Addressing climate change in a post-pandemic world

McKinsey 07 Apr 2020 12:00

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A ferocious pandemic is sweeping the globe, threatening lives and livelihoods at an alarming rate. As infection and death rates continue to rise, resident movement is restricted, economic activity is curtailed, governments resort to extraordinary measures, and individuals and corporations scramble to adjust. In the blink of an eye, the coronavirus has upended the world’s operating assumptions. Now, all attention is focused on countering this new and extreme threat, and on blunting the force of the major recession that is likely to follow.

Amid this dislocation, it is easy to forget that just a few short months ago, the debate about climate change, the socioeconomic impacts it gives rise to, and the collective response it calls for were gaining momentum. Sustainability, indeed, was rising on the agenda of many public- and private-sector leaders—before the unsustainable, suddenly, became impossible to avoid.

Given the scope and magnitude of this sudden crisis, and the long shadow it will cast, can the world afford to pay attention to climate change and the broader sustainability agenda at this time? Our firm belief is that we simply cannot afford to do otherwise. Not only does climate action remain critical over the next decade, but investments in climate-resilient infrastructure and the transition to a lower-carbon future can drive significant near-term job creation while increasing economic and environmental resiliency. And with near-zero interest rates for the foreseeable future, there is no better time than the present for such investments.

What follows is our attempt at providing some initial answers to these questions, in the hope that they will inspire ideas and actions that help connect our immediate crisis response with priorities for recovery.

Understanding the similarities, the differences, and the broader relationships between pandemics and climate risk is a critical first step if we are to derive practical implications that inform our actions.

Finally, pandemics are a case of contagion risk, while climate hazards present a case of accumulation risk. Contagion can produce perfectly correlated events on a global scale (even as we now witness), which can tax the entire system at once; accumulation gives rise to an increased likelihood of severe, contemporaneous but not directly correlated events that can reinforce one another. This has clear implications for the mitigation actions they each call for.

While we are at the initial stages of a fast-unfolding crisis, we can already start seeing how the pandemic may influence the pace and nature of climate action, and how climate action could accelerate the recovery by creating jobs, driving capital formation, and increasing economic resiliency.

Moreover, lower interest rates may accelerate the deployment of new sustainable infrastructure, as well as of adaptation and resilience infrastructure—investments that would support near-term job creation. And lastly, the need for global cooperation may become more visible and be embraced more universally.

In this context, we believe all actors—individuals, companies, governments, and civil society—will have an important role.

When it comes to resilience, a major priority is building the capability to truly understand, qualitatively and quantitatively, corporate vulnerabilities against a much broader set of scenarios, and particularly physical events. In that context, it will also be important to model and prepare for situations where multiple hazards would combine: it is indeed not difficult to imagine a pandemic resurgence coinciding with floods or fires in a given region, with significant implications for disaster response and recovery. The same holds true for public entities, where resilience thinking will have to take greater account of the combination and correlation of events.

By all accounts, the steps we take in the decade ahead will be crucial in determining whether we avoid runaway climate change. An average global temperature rise above 1.5 or 2°C would create risks that the global economy is not prepared to weather. At an emission rate of 40 to 50 gigatons of CO2 per year, the global economy has ten to 25 years of carbon capacity left. Moving toward a lower-carbon economy presents a daunting challenge, and, if we choose to ignore the issue for a year or two, the math becomes even more daunting. In short, while all hands must be on deck to defeat the coronavirus and to restart the economy, to save lives and livelihoods, it is also critical that we begin now to integrate the thinking and planning required to build a much greater economic and environmental resiliency as part of the recovery ahead.

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