It’s no surprise to anyone that COVID-19, also known as coronavirus, has roiled the energy markets and the economy worldwide. With general economic activity and consumption going down, there have been many who pessimistically view the energy market as another victim of this global downturn and urge consumers, business leaders, and others to hoard cash and not take any steps until there is absolutely 100% certainty about the future. While this advice may hold true for some markets, it certainly does not hold true for energy markets. Below, you’ll see why now is an ideal time to help secure cost savings in the face of declining revenue for some and new opportunities for others.
What is COVID-19 and how has it impacted the global economy?
COVID-19 is a viral disease which is transmitted through person to person contact which causes severe symptoms in those it impacts, in particular the elderly and those with underlying health conditions. Most anyone can be impacted and be a carrier, even if there are only mild symptoms, a person who carries the disease may have a disproportionate impact on the health of others. Given the amount of commerce that is conducted in person from meetings to individuals patronizing restaurants, gyms, spas, and other establishments to the drop in travel, COVID-19 has hit almost every sector of the economy. This has had the ripple effect of causing layoffs, making businesses and consumers slash their spending, and resulting in a general downturn of economic activity no matter the kind of business to the point that governments around the world have had to bailout or provide certain monetary support to individual businesses or sectors of the economy.
What does COVID-19 and the economic downturn mean for the energy sector in particular?
During this time of economic uncertainty, demand has dropped for a wide variety of services. For better or worse, this includes the price of energy that both businesses and consumers will pay. Energy prices are now at their lowest level in more than 15 years due to the lack of demand from those who use energy on a daily and reliable basis. Additionally, the increase in production from key energy suppliers overseas has led to a large surplus related to normal demand and an even larger surplus of oil related to the current global demand. As energy is produced from a variety of sources, including oil, when there is a glut of supply in the market then overall energy prices go down.
What does this mean for those who are watching energy prices?
For those who are watching energy prices and the energy market, the low prices continue to be a boon for consumers who may be suffering operational losses elsewhere or may need to save money. Locking in a lower rate today is the first step to helping those who need to cut costs identify a center of cost savings. With the uncertain economic climate, any place that can help lower total expenditures should be under serious consideration.
Climate change and global warming have gone from a niche political issue 20 or more years ago to front and center topics, which impact a wide variety of industries and much of our public discourse. From the Green New Deal to other plans to combat the spread of climate change and other ecological impacts, a wide variety of solutions have been proposed to help reduce the economic impact of any plan that might constrain industry in addition to promoting Earth’s long-term well-being. For many, one of the more business or market-friendly solutions is a carbon pricing plan. Below, we’ll explore what it is, how it works, and what it means for industry going forward in uncertain economic times.
What is Carbon Pricing?
Carbon pricing is when carbon emissions themselves are calculated and a cost is associated with the emission. For example, carbon emissions are created when coal, natural gas, and oil are used to create energy. These energy sources, known as fossil fuels, create the carbon emissions which are primarily responsible, if not heavily contribute, to climate change. Proponents of carbon pricing argue that climate change, including rising sea levels and temperatures, is mainly caused by industries and activities which disproportionately produce these outputs, and, therefore these effects.
By working to assign a price to these carbon outputs, businesses will become more conscious of creating these outputs and will, in turn, find a way to create less of them. This burden shifting from those who have to deal with the impact of climate change and find a solution, namely government and taxpayers, to those who create the carbon outputs, energy producers and other industries, is just one goal of carbon pricing. The other goal is to help ensure that more climate-friendly technology will be introduced and used in the fight against climate change by businesses as they look to reduce their overall carbon usage.
How Do Carbon Pricing Plans Work?
The principal method for executing a carbon evaluating plan is through a plan which has accepted its reasonable part of information inclusion and is ordinarily known as cap-and-trade. This system would force a cap on how much carbon outflows that could be utilized in a year and utilize a market-based system so makers, energy makers, or others could acquire more. For instance, assuming that 100 carbon units are split between qualifying organizations in entire or to a limited extent, a few organizations can pay others or go to an open market to offer on carbon units which assist with guaranteeing they make their energy or creation standard. This boosts numerous organizations to 1) put resources into more effective methods for creating their item or energy and 2) put resources into all the more harmless to the ecosystem ways for these activities to occur. This likewise helps reward energy-productive organizations by permitting them to offer their portion of the carbon unit to recover the expense of introducing and putting resources into harmless to the ecosystem innovation and in the end benefitting from such a choice in the short or long haul.
The second method for executing a carbon evaluating plan is through a carbon tax. A significantly more direct method for executing a carbon valuing plan, the carbon tax would punish the individuals who use carbon more by taxing them more. The motivator for any carbon maker would in this manner be bringing down their tax trouble by putting resources into energy-proficient and harmless to the ecosystem innovation. Some have likewise proposed a rising carbon tax over the long haul so even the biggest firms are not resistant from the immediate expense of delivering carbon without finding a way ways to further develop their energy productivity. At last, there are a few half breed models that consider the two plans which have been proposed and perhaps serviceable.
What’s the significance here for energy makers and other carbon-weighty ventures?
Numerous people and business pioneers have been watching the advancement of the carbon valuing plan and the various proposition encompassing it with interest for how might affect both the economy and the climate. While there are numerous propositions being talked about at different degrees of government, Congress still can’t seem to pass a bill that would order an authoritative carbon evaluating plan plot. Until further notice, the public discussion will go on with regards to the most ideal way to carry out a carbon estimating plan, on the off chance that one is carried out by any stretch of the imagination.
It’s no secret that the climate is changing. In various parts of the world, we’re now seeing new types of weather; whether its higher temperatures, less frequent occurrences of winter weather, and dynamic shifts that foreshadow a worsening of global temperatures. For so many, questions abound on how this will impact our personal lives, businesses at large, and other crucial components of society and our economy. However, one of the lesser questioned parts of climate change and extreme weather is its impact on energy consumption.
Does climate change have an impact on extreme weather and energy consumption?
Many times, there is an open question as to whether climate change has an impact on creating extreme weather which, in turn, creates a higher demand for energy consumption. Changing needs have created changing consumer habits. Extreme weather events for some areas may not even be something as dramatic as a hurricane, earthquake, or tornado. They can be as predictable as a heat wave or cold snap meaning more energy will be required for a longer amount of time.
What are some examples of the impact extreme weather can have on energy consumption?
According to the Environmental Protection Agency (EPA), there are very real costs to extreme weather events such as a warmer climate. The agency cites data which indicates that a 6 to 9 degree rise in summer temperatures could increase the need for energy output and production by 10 – 20% by 2050. For some, this may not sound like much but it represents hundreds of billions of dollars in investment in infrastructure and output mechanisms. Additionally, some of our existing structures may be rendered less efficient due to the need for cooling water to efficiently run most of these power plants. With warmer water, plants will have to work harder to produce the same amount of power at less efficiency.
What other indirect impact could occur as a result of energy consumption?
One of the unheralded issues that could arise is the competition for natural resources that occurs when there are impacts as a result of relatively extreme weather. For example, power plants sometimes require large amounts of water to ensure they operate within safe, not even efficient, parameters. As water is a necessary and desired resource, power companies will be in competition with local governments and reservoirs to be the first to use the diminishing supply of water available to keep pace with traditional demand. Additionally, given the rising temperatures, power companies will not only have to keep pace with traditional demand, they will have to somehow compensate for increased demand to cope with the rising heat.
Are there any other vulnerabilities that could impact energy consumption or availability?
Given the amount and severity of hurricanes, it is entirely possible that oil-producing platforms which may have been previously considered safe will now be in the path of terrible storms. Hurricanes Katrina and Rita damaged hundreds of platforms which had negative impacts on oil distribution and availability, for example, hurting not just local energy concerns but impacting global supply as well. For many, it may well be time to take some stock on distribution channels and construction suitability for extreme weather events.
Will an extreme weather event impact energy consumption soon?
Although there is no way to know when or how an extreme weather event can or will impact energy consumption, it is likely that we will again see energy consumption impacted by extreme weather in the years to come.