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The energy sector after Covid-19

May 20, 2021

How green transitioning can limit the CO2 emission rebound

Ever since the development of renewable energy sources, the energy sector has been transitioning away from oil and fossil fuels towards resources with low or zero environmental impact.

Falling oil prices, which culminated in April 2020, have accelerated this transition: most oil  producing companies and countries have started to look beyond oil, despite prices slowly stabilising once again in the first months of 2021.

A real transition “beyond oil” can happen only if adopted also by those oil producing countries and economies with the highest polluting emissions. China, the world’s largest oil importer, is leading the way in the renewable sector with no less than seven companies active in solar energy, placing the country among the world’s top ten. China is also among the leading global producers of wind power.

In this global context, Europe is forging ahead in its green trajectory towards reducing emissions through sustainable solutions. In recent years, the EU has promoted a fairly advanced legislation on environmental sustainability, encouraging reduction in energy consumption and increase in energy efficiency.

Today, the focus is on the Green New Deal, which positions Europe at the forefront of the global energy transition, with the goal of zero CO2 emissions by 2050.

In order to meet this objective, the EU has set interim targets for 2030, including a cut of at least 55% in greenhouse gas emissions compared to 1990 levels, at least 32% of energy supply produced from renewable energy, and at least a 32.5% improvement in energy efficiency.

The Covid-19 crisis has also shown that investors still strongly favour sustainable investments. The European Bank is moving in this direction, too. In addition to the decision to stop financing fossil fuels, it will support investments of around EUR 1 trillion up to 2030 in favour of companies that implement climate initiatives by using renewable energy sources.

Global emissions plunged by almost 2 billion tonnes in 2020, the largest absolute decline in history.

This positive trend, however, doesn’t seem to be able to stand the test of time, if it’s not supported by major policy changes and a shifting of gears in the private sector. 2021 shows that, as travel and economic activities pick up around the world, oil consumption and its emissions are rising again.

Nevertheless, there are still reasons for optimism. The 2020 drop underscores that getting to the set targets of zero emissions is a difficult, but not impossible challenge to meet. Countries across Europe and around the world must continue in their efforts to turn their net zero pledges into concrete energy policies and actions.

In this context, Small and Medium-sized Enterprises (SMEs) are important stakeholders given their contribution to global economic activity, social well-being, and environmental footprint. As eco-innovators they can play a key role in the successful deployment of renewable energy and in stepping up energy efficiency in the EU.