Will Covid-19 Destroy or Build Trust and Ambition?
Written by Ged Davis, Executive Chair, Scenarios, World Energy Council
In less than six months Covid-19 has dramatically changed the present, with 6 million confirmed infections and over 360,000 deaths across the globe. But how will this pandemic change the future? We may not have the answer to this, but we can create plausible scenarios for what lies ahead and identify the relevant signals of change.
The “unknowns” of the Covid crisis cover every aspect of global response and recovery. How pernicious is the pandemic? Will it be solved with primarily a technology fix or require sustained behavioural change? How quickly will the global economy recover? And what are the implications for energy? There are many shapers of the future but two are particularly critical for governments and enterprises:
- Whether countries trust each other in addressing the pandemic and other global challenges, or whether recovery efforts reinforce self-reliance
- The degree of ambition in addressing a wider resilience agenda, including climate change, or a reversion to the old agenda
In the interests of assisting its community, the World Energy Council has developed medium-term scenarios that can be used to explore the pathways from today to beyond the Covid-19 pandemic. These four plausible scenarios can be evaluated within the trust/ambition space.
These include two ‘high trust’ scenarios, in which medical techno-fixes resolve the pandemic by the end of 2021:
- Pause: after the imposed pause of the pandemic lockdowns, societies open-up and collaborate in an attempt to return to a pre-pandemic normal. The advent of a vaccine and a desire to collaborate enables containment of the virus. By 2022 debt and uncertainty make it tough to finance new projects, slowing the transition to a new energy economy. Energy demand slowly rises, and oil and gas prices begin to recover making renewables competitive. There is a general acceptance that progress on the Paris Agreement will be slower than expected.
- Fast-forward: while the pandemic has slowed economic growth, it has put transformation and collaborative innovation on fast-forward. Successfully tackling Covid-19 through effective scientific collaboration invigorates the economy. A new world order is beginning to develop, with China on the rise. Effective partnerships create technology-enabled resilience rather than lowest cost, efficient supply chains. Collaboration enables progress on climate policy implementation, but there remains much work for countries to do to meet their 2050 commitments.
At the moment, quantification of Covid-19 scenarios can only be illustrative. We assume for each of the two ‘high trust’ scenarios that GWP declines by 5% in 2020 with a bounce-back in 2021, and then an annual rise at historical rates to 2024. Such a recovery would boost demand for electricity, low-carbon sources would outpace coal-fired generation, and world oil demand would reach 2019 levels by 2022.
In Pause there is a strong focus on resolving economic challenges. Whereas in Fast-forward a rise of public support for addressing resilience challenges gives governments confidence in recovery policies that deliver both on economic and climate goals.
There are also two ‘low trust’ scenarios, in which medical techno-fixes are slow in coming and the pandemic is resolved largely by diverse country-specific behavioural fixes by the end of 2023:
- Rewind: There is a drive to repair the local economy. Vaccine development is slow and governments look to behavioural fixes to tackle the virus. By the end 2022 the US, UK and China all develop promising vaccines, giving priority to their populations. Not all countries without vaccines handle the virus well, nor do they effectively manage the dramatic loss of economic activity. The global pandemic has exposed the vulnerability of global supply chains and the dangers of interdependence.
Most countries respond by pulling back, in a kind of rewinding of a taken-for-granted global order. Some sectors, notably energy, agriculture and pharma, face a growing protectionist movement as trade becomes more bilateral. An inward-turning, domestic focus creates a widening gap between rich and poor countries.
- Re-Record: The period to 2023 is gruelling. Research into vaccines and treatments and containment policies proliferate in a confusing, non-coordinated fashion. The slow economic recovery is accompanied by social unrest. Globalization is on the backfoot. In most countries, the low-paid and unemployed begin to demand greater equality, starting with much larger recovery programs. Under their nudging with local environmental activists, and the corporate social responsibility movement, governments offer to move funding closer to cities, providing national and local incentives for transformations in energy infrastructure. These diverse human-centred local experiments begin to re-record the old version of energy infrastructure, with the creation of new, locally focused renewables, storage and regenerative options.
For each of the two ‘low trust’ scenarios we assume GWP declines by 8% in 2020 with an annual rise at historical rates to 2024. With such a recovery wind and solar power would increase their share of generation to nearly 9% in 2020.
In Rewind energy security remains the cornerstone of policy. There are diverse approaches to climate change from disinterest to wide support, but overall progress remains inadequate.
Re-record involves very different degrees of success (and failure) in addressing the pandemic and leads to a breakdown of global cooperation. In many countries the power to act is increasingly sub-regional and local community focused. There is social unrest in some areas, but also the pervasive rise of constructive local solutions.
Which scenario is best supported by current signals? Will Covid-19 destroy or build trust and ambition?