative to support corporates shaken by the crisis and restart the global economy fast. We are also committed to learning the lessons from the COVID-19 crisis, which has dramatically demonstrated the unpreparedness of the global economy to systemic risks, despite early warnings from scientists.

Our companies – and many others around us – have the ambition, the technologies and the skills to build a healthier, more resilient, net-zero-emissions economy, that drives sustainable economic prosperity. The Energy Transitions Commission, of which we are members, has defined some key priorities to help the global economy recover while building this better economy. Governments have the choice, the power and the responsibility to build it faster with us”.

The Energy Transitions Commission outlines seven key priorities for the next wave of government stimulus to boost economic recovery while building a heathier, more resilient, net-zero-emissions global economy: 

1. Unleash massive investment in renewable power systems – With demand for electricity growing fast due to electrification, the renewable energy sector constitutes the biggest investment opportunity of the next decade and has the potential to create more than 17 million jobs globally by 2030 while providing cheaper power to households and businesses (Source: IRENA). Governments should accelerate investment in renewable power generation, flexibility provision and grid infrastructure. They can achieve it by de-risking private investment through competitive auctions for renewable power generation, enabling investment in transmission and distribution grids, and fast-tracking the planning process on shovel ready projects

1. Boost the construction sector via green buildings and green infrastructure – A massive investment plan is needed to revitalize the economy and get people back to work. This spending should go to investments required in key energy and energy-using sectors by 2030 to put the global economy on path to low-carbon energy systems – evaluated to US$50 trillion (Source: NCE). The construction sector can initially be boosted by focusing on energy retrofitting of currently empty public buildings, then on retrofitting of commercial and residential buildings, as well as on energy-efficient new builds in urbanising countries. Beyond buildings, major infrastructure projects focused on new energy networks, low-carbon transport, digital and urban development would stimulate the economy and improve quality of life in developed and developing countries

1. Support the automotive sector while pursuing clean air – During the lockdown, urban populations have experienced first-hand and in a dramatic way what clean air looks like. Meanwhile, the automotive sector has been severely hit by the global economic standstill. Both urban populations and automotive manufacturers would benefit from incentives such as car-scrapping and purchase subsidies, with greater support for electric vehicles and a rapid phase-out of support for internal combustion engine vehicles. Direct financial support to car manufacturers could also be subject to set a phase-out date for ICE production (ideally in the early 2030s for two/three-wheelers and passenger cars) and focused on investments needed to shift to electric mobility.
2. Make the second wave of government support to businesses conditional to climate commitments – The second wave of economic support from governments will be focused on rebuilding national economies. It should incentivize the transition to more sustainable and resilient business models to strengthen each country’s economic fabric ahead of future climate-related shocks. Climate conditionalities should focus on medium-term targets so as not to slow down recovery and may need to differ between corporates and SMEs. They should include clearly defined decarbonization targets for 2030, in line with an objective of net-zero emissions by 2050, an obligation to disclose climate-related financial risks from 2021, and investment plans demonstrating how new investments will contribute to the companies’ emissions reduction trajectory. In heavy-emitting sectors such as automotive, aviation and energy-intensive manufacturing, specific commitments could be developed in line with sectoral low-carbon transition requirements.
3. Provide targeted support to innovative low-carbon activities – Stimulus packages should champion the development and early deployment of innovations which have the potential to drive the competitiveness of national economies and reduce greenhouse gas emissions. This is the case of zero-carbon hydrogen production, low-carbon fuels for the shipping and aviation industry, low-carbon materials (like green cement or green steel), circular business models (in particular used materials collection and recycling activities), digital solutions for system and energy efficiency, among many others. The government can support this new economic sector through continued innovation support focusing on early-stage development and industrial-scale deployment, financial support mechanisms such as loan guarantees to de-risk and lower cost of capital for early deployment, and new regulations like fuels mandates or lifecycle emissions regulations to create demand at scale for new products.
4. Accelerate the transition of the fossil fuels industry – As the world progresses towards a lower-carbon economy, demand for fossil fuels is likely to shrink.  This combined with the unprecedented fall in oil and gas prices over the past month has opened a window of opportunity for governments to accelerate the transition of the fossil fuels industry. For major energy importers, this represents a key opportunity to remove any remaining fossil fuels consumption subsidies, made unnecessary in a period of low prices, and to increase fossil fuel taxes without triggering significant consumer price increases. Those reforms could provide a useful source of fiscal revenues in a period of high countercyclical public spending. For oil and gas producing countries and coal-rich economies, fiscal stimulus could usefully be invested in an early phase-out of the least competitive assets, the diversification of their economy, and supportive measures for workers and regions which will be impacted by the transition.
5. Do not let carbon pricing and regulations spiral down – In the wake of the COVID-19 crisis, carbon prices and carbon regulations which are already in place might find themselves under renewed attack. The ETC encourages governments to stand firm: stimulating demand across multiple sectors of the economy will be more effective for economic recovery and have more lasting economic effects than deregulation. Although carbon prices and regulations might be perceived by some as a cost today, they are essential policy tools to build a resilient economy and lessen the risks of major climate-related economic crises in the coming decades.