COVID-19 in CEE - Prospects for a Green and Resilient COVID-19 Recovery

• A Wake-up Call for That Other Looming Crisis?

They say never let a good crisis go to waste though this one already has in one sense. Aside from a residential pile-up, the statistically and visibly positive climate and environmental benefits associated with a global economic downturn will only last as long as the recession.

In this particular instance, the convenience of a home office and virtual meetings and maybe even the serenity of empty streets will have a more lasting impact that bodes well for urban congestion and air quality, but emissions from transport and other sectors hit by the crisis will come roaring back.

The year after the 2008-2009 recession, emissions from fossil fuel combustion and cement production reached their highest total annual growth ever recorded. Let’s hope something of that magnitude will not be repeated, but we should welcome a healthy emissions ‘rebound’ in 2021 to signal that economic activity is humming again. This should also drive home the point that sacrificing GDP and wealth is not sustainable for society. Climate and environmental objectives will not be successful at the expense of economic activity but by reshaping it - the energy transition is a disruptive growth model pushing out old, inefficient and carbon-intensive activities in favour of smart, clean technologies. Cities, countries and continents investing in low carbon industrial and manufacturing processes, infrastructure and energy sources are creating new business opportunities. This is a two-way street meaning consumer culture and behavioural norms will need to evolve as well.

Not letting this crisis go to waste is about tough decisions in the coming weeks and months that will lock in technologies and corresponding emissions in the long run. No one asked for it, but this is a historic opportunity for governments to expand clean energy project pipelines and agree to more ambitious nationally determined contributions (NDCs) aligned with the Paris agreement in the process.

It is also an opportunity for struggling carbon-intensive industries that employ millions to lobby for postponement of stricter more expensive environmental regulations and shrug off bailout conditionality. After all, this wasn’t their fault. But consider the tradeoffs for propping up an industry already in structural decline or deciding between a new coal blast furnace or replacing it with natural gas-fueled units that can eventually switch to green hydrogen. But consider the tradeoffs for propping up an industry already in structural decline or deciding to purchase a coal blast furnace instead of natural gas-fueled units that can eventually switch to green hydrogen. Investing in jobs and assets that will ultimately be unproductive, lost and stranded even thirty years from now might make for an easy political win at the moment but can be devastating to future competitiveness.

One thing that is certain is that the world has never been better prepared to mainstream climate into an economic recovery. China was ahead of the curve in 2009, prioritizing green stimulus which helped it become the global heavyweight in solar module manufacturing it is today. Clean technologies that were expensive in 2010 are now competitive and scalable. Europe in particular has the financial (EIB) and legislative (Green Deal) tools in place to pursue a sustainable and resilient recovery at home and, perhaps more importantly, lead this effort abroad. Will we take a giant leap forward or a comfortable step back?

The newly renamed and repurposed Energy Security & Sustainability (ESS) programme officially launches next week and will provide advocacy for the post-COVID-19 leap forward.

• Putting the European Green Deal at the Heart of the Recovery

Our 7 April Brussels webinar featured a panel discussion affirming the commitment and readiness of the EU to put the European Green Deal at the heart of the post-COVID-19 recovery.

At the same time, EU institutions are re-evaluating the European Green Deal timetable in consideration of COVID-19, which may cause minor disruptions to the legislative process but will not change the ultimate outcomes. See the two-page outcome report here.

• Visegrad Countries Taking Measured Approach

The public denouncement of the European Green Deal and ETS has been loud from certain government offices in Czechia and Poland but the former has remained steadfast in its support at the European Council level and elements of the Polish government recognize this as an opportunity to secure more EU funding for its coal regions in transition.

Slovakia became one of 17 and the first V4 member state to sign an open letter pledging support for the central role of the European Green Deal in the economic response to COVID-19 behind its new Minister of Environment Jan Budaj. Although Hungary has not publicly played its hand, it has been dovish on the European Green Deal to this point and recognizes opportunities linked to recovery.

• Just Transition Mechanism and CEE Energy Transition

Cohesion countries still expect more funding to support their energy transitions and the main area of contention is how the Just Transition Mechanism will achieve the European Commission’s EUR 100 billion levels of investment over the next ten years.

In an op-ed for the Central European Energy Partners (CEEP) Q1 Review, GLOBSEC Climate and Energy Fellow Nolan Theisen points out that there will never be enough ‘fresh’ grant money, and ultimately it is incumbent on member states to develop better financial tools and project pipelines to crowd-in private investment for clean technologies to develop sustainable industries and create new jobs. Now there is some uncertainty over such EU funds envisaged to support long-term social and R&I energy transition objectives that could be redirected to ‘ready-to-go' projects that can be funded and start immediately.

• Cee Energy Sector Response to COVID-19

During a virtual call on 3 April, the Lighthouse Energy Transition Task Force discussed the impact of COVID-19, how they were coping with it, and key challenges ahead. See the policy note here.

• European Stability Mechanism Green Benchmarking

Vazil Hudák, Vice-Chair, GLOBSEC, and Miroslav Kollár, Board Member, 4 Gimel Investments co-authored an op-ed Policies Beyond the COVID-19 recommending coordinated actions of governments and corporations that will be necessary to transform the economic challenge of COVID-19 into an opportunity.

One key proposal is to allocate unused European Stability Mechanism capacity to a member state for post-COVID-19 recovery. These credit lines would be based on country-specific recovery plans approved by the Commission under clearly formulated conditions including benchmarks to achieve a ‘smart and clean’ recovery.

• Slovakia Low Carbon Economy Pathways (Slovakia LCEP) Programme

The newly formed Slovakia LCEP steering committee convened for a virtual roundtable earlier in the month sharing sober assessments of the long road to recovery facing CEE economies that serve as the manufacturing supply chain of Europe, especially for the automotive industry. Slovakia relies on intra-EU exports more than any other EU member state.

On a more upbeat note, they also discussed ways in which green policies and funds can both provide an immediate boost to the Slovak economy and contribute to long term emissions reductions, starting with building renovations. See the policy note one-pager here.
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