IEA report on Covid-19 impact

Beyond the immediate impact on health, the current Covid-19 crisis has major implications for global economies, energy use and CO2 emissions.

Analysis of daily data through to mid-April by the International Energy Agency (IEA) shows that countries in full lockdown during this period experienced an average 25% decline in energy demand per week and countries in partial lockdown an average 18% decline.

Daily data collected for 30 countries until 14 April, representing over two-thirds of global energy demand, show that demand depression depends on duration and stringency of lockdowns.

Global energy demand declined by 3.8% in the first quarter of 2020, with most of the impact felt in March as confinement measures were enforced in Europe, North America and elsewhere.

At the start of 2020, it was forecast that global energy investment would grow by 2%; instead, it has fallen by 20% – a fall in spending of $400billion.

Covid-19 impact: the IEA’s sector-by-sector energy breakdown (for the first quarter of 2020)

  • Global coal demand was hit the hardest, falling by almost 8% compared with the first quarter of 2019. Three reasons converged to explain this drop. China – a coal-based economy – was the country the hardest hit by Covid‑19 in the first quarter; cheap gas and continued growth in renewables elsewhere challenged coal, and mild weather also capped coal use.
  • Oil demand was also hit strongly, down nearly 5% in the first quarter, mostly by curtailment in mobility and aviation, which account for nearly 60% of global oil demand. By the end of March, global road transport activity was almost 50% below the 2019 average and aviation 60% below.
  • The impact of the pandemic on gas demand was more moderate, at around 2%, as gas-based economies were not strongly affected in the first quarter of 2020.
  • Renewables were the only source that posted growth in demand, driven by larger installed capacity and priority dispatch.
  • Electricity demand has been significantly reduced as a result of lockdown measures, with knock-on effects on the power mix. Electricity demand has been depressed by 20% or more during periods of full lockdown in several countries, as upticks for residential demand are far outweighed by reductions in commercial and industrial operations. For weeks, the shape of demand resembled that of a prolonged Sunday. Demand reductions have lifted the share of renewables in the electricity supply, as their output is largely unaffected by demand. Demand fell for all other sources of electricity, including coal, gas and nuclear power.

Coronavirus and Globalisation: What’s next for supply chain sustainability?

The coronavirus pandemic has left global economies at a standstill and knocked the confidence in global and connected trade.

The question has been asked: would businesses benefit from pivoting to more localised value chains, as France President Macron advocates, or do global supply chains enable a global shift towards a climate-resilient future?

While that is open to debate, the damage caused by the coronavirus is there for all to see, in hard figures. In what has been described as “an ugly” situation, the World Trade Organisation has forecast a decline in international trade and commerce of between 13% to 32% this year.

The World Trade Organisation has forecast a decline in international trade and commerce of between 13% to 32% this year

The virus is having a huge impact on transport and productivity with many supply chains being affected. Manufacturers are trying to shift the structure of their supply chains to make up for missed deliveries or inputting pivoting systems to make different products entirely.

PPE and hand sanitiser are two obvious examples where this is the case. Turning whiskey into wine was not an unfamiliar process before the outbreak, but how many distilleries would have imagined they’d end up making products that people would raise a glass to because they made them safe not happy?

The world has been turned upside down in so many respects.

Sustainability to suffer in the long run?

With this shift in supply chain structure comes concerns, that the short-term focus placed upon operational capacity and processes could unravel efforts to integrate suppliers into more sustainable practices.

As data from the Financial Times reveals, COVID-19 has unmasked an overt reliance on manufacturing suppliers located in China, with 300 of the world’s top 500 companies owning facilities in Wuhan, the city where the pandemic began.

It has become more and more apparent that, for many organisations, the globalisation of manufacturing has created a scenario where supply chains are unprepared for disruption.

This is due to either being very localised or spanning several different countries, it can even be to the point where end-user businesses won’t be aware of associated links to deforestation, human rights abuse and other environmental and ethical factors.