COVID-19 has turned out to be a great leveler for global economies

Was 2020 the annus horribilis as most would remember it to be? Yes, it was a year in which global economies were ravaged by the ongoing COVID-19 pandemic and life as we pretty much knew came to a standstill.

But it was also a watershed year in the international context on climate and environment as it has changed unexpectedly for the better. The European Union and China, followed by other large economies, made unilateral and unconditional commitments (2030-60) to climate neutrality. US President Joe Biden advocates a “clean energy revolution”, and has said the US will rejoin the Paris Agreement.

Major transnational agreements like the Regional Comprehensive Economic Partnership, Brexit and the Comprehensive Agreement on Investment between China and the EU were also inked. And most of these agreements have the potential to make a significant difference in our daily lives. Among all these it is the CAI between China and the EU that has the potential to shape a new future.

Arvea Marieni, a Hamburgbased climate change expert, tells me that the CAI can be a convergence tool and ensure the necessary level playing field for economies. “Principles (and measures) of environmental and climate sustainability are being incorporated into the European Union’s economic agreements. What we are now seeing is a path anticipated in words, but never beaten until now,” she says from Germany.

The progress achieved in the last few months can offer a blueprint for reform of the international trade and energy systems, largely through common environmental and industry standards and strengthening the rule-based multilateralism, she says.

Corrado Clini, former environment minister of Italy and a veteran climate change negotiator, believes that in just a few months, results have been achieved that were unthinkable for over three decades. With several countries in the process of updating their greenhouse gas reduction targets, like when they will attain peak emissions and when they will reach net zero carbon emissions, the Paris climate agreement goals seem even closer, he says.

But the road is still very long, according to experts. To win the fight over climate change, emissions must fall by 7.6 percent every year. There was some progress last year when the pandemic caused emission reductions of about 7 percent, they say.

Arvea believes that the alignment on climate and environment allows both Brussels and Beijing to exploit the competitive advantages acquired with shrewd policies on renewables and green technology.

Ursula von der Leyen, the president of the EU Commission, says, the EU is integrating climate objectives into all sectoral policies and international trade agreements. The EU wants to prove that a zero-emissions economy is not only possible but is also a better and fairer model. A transformation of this size, which is a revolution, offers an opportunity to act to avoid perpetuating inequality, according to senior Commission officials.

But it is always economic necessity that drives such a change. The next industrial revolution is already underway. Technology is already reshaping global production chains. From this perspective, China’s new “dual circulation” strategy is not just a reaction to growing geopolitical tensions, but a consequence of profound changes in production systems, the experts say.

In April 2019, when Chinese and international partners jointly launched the BRI International Green Development Coalition as a policy dialog and communications platform, as well as a green technology exchange and transfer engine for advancing global consensus on green development and the eco-transition, they certainly were forward-looking. With its guidance project, aimed at the formulation of guidelines on the classifications of BRI projects, the BRIGC was anticipating both the EU and the Chinese taxonomies (taxonomy regulations) that will have a tremendous impact on climate finance to promote clean projects that take into account environmental, climate and biodiversity impacts.

Zhang Jianyu, vice-president of EDF and international coordinator of BRIGC, told me that it is important to recognize and address the eco-environmental risks in overseas investments. “Enhancing the whole life cycle of environmental management and climate risk mitigation in BRI investments will greatly contribute to the attainment of nationally-determined contributions and sustainable development as a whole,” he says.

Zhang says China has already launched the world’s largest emissions trading system and there is huge potential that both China and the EU can jointly explore through enhanced bilateral cooperation on the ETS and through the work in the BRI countries. In this respect, EU policies also seem to be broadly consistent with Chinese policies on energy transition and the plan to build up an “ecological civilization”.

Every cycle of innovation rises from the ashes of an old system. Those who accept the challenges of industrial disruption, the innovators and visionaries, will dictate the rules of the new geo-economy, says Arvea.