17 April 2020 - With billions of people across the globe in lockdown to stem the flow of COVID-19, the world is in the midst of an acute public health crisis and the largest economic shock of a generation.

Meanwhile, another crisis, far harder to control, trundles along in the background.

Unlike us humans, climate change cannot be put on lockdown. And unlike many of our day-to-day activities, climate change cannot be postponed.

As countries adopt strict social distancing measures, many parts of the world are in limbo, waiting for these unnatural changes in our human behaviour to pay off.

The cost of shutting down huge sections of our economies is unprecedented and deep. The fiscal packages being produced by governments are of magnitudes that have never even been discussed before, let alone constructed and enacted in a matter of weeks. The long-term consequences of such big spending plans are also hard to comprehend and calculate. But there will be consequences.

For those concerned with climate, the worry is that COVID-19 will detrimentally impact the capacity of governments to address the shortfall in climate investment, and beyond that, focus on climate policy in a more general sense. While this may be true in some cases, there is a more positive story to be told.
 

Photo: UNDP Moldova

 

Stable investments, in a time of economic instability


For most of 2019 the American crude oil benchmark was trading between 55 and 63 USD. At the time of writing it is trading at an unprecedented minus 30 USD. This dramatic price drop has happened for a number of reasons, but the key takeaway is that oil has proven to be a risky investment for financiers.

Oil and gas companies rely on debt financing for the majority of their production activities and many oil producers will risk defaulting on their loans if prices remain this low.

Now investors have seen extreme volatility in the oil and gas markets, this is another argument to add to the rationales for investing more heavily in renewable energy infrastructure, more stable and freer from the politics and control of a few powerful oil producing nations.
 

Photo: UNDP Moldova

 

Opportunities in times of crisis


In the Chinese language, the word crisis is composed of two characters. One representing danger and the other opportunity.

In response to economic shutdowns and record job losses, governments have put together huge fiscal stimulus packages and corporate bailouts.

This is not unfamiliar territory.

In 2007-2008 a number of bailout packages were issued to banks with no strings attached, essentially transferring the losses the banks had incurred – through high-risk and reckless financial activities – to the taxpayers, which they spent the next decade paying off, through frugality and austerity.

However, this time people and policymakers are determined not to make the same mistakes again. Policymakers have an opportunity to rectify previous inefficiencies and provide incentives to urge industries towards decarbonisation pathways. Requiring airlines to reduce their emissions and giving tax credits to renewable energy investors are a few of the ‘strings’ that could be attached to these stimulus packages. And with such incentives comes a host of opportunities for investors who are searching for less risky and more sustainable options as an inflated stock market is in decline and most government bonds yields are well below one percent.
 

What UNDP is doing

 

Photo: UNDP Climate Action Summit Flagship Event | @UNDP

 

In response to the climate crisis, last year UNDP made its Climate Promise – to support at least 100 countries to enhance their national climate plans by COP26, the next UN annual climate conference.

Although COP26 has now been postponed due to the COVID-19 crisis, the UN and our partners have not been deterred from taking on the dual crises we are now presented with. In fact, our work on the Climate Promise is progressing and gathering speed, with Moldova being the latest country to submit its enhanced climate plan in early March.

We need the necessary climate plans and targets in place, which is what this year is all about. But beyond that, the looming question is – how do we finance and implement these plans?

Part of the answer is the need to involve the private sector and incentivise businesses to invest in mitigation projects as well as decarbonise their own activities.

In Côte d'Ivoire, we are working with the government to prepare for the launch of a green bond to raise finance for decarbonisation activities as well as fostering lessons learned from other private sector engagement initiatives in the region. In Ghana, we have helped facilitate the cooperative approaches being taken between Ghana and Switzerland, that will lead to the derisking of private sector investments into renewable energy projects. And, in the Philippines, new rice farming techniques are reducing the amount of methane emitted, meaning the emission reduction generated can bring in carbon finance flows, boosting farmers’ revenues.

For many, the question of financing is even harder to answer now that we have another crisis to fight simultaneously. But in this time of uncertainty, there’s an opportunity for change. For many of us practicing social distancing and in isolation, we have time to take stock and reflect on how we can avoid reverting to business as usual, and instead find a different pathway to carbon neutrality and equitable development.
 

The UNDP NDC Support Programme supports countries to strategically use their NDCs as a tool for realizing zero-carbon and climate-resilient development that is sustainable and fully inclusive. The NDC Support Programme is funded by the European Union, and the governments of Germany and Spain. The programme works in contribution to the NDC Partnership.

 

Authored by: Louis Nunes da Costa, Private Sector Research and Communications Consultant

Cover image from Adobe Stock, created with an image by USGS - " A giant whirlpool cloud, coaxed into shape by high-altitude winds, swirls above the sea between Spain and Morocco."

Related content

undp-ndcsp-moldova-1

With billions of people across the globe in lockdown to stem the flow of COVID-19, the world is in the midst of an acute public health crisis and the largest economic shock of a generation.

Posted on April 17, 2020