In an interview with Forbes last week, Charles Donovan, executive director of the Center for Climate Finance and Investment at Imperial College Business School in London, laid out the reasons why he thinks building a global economy based on fossil fuels makes the world more vulnerable to market disruptions like the one caused by the coronavirus.
“I think we’re entering a whole new phase of volatility,” Donovan said. “These are the unfortunate repercussions of a global market that’s exposed to the volatility of the oil markets and suffers when unforeseeable events like coronavirus arise at the worst time. We are now seeing the downsides of the choices we’ve made about the kind of energy economy that we have.” He suggests that rather than shoveling cubic miles of dollars at energy companies, we should prioritize developing economies that are not coupled to oil and gas.
Here’s another factor in favor of renewables in Donovan’s view. They are far less likely to be monopolized by cartels (like OPEC) which means they are more difficult to manipulate (or fight wars over). Donovan says monetary policy has an historical bias toward fossil fuels, as happened last week when central banks pumped trillions of dollars into the markets after the OPEC nations failed to agree on new pumping limits, sending oil prices into free fall. That move ultimately failed due to another major shock to financial markets — the coronavirus.
“We’re coming to a very important point now where policymakers can ensure that this round of easing is not hugely biased towards keeping oil producers on a lifeline,” Donovan said. Bailouts could, instead, be structured around a strategy of decarbonization and preparing countries for low-carbon transitions. “To my mind those interventions need to be targeted towards structural investments and things like job retraining for people in industries that can no longer keep going,” Donovan said.
Economies built around more durable, sustainable energy rather than those built on finite, volatile hydrocarbons will be better able to withstand unexpected disruptions such as the one created by the coronavirus, he argues.
War, pestilence, polluted ground water, festering skies, oil spills, railway fires, pipeline leaks — all of them can be eliminated by building economies on renewables. So why aren’t we doing so? Because the fossil fuel companies have bought and paid for national governments for 100 years. So there’s always the possibility that abundant renewable energy would lower the incidence of corruption at the local, state, and federal level thanks to fewer fossil fuel lobbyists throwing campaign cash around. Could that really happen? It might be interesting to find out.