The coronavirus pandemic risks cancelling out recent progress in transitioning to clean energy, with unprecedented falls in demand, price volatility and pressure to quickly mitigate socioeconomic costs placing the near-term trajectory of the transition in doubt.
Policies, roadmaps and governance frameworks for energy transition at national, regional, and global levels need to be more robust and resilient against external shocks, according to the latest edition of World Economic Forum’s Fostering Effective Energy Transition 2020 report published today.
COVID-19 has forced companies across industries to adapt to operational disruption, changes in demand and new ways of working, and governments have introduced economic recovery packages to help mitigate these effects. If implemented with long-term strategies in mind, they could also accelerate the transition to clean energy, by helping countries scale their efforts towards sustainable and inclusive energy systems.
“The coronavirus pandemic offers an opportunity to consider unorthodox intervention in the energy markets and global collaboration to support a recovery that accelerates the energy transition once the acute crisis subsides,” said Roberto Bocca, Head of Energy and Materials, World Economic Forum. “This giant reset grants us the option to launch aggressive, forward-thinking and long-term strategies leading to a diversified, secure and reliable energy system that will ultimately support the future growth of the world economy in a sustainable and equitable way.”
The report draws on insights from Energy Transition Index (ETI) 2020, which benchmarks 115 economies on the current performance of their energy systems – across economic development and growth, environmental sustainability, and energy security and access indicators – and their readiness for transition to secure, sustainable, affordable, and inclusive energy systems.
The results for 2020 show that 75% of countries have improved their environmental sustainability, even as the global average score for this dimension remains the lowest of the three categories assessed. This progress is a result of multifaceted, incremental approaches, including pricing carbon, retiring coal plants ahead of schedule and redesigning electricity markets to integrate renewable energy sources.
However, this hard-won progress highlights the limitations of relying only on incremental gains from existing policies and technologies to complete the transition to clean energy. The greatest overall progress is observed among emerging economies, with the average ETI score for countries in the top 10% remaining constant since 2015, signalling an urgent need for breakthrough solutions – one threatened by COVID-19.
The Energy Transition Index 2020
Sweden (1) leads the ETI for the third consecutive year, followed by Switzerland (2) and Finland (3). France (8) and United Kingdom (7) are the only G20 countries in the top 10. They share common attributes, such as limiting energy subsidies, reducing reliance on imports (thereby improving energy security), achieving gains in energy intensity of GDP, and increasing political commitments to pursue ambitious energy transition and climate change targets.
Performance is mixed among the rest of the G20. Emerging centres of demand such as India (74) and China (78) have made consistent efforts to improve the enabling environment, which refers to political commitments, consumer engagement and investment, innovation and infrastructure, among others.
In China’s case, problems of air pollution have resulted in policies to control emissions, electrify vehicles, and develop the world’s largest capacity for solar PV and onshore wind power plants. For India, gains have come from a government-mandated renewable energy expansion program, now extended to 275 GW by 2027. India has also made significant strides in energy efficiency through bulk procurement of LED bulbs, smart meters, and programs for labelling of appliances. Similar measures are being experimented to drive down the costs of electric vehicles.
Meanwhile, the trend has been moderately positive in Germany (20), Japan (22) and South Korea (48) and Russia (80). Germany has demonstrated strong commitment in coal phase-out and decarbonization of industry through clean hydrogen, however affordability of energy services has been a challenge. Both Japan and Korea face natural disadvantages as net energy importers. However, innovative business environment, infrastructure development, and political commitment remain key enablers in both countries. In Russia, the energy sector remains a strong pillar of the economy and continues to lead globally on energy security, though progress on environmental sustainability has been moderate.
On the other hand, the ETI scores for United States (32), Canada (28), Brazil (47) and Australia (36) were either stagnant or declining. The challenges confirm the complexity of trade-offs inherent in energy transition. In the United States, the headwinds have been mostly related to policy environment, while for Canada and Australia, the challenges lie in balancing energy transition with economic growth given the role of energy sector in their economy.
The fact that only 11 out of 115 countries have made steady improvements in ETI scores since 2015 shows the complexity of energy transition. Argentina (56), China (78), India (74), and Italy (26) are among the major countries with consistent annual improvements. Others, such as Bangladesh (87), Bulgaria (61), Czech Republic (42), Hungary (31), Kenya (79) and Oman (73) have also made significant gains over time.
On the other hand, scores for Canada (28), Chile (29), Lebanon (114), Malaysia (38), Nigeria (113), and Turkey (67) have declined since 2015. The United States ranks outside the top 25% for the first time, primarily due to the uncertain regulatory outlook for energy transition.
More than 80% of countries have improved performance on energy access and security since 2015, but progress in developing countries in Asia and Africa remains a challenge. Energy access programs in these regions need to prioritize community services, such as street lighting, district heating and cooling, cold storages for food and pharmaceuticals preservation, urban sanitation and traffic management.
In advanced economies, “access” is defined by affordability. Utility bills represent growing share of household expenditure, a challenge that could be exacerbated by the economic uncertainties created by COVID-19. Furthermore, energy security is increasingly vulnerable to extreme weather events such as hurricanes, floods and wildfires – which have been rising in frequency and intensity – and cyber-attacks.
While the gaps between what is required, what is committed, and what is likely to be achieved remain large, the compounded disruptions from COVID-19 have destabilized the global energy system with potential short-term setbacks.Ultimately, greater efforts are needed to ensure that recent momentum is not just preserved, but accelerated in order to achieve the ambitious goals required.
Post-COVID-19, regaining citizen’s trust should be a priority for governments
The COVID-19 crisis has demonstrated governments’ ability to respond to a major global crisis with extraordinary flexibility, innovation and determination. However, emerging evidence suggests that much more could have been done in advance to bolster resilience and many actions may have undermined trust and transparency between governments and their citizens, according to a new OECD report.
Government at a Glance 2021 says that one of the biggest lessons of the pandemic is that governments will need to respond to future crises at speed and scale while safeguarding trust and transparency. “Looking forward, we must focus simultaneously on promoting the economic recovery and avoiding democratic decline” said OECD Director of Public Governance Elsa Pilichowski. “Reinforcing democracy should be one of our highest priorities.”
Countries have introduced thousands of emergency regulations, often on a fast track. Some alleviation of standards is inevitable in an emergency, but must be limited in scope and time to avoid damaging citizen perceptions of the competence, openness, transparency, and fairness of government.
Governments should step up their efforts in three areas to boost trust and transparency and reinforce democracy:
Tackling misinformation is key. Even with a boost in trust in government sparked by the pandemic in 2020, on average only 51% of people in OECD countries for which data is available trusted their government. There is a risk that some people and groups may be dissociating themselves from traditional democratic processes.
It is crucial to enhance representation and participation in a fair and transparent manner. Governments must seek to promote inclusion and diversity, support the representation of young people, women and other under-represented groups in public life and policy consultation. Fine-tuning consultation and engagement practices could improve transparency and trust in public institutions, says the report. Governments must also level the playing field in lobbying. Less than half of countries have transparency requirements covering most of the actors that regularly engage in lobbying.
Strengthening governance must be prioritised to tackle global challenges while harnessing the potential of new technologies. In 2018, only half of OECD countries had a specific government institution tasked with identifying novel, unforeseen or complex crises. To be fit for the future, and secure the foundations of democracy, governments must be ready to act at speed and scale while safeguarding trust and transparency.
Governments must also learn to spend better, according to Government at a Glance 2021. OECD countries are providing large amounts of support to citizens and businesses during this crisis: measures ongoing or announced as of March 2021 represented, roughly, 16.4% of GDP in additional spending or foregone revenues, and up to 10.5% of GDP via other means. Governments will need to review public spending to increase efficiency, ensure that spending priorities match people’s needs, and improve the quality of public services.
Sweden: Invest in skills and the digital economy to bolster the recovery from COVID-19
Sweden’s economy is on the road to recovery from the shock of the COVID-19 crisis, yet risks remain. Moving ahead with a labour reform to facilitate adaptation in a fast-changing economic environment, and investing in digital skills and infrastructure, will be crucial to revive employment and build a sustainable recovery, according to the latest OECD Economic Survey of Sweden.
The pandemic triggered a severe recession in Sweden, despite mild distancing measures and swift government action to protect people and businesses. GDP fell by less than in many other European economies in 2020, thanks to reinforced short-time work, compensation to firms for lost revenue and measures to prop up the financial system, but unemployment still rose sharply. Solid public finances provided room for further stimulus in 2021 to buttress the recovery.
The Survey recommends maintaining targeted support to people and firms until the pandemic subsides, then focusing on strengthening vocational training and skills and increasing investment in areas like high-speed internet and low-carbon transport. Addressing regional inequality, which is low but rising, should also be a priority as the recovery takes hold.
The Survey shows that Sweden has been among the most resilient OECD countries in the face of a historic shock. Yet, like other economies, it faces challenges from demographic changes and the shift to green, digital economies. Investments in education and training, and labour reforms along the lines negotiated by the social partners, will support job creation and strengthen economic resilience. Building on Sweden’s leadership in digital innovation and diffusion will also be key for driving productivity.
After a 3% contraction in 2020, interrupting several years of growth, the Survey projects a rebound in activity with 3.9% growth in 2021 and 3.4% in 2022 as industrial production resumes and exports recover. The recovery in world trade is bolstering the Swedish economy, however the country remains vulnerable to potential disruptions in global value chains.
|The pandemic has aggravated a mismatch in Sweden’s job market, with unfilled vacancies for highly qualified workers coinciding with high unemployment for low-skilled workers and immigrants. The public employment service needs strengthening to provide better support to jobseekers, including immigrants and women, and labour policies should strike the right balance between supporting businesses and workers and supporting transitions away from declining businesses towards growing sectors.|
A rising share of youths and older people in the population, especially in remote areas, is affecting the finances of local governments, which provide the bulk of welfare services. Strengthening local government budgets and ensuring equal welfare provision across the country will require providing tax income to poorer regions more efficiently and raising the economic growth potential across regions through investments in innovation. Improving coordination between government entities and reinforcing the role of universities in local economic networks would help achieve that aim.
Fewer women than men will regain work during COVID-19 recovery
Fewer women will regain jobs lost to the COVID-19 pandemic during the recovery period, than men, according to a new study released on Monday by the UN’s labour agency.
In Building Forward Fairer: Women’s rights to work and at work at the core of the COVID-19 recovery, the International Labour Organization (ILO) highlights that between 2019 and 2020, women’s employment declined by 4.2 per cent globally, representing 54 million jobs, while men suffered a three per cent decline, or 60 million jobs.
This means that there will be 13 million fewer women in employment this year compared to 2019, but the number of men in work will likely recover to levels seen two years ago.
This means that only 43 per cent of the world’s working-age women will be employed in 2021, compared to 69 per cent of their male counterparts.
The ILO paper suggests that women have seen disproportionate job and income losses because they are over-represented in the sectors hit hardest by lockdowns, such as accommodation, food services and manufacturing.
Not all regions have been affected in the same way. For example, the study revealed that women’s employment was hit hardest in the Americas, falling by more than nine per cent.
This was followed by the Arab States at just over four per cent, then Asia-Pacific at 3.8 per cent, Europe at 2.5 per cent and Central Asia at 1.9 per cent.
In Africa, men’s employment dropped by just 0.1 per cent between 2019 and 2020, while women’s employment decreased by 1.9 per cent.
Throughout the pandemic, women faired considerably better in countries that took measures to prevent them from losing their jobs and allowed them to get back into the workforce as early as possible.
In Chile and Colombia, for example, wage subsidies were applied to new hires, with higher subsidy rates for women.
And Colombia and Senegal were among those nations which created or strengthened support for women entrepreneurs.
Meanwhile, in Mexico and Kenya quotas were established to guarantee that women benefited from public employment programmes.
To address these imbalances, gender-responsive strategies must be at the core of recovery efforts, says the agency.
It is essential to invest in the care economy because the health, social work and education sectors are important job generators, especially for women, according to ILO.
Moreover, care leave policies and flexible working arrangements can also encourage a more even division of work at home between women and men.
The current gender gap can also be tackled by working towards universal access to comprehensive, adequate and sustainable social protection.
Promoting equal pay for work of equal value is also a potentially decisive and important step.
Domestic violence and work-related gender-based violence and harassment has worsened during the pandemic – further undermining women’s ability to be in the workforce – and the report highlights the need to eliminate the scourge immediately.
Promoting women’s participation in decision-making bodies, and more effective social dialogue, would also make a major difference, said ILO.
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