The Covid-19 pandemic represents the biggest shock to the global energy system in more than seven decades, with the drop in demand this year set to dwarf the impact of the 2008 financial crisis and result in a record annual decline in carbon emissions of almost 8%.
A new report released today by the International Energy Agency provides an almost real-time view of the Covid-19 pandemic’s extraordinary impact across all major fuels. Based on an analysis of more than 100 days of real data so far this year, the IEA’s Global Energy Review includes estimates for how energy consumption and carbon dioxide (CO2) emissions trends are likely to evolve over the rest of 2020.
“This is a historic shock to the entire energy world. Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas. Only renewables are holding up during the previously unheard-of slump in electricity use,” said Dr Fatih Birol, the IEA Executive Director. “It is still too early to determine the longer-term impacts, but the energy industry that emerges from this crisis will be significantly different from the one that came before.”
The Global Energy Review’s projections of energy demand and energy-related emissions for 2020 are based on assumptions that the lockdowns implemented around the world in response to the pandemic are progressively eased in most countries in the coming months, accompanied by a gradual economic recovery.
The report projects that energy demand will fall 6% in 2020 – seven times the decline after the 2008 global financial crisis. In absolute terms, the decline is unprecedented – the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer. Advanced economies are expected to see the biggest declines, with demand set to fall by 9% in the United States and by 11% in the European Union. The impact of the crisis on energy demand is heavily dependent on the duration and stringency of measures to curb the spread of the virus. For instance, the IEA found that each month of worldwide lockdown at the levels seen in early April reduces annual global energy demand by about 1.5%.
Changes to electricity use during lockdowns have resulted in significant declines in overall electricity demand, with consumption levels and patterns on weekdays looking like those of a pre-crisis Sunday. Full lockdowns have pushed down electricity demand by 20% or more, with lesser impacts from partial lockdowns. Electricity demand is set to decline by 5% in 2020, the largest drop since the Great Depression in the 1930s.
At the same time, lockdown measures are driving a major shift towards low-carbon sources of electricity including wind, solar PV, hydropower and nuclear. After overtaking coal for the first time ever in 2019, low-carbon sources are set to extend their lead this year to reach 40% of global electricity generation – 6 percentage points ahead of coal. Electricity generation from wind and solar PV continues to increase in 2020, lifted by new projects that were completed in 2019 and early 2020.
This trend is affecting demand for electricity from coal and natural gas, which are finding themselves increasingly squeezed between low overall power demand and increasing output from renewables. As a result, the combined share of gas and coal in the global power mix is set to drop by 3 percentage points in 2020 to a level not seen since 2001.
Coal is particularly hard hit, with global demand projected to fall by 8% in 2020, the largest decline since the Second World War. Following its 2018 peak, coal-fired power generation is set to fall by more than 10% this year.
After 10 years of uninterrupted growth, natural gas demand is on track to decline 5% in 2020. This would be the largest recorded year-on-year drop in consumption since natural gas demand developed at scale during the second half of the 20th century. The massive impact of the crisis on oil demand has already been covered in detail in our April Oil Market Report.
Renewables are set to be the only energy source that will grow in 2020, with their share of global electricity generation projected to jump thanks to their priority access to grids and low operating costs. Despite supply chain disruptions that have paused or delayed deployment in several key regions this year, solar PV and wind are on track to help lift renewable electricity generation by 5% in 2020, aided by higher output from hydropower.
“This crisis has underlined the deep reliance of modern societies on reliable electricity supplies for supporting healthcare systems, businesses and the basic amenities of daily life,” said Dr Birol. “But nobody should take any of this for granted – greater investments and smarter policies are needed to keep electricity supplies secure.”
Despite the resilience of renewables in electricity generation in 2020, their growth is set to be lower than in previous years. Nuclear power, another major source of low-carbon electricity, is on track to drop by 3% this year from the all-time high it reached in 2019. And renewables outside the power sector are faring less well. Global demand for biofuels is set to fall substantially in 2020 as restrictions on transport and travel reduce road transport fuel demand, including for blended fuels.
As a result of these trends – mainly the declines in coal and oil use – global energy-related CO2 emissions are set to fall by almost 8% in 2020, reaching their lowest level since 2010. This would be the largest decrease in emissions ever recorded – nearly six times larger than the previous record drop of 400 million tonnes in 2009 that resulted from the global financial crisis.
“Resulting from premature deaths and economic trauma around the world, the historic decline in global emissions is absolutely nothing to cheer,” said Dr Birol. “And if the aftermath of the 2008 financial crisis is anything to go by, we are likely to soon see a sharp rebound in emissions as economic conditions improve. But governments can learn from that experience by putting clean energy technologies – renewables, efficiency, batteries, hydrogen and carbon capture – at the heart of their plans for economic recovery. Investing in those areas can create jobs, make economies more competitive and steer the world towards a more resilient and cleaner energy future.”
Russia Among Global Top Ten Improvers for Progress Made in Health and Education
Russia is among the top ten countries globally for improvements to human capital development over the last decade, according to the latest update of the World Bank’s Human Capital Index (HCI).
The 2020 Human Capital Index includes health and education data for 174 countries covering 98 percent of the world’s population up to March 2020.
Russia’s improvements were largely in health, reflected in better child and adult survival rates and reduced stunting. Across the Europe and Central Asia region, Russia, along with Azerbaijan, Albania, Montenegro, and Poland, also made the largest gains in increasing expected years of schooling – mainly due to improvements in secondary school and pre-primary enrollments. The report also shows that over the last 10 years Russia has seen a reduction in adult mortality rates. However, absolute values of this indicator remain high in the country with this progress now at risk due to the global Covid-19 pandemic.
“Human capital contributes greatly to improving of economic growth in every country. Investments in knowledge and health that people accumulate during their lives are of paramount concern to governments around the world. Russia is among the top improvers globally in the Index. However, challenges persist and much needs to be done to improve the absolute values of Index indicators,” said Renaud Seligmann, the World Bank Country Director in Russia.
The HCI, first launched in 2018, looks at a child’s trajectory, from birth to age 18, on such critical metrics as child survival (birth to age 5); expected years of primary and secondary education adjusted for quality; child stunting; and adult survival rates. HCI 2020, based on data up to March of this year, provides a crucial pre-pandemic baseline that can help inform health and education policies and investments for the post-pandemic recovery.
Of the 48 countries in Europe and Central Asia included in the 2020 Human Capital Index (HCI), 33 are among the upper-third in the world, and almost all are in the top half. However, there are significant variations within the region.
In Russia, a child born today can expect to achieve 68 percent of the productivity of a fully educated adult in optimal health. It is at the average level for Europe and Central Asia countries and the third result globally among the countries of the same income group. There is a stark contrast between education and health subscales in Russia. While the education outcomes of the country are high and outperform many high-income peers, its health outcomes are below the global average.
Accelerating Mongolia’s Development Requires a Shift “from Mines to Minds”
A new report by the World Bank estimates that out of every dollar in mineral revenues Mongolia has generated over the past 20 years, only one cent has been saved for future generations. The report argues that to break this cycle, Mongolia should use its mineral wealth to invest in people and institutions, while gradually reducing its dependence on the sector.
This is particularly true as demand for key minerals is likely to tumble due to climate change concerns, a shift of investors’ preference toward sustainability, China’s ambitious goal to reduce coal consumption, and persistence of the COVID-19 shock, according to Mongolia’s Mines and Minds, the World Bank’s September 2020 Country Economic Memorandum for Mongolia.
Since the advent of large-scale mining in 2004, Mongolia’s economy has grown at an average rate of 7.2 percent per year, making it one of the fastest-growing economies in the world. Growth has translated to rapid decline – although at times partly reversed – in the incidence of poverty and improved quality of life. The report also notes that Mongolia enjoys relatively strong human capital, and its infrastructure capital has improved for the last few decades, though remains scarce given the size of the country and low population density. This performance has been made partly possible through a generous but inefficient social assistance system and a large public investment program supported by mineral revenues and external borrowing.
However, a number of enduring challenges have grown in the shadow of this success. Mongolia’s rapid growth has been obscured by its extreme macroeconomic volatility and frequent boom and bust cycles. Growth has almost entirely come through capital accumulation and the intensive use of natural capital rather than through sustained productivity growth. Meanwhile, the country has not only consumed almost all its mineral outputs, but has also borrowed heavily against them, bequeathing negative wealth to the next generation.
“Instead of maximizing the benefits of its mineral wealth for diversified and inclusive growth, Mongolia has increasingly become more addicted to it. At the same time, human capital has been underutilized and institutional capital has eroded.” said Andrei Mikhnev, World Bank Country Manager for Mongolia. “Such inability to capitalize on the country’s endowments has resulted in limited diversification of outputs and exports and has further amplified its vulnerability to the swings of the global commodity markets. Breaking this gridlock calls for a fundamental shift in approach that puts investing in minds on an equal footing with mines.”
The report recommends key policy actions to build the foundation of a diversified and sustainably growing economy. These include:
- Implement countercyclical fiscal and monetary policies – supported through transparent fiscal rules, an independent fiscal council, a market-driven exchange rate, and a well-functioning stabilization fund – to smooth consumption over the business cycle rather than maximize current consumption.
- Undertake bold investment climate reforms to enhance competition, secure investor rights, and create a more level playing field that enables productive firms to invest and grow.
- Move away from the mindset of diversifying products to expanding endowments, especially in terms of better utilization of Mongolia’s young and educated, especially female, labor force.
- Accelerate the implementation of fundamental governance reforms (especially on the government effectiveness and control of corruption) to reduce political interference, increase transparency, and improve regulatory quality throughout the economy.
“Fortunately, there are many encouraging signs of improved macroeconomic management in 2017-19, providing the new government an opportunity to advance its reform efforts,” said Jean-Pascal Nganou, World Bank Senior Country Economist and lead author of the report. “Some impressive fiscal outcomes were achieved not by introducing new reforms but by effectively implementing existing ones. They demonstrate that with the right political will and leadership, similar improvements are possible in other areas including monetary and exchange rate policy, the financial sector, the business environment, and the labor market. The new administration has, therefore, an opportunity to institutionalize these reforms and avoid policy regression in the future.”
Nearly 9 in 10 People Globally Want a More Sustainable and Equitable World Post COVID-19
In a new World Economic Forum-Ipsos survey of more than 21,000 adults from 28 countries nearly nine in ten say they are ready for their life and the world to change.
72% would like their own lives to change significantly and 86% want the world to become more sustainable and equitable, rather than going back to how it was before the COVID-19 crisis started. In all countries, those who share this view outnumber those who don’t by a very significant margin (more than 50 percentage points in every country except South Korea). Preference for the world to change in a more sustainable and equitable manner is most prevalent across the Latin America and Middle East-Africa regions as well as in Russia and Malaysia.
Next week’s World Economic Forum Sustainable Development Impact Summit will address the achievement of the sustainable development goals and the appetite for transformation which will drive the “decade of delivery”.
Clear majority ready for a more sustainable and equitable world
Globally, 86% of all adults surveyed agree that, “I want the world to change significantly and become more sustainable and equitable rather than returning to how it was before the COVID-19”. Of those, 46% strongly agree and 41% somewhat agree, while 14% disagree (10% somewhat and 4% strongly).
Russia and Colombia top the list of countries that strongly or somewhat agree with that statement at 94%. They are followed by Peru (93%) Mexico (93%) Chile (93%) Malaysia (92%), South Africa (91%) Argentina (90%) and Saudi Arabia (89%). The countries that are most change averse – disagreeing somewhat or strongly disagreeing with the statement – are South Korea (27%), Germany (22%), Netherlands (21%), US (21%) and Japan (18%).
Dominic Waughray, Managing Director, at the World Economic Forum said, “The Great Reset is the task of overhauling our global systems to become more equitable and sustainable, and it is more urgent than ever as COVID-19 has exposed the world’s critical vulnerabilities. But the technology to transform things tends to outpace the human will to change. In six months, the pandemic has systematically broken down this cultural barrier and we are now at a pivot point where we can use the social momentum of this crisis to avert the next one.”
Ready for significant personal change
Across all 28 countries, 72% want their lives to change significantly rather than returning to what it was like before the COVID-19 crisis (30% strongly and 41% somewhat) while the other 29% disagree (21% strongly and 8% somewhat).
Latin America stands out for its optimism, with Mexico, Colombia and Peru in the top five countries strongly or somewhat agreeing. Agreement is also high South Africa (86%), Saudi Arabia (86%, Malaysia (86%) and India (85%). By contrast, at least two out of five adults in the Netherlands, Germany, South Korea, Japan, Sweden, the US, UK and Canada long for their life to just return to how it was before the pandemic.
MethodologyThese are the results of a 28-country survey conducted by Ipsos on its Global Advisor online platform. Ipsos interviewed a total of 21,104 adults aged 18-74 in United States, Canada, Malaysia, South Africa, and Turkey, and 16-74 in 23 other countries between August 21 and September 4, 2020. Where results do not sum to 100 or the ‘difference’ appears to be +/-1 more/less than the actual, this may be due to rounding, multiple responses or the exclusion of don’t knows or not stated responses.
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