11 May 2020

Green recovery after Covid-19 crisis

These are strange times. The corona crisis shows a number of effects that we can all clearly observe. Companies are completely or partially closed and have reduced their activities. It is unclear how long this will take, but the lockdown will for sure lead to a serious economic downturn. On the upside, restricted travel, working from home and much less commuting results in cleaner air and as people are looking for ways to help each other, social cohesion is getting stronger. It is interesting to see that government decisions are clearly based on the appreciated insights of scientists such as biomedics and virologists.

Similarities and key differences between COVID-19 and climate change

The news about the corona (Covid-19) virus pushes the discussion about climate change into the background, but there are clearly some similarities between the two phenomena. In both cases there is a physical shock in society with potentially great socio-economic impact and lives are threatened worldwide. Both phenomena cannot be considered as a "Black Swan", a phenomenon that has always been there, but which we did not notice. Scientists and entrepreneurs have sent early warnings on the risk of viruses and climate change. There is clearly not enough resilience in society to cope with these changes in the short and long term without any problems. The role of the government (European, National and regional) is crucial in taking decisions to limit the impact of COVID-19 and to recover from the lockdown situation, but also to tackle climate change.

Despite these similarities, there are also some key differences to be discovered. The speed and duration of the change is clearly different. The expectation is that the effects of the corona crisis may last from months till years, depending on the recovery strategy, but the climate change process is much slower with a time scale that spans decades. But also the size and impact are different. By the end of last April, there were already 200,000 confirmed Covid-19 casualties. Regarding climate change these numbers are still unclear and disputed, but may be much higher if necessary measures are not taken. A difference can also be observed regarding the potential and options for recovery. We can build up immunity or develop a vaccine to ban the virus, but can we reverse climate change and cool down the earth again? Regarding public awareness, the draconic measures may be questioned, but it is clear that no one will deny corona.  On the other hand, there are still climate sceptics who dispute climate change.

Economic downturn, energy demand and emissions

Sustainability is closely related to economic activity and market conditions. Demand for oil and gas has fallen dramatically as a result of the corona crisis, and oil and gas prices are dropping worldwide due to delayed and insufficient production restrictions. Recently, in the US, the oil price even fell below zero due to overproduction and insufficient storage capacity. Countries in full lockdown show a decreased  electricity demand of 20% or more. The International Energy Agency (IEA) expects for 2020 that energy demand worldwide will decrease with 5% and CO2 emissions will drop with 8%. In their global energy review 2020 IEA reported a shift in the energy mix towards less polluting sources. Global coals demand is hit strongly, followed by oil and to a lesser extent by gas. Renewables were the only source that reported growth in demand. It is still too early to judge the long-term effects, as it depends on the corona lockdown exit strategy and the way forward towards economic recovery.

For the industry, the price of CO2 is important for making investment decisions, but this price is still too low and a disadvantage for sustainable solutions. In 2019 the carbon price in the European Emissions Trading Scheme (EU ETS) was around 25 Euro per ton CO2 and affected by the corona crisis, fell to a two-year low just above 15 Euro by the end of March. Recent studies show that to remain within a temperature rise of 2oC worldwide, a price is required of at least US $ 40–80 / tCO2 in 2020 and US $ 50–100 / tCO2 in 2030. In addition to the ETS system, there are a number of countries that levy taxes on CO2 emissions and thereby increase the market price artificially. In addition to CO2 pricing, additional climate policy is necessary, for example by stimulating energy efficiency, sustainable energy, innovation and technological developments.

Building back better

The first priority is of course to fight the corona virus as effectively as possible, but the question is what the world looks like after the crisis. The Covid-19 crisis can also be seen as an opportunity to do things better and to build a resilient and sustainable society. Statements like “Building Back Better!” and “Green Recovery” are on the rise.

Governments are still committed towards clean energy technologies, energy efficiencies and keep supporting renewables and are currently looking for opportunities to boost economic activities and reduce unemployment by creating green stimulus packages. The Dutch government is currently investigating the consequences of the Covid-19 outbreak on their climate and energy policy and how a so-called “green recovery” of the economy can be promoted. Portugal, although less affected by Covid-19 than many other European countries, is planning to build a 1 GW hydrogen factory to beat the economic downturn. For the time being, the corona crisis has delayed the Green Deal, one of the top priorities of the European Commission. But instead of postponing this initiative, acceleration is needed to reform the current unsustainable and polluting economic model.

The industry can also use the momentum to rethink and adjust future plans. In the light of sustainability and energy-efficiency, a risk-driven and holistic approach to re-assess the own business operations is a good starting point, where also suppliers and customers are taken into account. Building in extra flexibility in the business operations and simplifying and localising the supply chain will help to better withstand shocks. In addition, looking for lean processes and opportunities for limiting pollution and reducing energy and material losses in production and the rest of the chain will be beneficial for the business. It is the right time for an accelerated replacement of old polluting, energy-inefficient and less productive installations with an opportunity for technology upgrades and the introduction of the state-of-the-art technology.

A four-step approach to reduce industrial emissions

Broadly speaking, four steps can be distinguished to substantially reduce CO2 emissions:

  • Put the energy basics in place by increasing awareness in the organization, mapping energy consumption and dismantling inefficient equipment
  • Better housekeeping by optimizing the business operations, properly maintaining the installations and reducing the energy requirements per product
  • Invest in the best available technologies for the existing process, both for existing plants and for new factories and production lines
  • Redesign the primary process to build the factory of the future, using new processes, new raw materials and new technologies

With the first three steps it is possible to reduce approximately 30% of carbon emissions, but step 4 is essential to achieve further reduction.

Four-step approach in reducing industrial carbon emissions

Making existing processes and installations more energy efficient is important, but that is not enough. The possibilities of using biofuels and hydrogen as an alternative to fossil fuels, electrification of heating processes with techniques like heat pumps and E-boilers, application of hydrogen using electrolysers and fuel cells, CO2 capture, storage and usage and sourcing renewable energy from sun and wind need also be considered.

Less emissions require modifications of industrial installations with new techniques that often need to be integrated in an existing, mostly fossil environment. As a global provider of energy solutions, Stork keeps industrial assets up-to-date, but also future-proof, and ensures that they continue to meet the strict emission requirements, while ensuring productivity.

Alignment of short-term stimulus actions and a well-designed long-term road map will give the industry the opportunity to make a “green recovery” happen and to contribute to a climate-friendly, healthier and more resilient society.

The author

Principal Consultant

Jack Doomernik

Jack Doomernik is principal consultant at Stork Asset Management Technology and Subject Matter Expert on performance monitoring. In addition, he is professor in Smart Energy systems at Avans University of Applied Sciences in the Netherlands.

Watch our recorded webinar!

Managing the COVID-19 risk - the new normal

Controlling your performance tomorrow is ensuring the understanding and management of future risks. Learn about the importance of risk management in business, which cannot be understated.