There are fears that a post-pandemic push to ramp up economies around the world will reverse efforts to mitigate climate change, but this could come at a price of its own. Silvia Pavoni reports.  

The coronavirus crisis is set to change our future, and the question of what this will mean for the environment remains unanswered. 

Some argue that dealing with this emergency inevitably puts everything else on the back burner. In some cases, it might go as far as reversing progress, since propping up economic recovery might mean engaging in the activities that are harmful to the environment.

In 2019, China had already commissioned additional coal power capacity that accounted for two-thirds of the total 68.3 gigawatts of new capacity globally, according to the Boom and Bust 2020 report by environmental groups including the Global Energy Monitor and the Sierra Club. Although globally the amount of power generated by coal decreased by 3%, China’s additions offset declines elsewhere in the world so capacity (though not usage) of the global coal fleet grew by 34.1 gigawatts in 2019. It was the first increase in net capacity since 2015.

Although China’s capacity continues to exceed demand and many recent commissions are relegated to ‘emergency back-up status’, it would be logical to expect a change as part of measures to reinvigorate the economy. For the first time in four decades, China’s economic growth has slumped, with a 6.8% decline in output between January and March 2020. 

China crisis

Globally, airlines are lobbying to amend the terms of the Carbon Offsetting and Reduction Scheme for International Aviation, under which they have to pay to offset any rise in carbon emissions above a certain baseline. That baseline is determined by averaging emissions for 2019 and 2020 but, given the pandemic’s resultant halt on travel, the benchmark will be much lower than initially forecast. Targets would therefore be harder to meet. The airlines’ trade body, the International Air Transport Association, has said that some countries might pull out of the agreement if compliance costs became too high.

The economic and business pressures are clear. But there are other considerations that highlight the need to push ahead with measures to contain climate change.

Lockdowns have imposed economic damage but have also brought attention to the environment on a human level. Residents of cities around the world, from Shanghai to New York to Paris, have enjoyed cleaner air, for example. French president Emmanuel Macron believes people will not want to go back to “dirty air” after the emergency is over.

“When we get out of this crisis people will no longer accept breathing dirty air,” he said in a Financial Times interview. “People will say:  ‘I do not agree with the choices of societies where I’ll breathe such air, where my baby will have bronchitis because of it. And remember you stopped everything for this Covid thing but now you want to make me breathe bad air!’.” It is a valid point.

Aversion to flying

Furthermore, Natixis chief economist Patrick Artus expects a long-lasting aversion to travel as well as stricter climate and environmental regulation. Academics at Vienna University of Economics and University of London’s SOAS say financing the response to the coronavirus pandemic is not mutually exclusive from enacting and expanding the EU’s Green Deal. On the contrary, the two would go hand in hand. And sustainable funds have rewarded investors with better performance than conventional ones in the first quarter of 2020, as Morningstar found. 

Energy-intensive measures to prop up economic recovery are tempting. After all, these were introduced after the financial crisis over a decade ago – resulting in higher emissions. Politicians and policy-makers are dealing with an enormous challenge; output does need to grow again, globally, and fast before recession or, worse, depression bites.

But no matter how arduous, including environmental factors in the post-pandemic recovery plan is an effort worth pursuing globally. We could all do worse than attempting to prepare for a future and potentially catastrophic crisis that may already be in the making.

This is a monthly column focusing on ESG principles and how they are reshaping banking, markets and investment. We would like to hear your views on sustainable finance, how it is changing your organisation, your work and your incentives structure. Contact and, on Twitter, @Silvia_Pavoni


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