Covid-19 won’t end shift to lower-carbon economy: Fitch

The Covid-19 outbreak has severely affected the short-term economic outlook, but it won’t derail the long-run transition toward a low-carbon world, says Fitch Ratings.

While the global pandemic may slow the pace of the shift to a less carbon-intensive economy, the rating agency said in a new report, it will not prove to be a serious setback.

“We do not expect any change in the trajectory of the transition,” the Fitch report stated.

In the short-term, Fitch allowed, “some green initiatives could face delays.”

For example, it noted that automakers have been lobbying to postpone tougher emissions standards.

“A delay would support short-term cash flow in the sector, which faced challenging trading conditions in 2019. However, any temporary delay will not affect long-term investment plans for low-carbon vehicle fleets and infrastructure,” Fitch added.

Electricity demand has dropped by an average of 15% in countries with lockdowns, Fitch also reported.

The report said that the share of total supply from renewable energy has jumped sharply in countries with a high share of wind and solar capacity. “This is due to stable weather patterns and declining overall demand,” it said.

While the plunge in oil prices affects the economics of renewables, “The impact of a sustained low oil price on renewable power may be less pronounced than the effect of an accelerated move away from feed-in tariffs in key markets.”

At the same time, the report also said that the drop in energy demand due to the outbreak “may further exacerbate vulnerabilities in the coal sector.”

Fitch added that it expects environmental factors to represent a larger part of post-pandemic recovery plans, particularly in Europe.

“Central banks are increasingly taking climate considerations into account when setting prudential requirements and managing their own assets,” it said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.