COVID-19 Could Delay Emergency Climate Change PoliciesBy Dalia Maria de León | Wed, 03/25/2020 - 15:57
The International Energy Agency (IEA) has urged governments to respond to the impact of the COVID-19 worldwide crises, while not losing sight of one of the major challenges of our time: the transition to clean energy. The combination of the COVID-19 crisis and volatile market conditions could distract the attention of policymakers, business leaders and investors away from clean energy transitions, IEA warns.
Dr. Fatih Birol, Executive Director of the agency, said that COVID-19 is turning into an unprecedented international crisis with serious repercussions on people’s health and economic activity. Although these may be severe, the effects are likely to be temporary. Meanwhile, the threat posed by climate change, which requires to reduce global emissions significantly this decade, will remain. We should not allow today’s crisis to compromise our efforts to tackle the world’s inescapable challenge, he said.
Global supply chain disruptions are raising concerns among renewable energy developers and investors who suggest that the delivery of components will be delayed. This, in turn, will impact the project’s eligibility for tax credits, which depend on when construction begins and is completed. Delays are causing wind and solar projects to be at risk in countries such as the US and Germany. The US renewables market is particularly sensitive to supply chain and construction disruptions because of tax rules that cause the value of production tax credits (PTCs) or investment tax credits (ITCs) to fluctuate based on the year in which construction begins. Meanwhile, in Germany, operators of one of the world’s largest solar markets have urged authorities to ease subsidy timetables so projects facing COVID-19 hold-ups do not end up missing out.
Governments are drawing up stimulus plans in an effort to counter the economic damage from the pandemic. These stimulus packages offer an excellent opportunity to ensure that the essential task of building a secure and sustainable energy future does not get lost amid the flurry of immediate priorities.
In the US, renewable energy groups are pushing for solar and wind tax credit extensions and direct pay provisions to be included in the US$2 trillion COVID-19 stimulus package, likely to be passed Wednesday after, and which is intended for workers, businesses and a healthcare system strained by the pandemic.
According to Birol, large-scale investment to boost the development, deployment, and integration of clean energy technologies like hydrogen batteries and carbon capture, should be a core element of governments’ plans because the acceleration of the clean energy transition will stimulate economies. The progress this will achieve in transforming the energy infrastructure of a country will be seen long after the COVID-19 crisis is over, Birol argues.