The Corona, Oil and the Challenge of Climate Change

Many observers have noticed that the current crisis could serve as a policy template for meeting the challenge of climate change. We collectively experience and manage a ‘de-growth’ process of unprecedented speed, and most governments are busy with finding ways how to recover growth. Yet, astute analysts such as the previous governor of the Bank of England, Mark Carney, argue that we might now ‘pre-adapt’ to unavoidable changes in our economic systems that radically question the common conceptions of growth. I want to contribute to this debate in highlighting one specific aspect, weaning off the world from carbon fuels. The carbon economy is deeply entrenched in the structure of the technosphere as it emerged since the late 18th century.

The oil business is in disarray, as nobody anticipated the implosion of demand for fuel following the global lockdown on all kinds of movements of people. The economic effect is contradictory. On the one hand, cheap oil prices reduce the incentives to switch to renewables: For example, consumers will be wary to spend money on purchasing a new electric car today, as car sales collapsed, too. This is especially true for people in the lower middle-income strata and below. On the other hand, the shrinking profits of big oil mean that the return on investment in renewables looks more attractive. In such an ambiguous environment, much will depend on the adjustment of long-term perspectives: For example, so far investment in the energy sector was regarded to be a safest venue for large public investors, such as pension funds. The bad shape of the oil industry will further speed up their adjustment of investment strategy, beyond the imperative of ‘greening’ their assets.

This sketch clearly shows that we need a post-Corona strategy that does not only focus on the Corona, but takes the wider context into consideration, in the sense of creating opportunities for radical change. Many observers have already pointed out that the plunge of international movements of people will not be temporary, for many reasons. One is certainly that restrictions will persist at least until a therapy and vaccine will be available. But it would be naïve to think that after that life will continue as in the good old times of globalization. The aftermath will last long enough to trigger permanent behavioural and organizational changes: Many managers and employees discover that you can do meetings online, and may continue with that, especially since pressure on cost will persist a long time after the crisis: Slowing down the frequency and reach of business travel will happen for both health and cost considerations. The other reason is that the crisis exposed the fragility of the global supply chains and investment patterns: Since we all know that the next virus is around the corner, we need to prepare. This puts an end to the fast growth of globalization which had deep impact on the technosphere, in terms of the division of functions across countries, shapes of technological networks and so on. There will a strong trend towards re-localization and disentangling the current international division of labour.

This means that the reduction of demand for fuels will be permanent. This is exactly what we need to cope with climate change. Corona drives de-carbonization. However, this opportunity can only materialize if we embed the Corona emergency measures in a more comprehensive strategy for economic transition. This challenge is daunting, as the crisis of the oil sector exposed its well-known political economy. The political consequences of lower oil prices will be tremendous, and these will deeply affect the collective capacities of humankind to meet the challenge both of the Corona and the climate crisis.

There is direct causal connection between oil and the spread of the virus. A most worrying case is Venezuela, a country extremely rich with oil. Because of the catastrophic political situation over years, the health sector is almost defunct: With the plunge of oil prices, there is no chance to improve conditions in the near future. Venezuela does not have any capacities to deal adequately with the Corona. However, this case is not unique, as many other countries face this inexorable link between oil prices, the health of public sector, and their capability to withstand the effects of the Corona on health, both public and of the economy. This is how Corona undermines the global capacity to contain its diffusion. Against this background, it is tragic that the United States fail to assume an adequate role in coordinating global efforts. To the contrary, so far the Corona has triggered more inward-looking short-termism in the desperate attempts to cope with the economic challenges of the virus. This is not about oil, but the US had already withdrawn from coordinated international efforts in meeting climate change. This pattern now continues.

To summarize, the Corona could strengthen us to move forward in facing the even bigger challenge of climate change. At the same time, there are many ways how the virus undermines our public institutions that would enable us for achieving this. One example is the complex and far-reaching impact of oil sector developments on socio-technological change and the political environment. This reveals that technological innovation is not enough to restructure the technosphere, as market optimists believe.

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: