During the Coronavirus pandemic, demand for oil plunged leaving the fossil fuel industry in survival mode. The oil price plunge reduced the lucrative returns expected from exploration projects. US and Canadian oil production, which is relatively high-cost compared to Saudi Arabian, could have a hard time recovering. There was also delay in a number of big fossil fuel projects, from LNG terminals in Australia to coal plants in Indonesia. If consumer demand is reduced due to the economic crisis, then fossil-fuel use might not recover. But the fossil fuel industry has also had lots of support from governments around the world.
Before the pandemic, the fossil fuel industry already got government subsidies of $300bn each year. Additionally, the US Coronavirus relief package offered low-interest loans that were available to fossil fuel companies, without requiring any climate action. The Canadian government said it would give loans to its oil companies and gave financial backing to proceed with the $8 billion Keystone XL pipeline, despite a decade long opposition prior to the pandemic. Other pipelines also continued construction despite the lock down. In China, once the virus reduced, there was a surge in issue of permits for new coal-fired power plants - more permits were issued than in the whole of 2019. In South Korea, the major coal plant builder Doosan Heavy Industries got a $825m government bailout although it was already in financial trouble before the pandemic. The Australian government deferred taxes for oil and gas explorers.
Three US states passed laws criminalising fossil fuel protests – South Dakota, Kentucky and West Virginia.
Coronavirus also led to increased production of surgical masks, protective gear and medicines, most of which have roots in fossil fuels.
The Coronavirus pandemic posed a serious threat to global investments in clean energy. The International Energy Agency (IEA) warned that energy companies could struggle to finance projects involving solar, wind and other renewable technologies. Forecasts for global solar demand were cut for 2020 and new solar projects expected to go down by 8%. Solar manufacturers across the world cited production and project delay, and analysts warned of higher costs for green manufacturers and a hit to global operations. Brazil indefinitely postponed green power auctions scheduled for 2020 and in South Africa, the state-owned power giant Eskom said it will cut the wind power it had committed to buy.
Analysts think that the continuing drop in oil prices could encourage people to use more oil and gas, hurt demand for low- or no-carbon products like electric vehicles and discourage investment in energy efficiency and renewable energy.
The only positive for green energy is that the cost of renewables is now at par or below that of fossil fuels. Some experts believe that plummeting demand caused by the economic crisis could lead to a massive spike in oil prices next year when the economy comes out of hibernation, leaving a gap for renewables such as wind and solar to fill. Some governments are continuing investment in green energy. In France, the government approved 288 wind and solar energy projects, relaxed deadlines and cancelled a planned withdrawal of rooftop solar subsidies.
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