COVID-19: the unexpected road to decarbonisation

rethink sustainability

COVID-19: the unexpected road to decarbonisation

Today, there's a good chance you won't be outside enjoying spring and the blossoming nature but at home, practicing social distancing as advised or enforced by your government. The spread of the COVID-19 virus has now infected more than 3 million people around the globe and has caused over 200’000 fatalities worldwide1.

The confinement measures taken to fight this extraordinary health crisis, categorised as a pandemic by the World Health Organisation, are shutting down entire economies and leaving millions of people unemployed. The crisis has swept across financial markets, for instance delivering the worst first quarter ever for the Dow Jones index.

Yet, there's another unforeseen consequence to the COVID-19 crisis.


Cleaning the sky

Since the beginning of the slowdown, we've seen a drastic reduction in air pollution2; Nitrogen Dioxide (NO2) in particular, with concentrations across all impacted countries dissipating rapidly. Just a mere two weeks after the UK went into lockdown (March 23), NO2 pollution fell, in some cities, by as much as 60% compared to the same period in 2019. China is responsible for 50% of Asia’s nitrogen dioxide emissions. January and February of this year saw China’s NO2 emissions drop by 40% in some areas - the equivalent of taking 192’000 cars off the road.

This change is visible from space. Satellite images by NASA and the ESA showed a radical decrease in NO2 during this period. India’s capital, Delhi, has enjoyed improved air quality since lockdown was imposed across the country on 24 March. The air quality dramatically fell below 20 according to the Air Quality Index (AQI). For comparison, on average the AQI in the city ranges between 200 and 900. These figures are dangerously high as the World Health Organisation considers a score above 25 as unsafe. Countries around the world are also experiencing improved air quality as their governments have implemented severe restrictions or quarantines.

Since the beginning of the slowdown, we've seen a drastic reduction in air pollution.

Due to the pandemic, airlines are being forced to ground their fleets. Already threatened by the rising "flygskam"3, airlines globally are facing economic collapse and even bankruptcy. British Airways has announced plans to cut 12’000 jobs, the British airline Flybe went into administration in March and Virgin Australia declared bankruptcy. According to Dave Calhoun, CEO of Boeing: “It will take two to three years for travel to return to 2019 levels and an additional few years beyond that for the industry's long-term growth trend to return”. As companies are pressing governments for bailouts, there is a clear opportunity to set a precedent and accelerate the green transition of the air industry. In Europe, there’s a large call to attach green strings to the state rescues. Brussels officials are “under pressure to approve cash injections only if companies can prove their business models are compliant with global climate goals like the Paris Agreement”, shares the Financial Times. All sectors are concerned by the European Green Deal, including aviation,

With structured bailouts linked to climate change conditions, we believe that stricter emissions rules can be secured and lead the industry onto a more sustainable path.

Nature's capacity to bounce back

In the wake of the first lockdowns in northern Italy, some debunked stories claimed that even dolphins had returned to Venice. Sadly, nature does not bounce back quite so easily. But, the famously polluted canals have surprised the Venetians as they became clear in a matter of days, showing an improvement in water quality which had not been observed in years. This unexpected consequence isn't due to a lack of pollution but to the absence of motorised transport such as cruise ships. Will this unintended consequence of coronavirus push Venetians to begin to seriously limit tourism and rediscover the Laguna's unique biosphere? While this is positive for the environment, it is not for the economy which relies mainly on tourism with €2bn annually in gross revenue for the Serenissima alone.
 

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We believe investing in an inclusive transition to net zero emissions by investing in workers and supporting the adaptation to new technologies is key to transition to a cleaner economy.

This is an unprecedented opportunity to see how our world could be like when concerted sustainable efforts to reduce global carbon emissions are in place. Our earth is resilient and our ecosystem can bounce back faster than we expected.


But will it last?

In our globalised word, challenges have no borders and responses shouldn't either. In order to achieve change, we must jointly address climate change, health crises and economic recessions. Governments, companies as well as individuals have a role to play to drive and implement the necessary global systemic shift.

This is an unprecedented opportunity to see how our world could be like when concerted sustainable efforts to reduce global carbon emissions are in place.

As confinement measures today leave billions of people in isolation, creativity and behavioural changes are setting a new normal. Remote working is developing rapidly, forcing new habits such as limited commuting, and more online meetings reducing the need for long-haul business flights. Leading by example, the G20's head of states met by video conference and pledged to accelerate cooperation on a coronavirus vaccine, share research and ­­­­­­be accountable to the most vulnerable communities.

We are left with one question: once the world is finally safe from the pandemic, will emissions rebound to pre-pandemic levels? We believe that sustainable spending of economic stimuli measures coupled with low interest rates, structured bailouts and permanent adoption of new work behaviours, facilitate a historic opportunity for the climate transition.

So are we on the edge of a deep structural change leading to carbon neutrality? For Lombard Odier, this is only the beginning of the transition to the CLIC economy, one that is fair, inclusive and resilient.

1 Data as of 29 April 2020.
2 https://www.eea.europa.eu/highlights/air-pollution-goes-down-as
3 Flygskam (noun, Swedish): The feeling of climate guilt associated with airline travel, literally ‘flight shame’.

Important information

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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