THE WORLD IS IN A NEW CHAPTER OF ITS LIFE; WHAT WE DO FROM HERE ON WILL DECIDE HOW THE FUTURE WILL GO, AS IT FIGHTS THIS NEW COVID-19 VIRUS - Keith Hunt
From The Economist - May 23 - 2020
Seize the moment
The Covid-19 crisis reveals how hard it will be to tackle climate change—and creates a unique chance to do so
Following the pandemic is like watching the climate crisis with your finger jammed on the fast-forward button. Neither the virus nor greenhouse gases care much for borders, making both scourges global. Both put the poor and vulnerable at greater risk than wealthy elites and demand government action on a scale hardly ever seen in peacetime. And with China's leadership focused only on its own advantage and America's as scornful of the World Health Organisation as it is of the Paris climate agreement, neither calamity is getting the co-ordinated international response it deserves.
The two crises do not just resemble each other. They interact. Shutting down swathes of the economy has led to huge cuts in greenhouse-gas emissions. In the first week of April, daily emissions worldwide were 17% below what they were last year. The International Energy Agency expects global industrial greenhouse-gas emissions to be about 8% lower in 2020 than they were in 2019, the largest annual drop since the second world war.
That drop reveals a crucial truth about the climate crisis. It is much too large to be solved by the abandonment of planes, trains and automobiles. Even if people endure huge changes in how they lead their lives, this sad experiment has shown, the world would still have more than 90% of the necessary decarbonisation left to do to get on track for the Paris agreement's most ambitious goal, of a climate only 1.5°C warmer than it was before the Industrial Revolution.
But as we explain this week (see Briefing) the pandemic both reveals the size of the challenge ahead and also creates a unique chance to enact government policies that steer the economy away from carbon at a lower financial, social and political cost than might otherwise have been the case. Rock-bottom energy prices make it easier to cut subsidies for fossil fuels and to introduce a tax on carbon. The revenues from that tax over the next decade can help repair battered government finances. The businesses at the heart of the fossil-fuel economy—oil and gas firms, steel producers, carmakers—are already going through the agony of shrinking their long-term capacity and employment. Getting economies in medically induced comas back on their feet is a circumstance tailor-made for investment in climate-friendly infrastructure that boosts growth and creates new jobs. Low interest rates make the bill smaller than ever.
Take carbon-pricing first. Long cherished by economists (and The Economist), such schemes use the power of the market to in-centivise consumers and firms to cut their emissions, thus ensuring that the shift from carbon happens in the most efficient way possible. The timing is particularly propitious because such prices have the most immediate effects when they tip the balance between two already available technologies. In the past it was possible to argue that, although prices might entrench an advantage for cleaner gas over dirtier coal, renewable technologies were too immature to benefit. But over the past decade the costs of wind and solar power have tumbled. A relatively small push from a carbon price could give renewables a decisive advantage—one which would become permanent as wider deployment made them cheaper still. There may never have been a time when carbon prices could achieve so much so quickly.
Carbon prices are not as popular with politicians as they are with economists, which is why too few of them exist. But even before Covid-19 there were hints their time was coming. Europe is planning an expansion of its carbon-pricing scheme, the largest in the world; China is instituting a brand new one. Joe Biden, who backed carbon prices when he was vice-president, will do so again in the coming election campaign—and at least some on the right will agree with that. The proceeds from a carbon tax could raise over 1% of GDP early on and would then taper away over several decades. This money could either be paid as a dividend to the public or, as is more likely now, help lower government debts, which are already forecast to reach an average of 122% of GDP in the rich world this year, and will rise further if green investments are debt-financed.
Carbon pricing is only part of the big-bang response now possible. By itself, it is unlikely to create a network of electric-vehicle charging-points, more nuclear power plants to underpin the cheap but intermittent electricity supplied by renewables, programmes to retrofit inefficient buildings and to develop technologies aimed at reducing emissions that cannot simply be electrified away, such as those from large aircraft and some farms. In these areas subsidies and direct government investment are needed to ensure that tomorrow's consumers and firms have the technologies which carbon prices will encourage.
Some governments have put their efforts into greening their covid-19 bail-outs. Air France has been told either to scrap domestic routes that compete with high-speed trains, powered by nuclear electricity, or to forfeit taxpayer assistance. But dirigisme disguised as a helping hand could have dangerous consequences: better to focus on insisting that governments must not skew their bail-outs towards fossil fuels.
In other countries the risk is of climate-damaging policies. America has been relaxing its environmental rules further during the pandemic. China—whose stimulus for heavy industry sent global emissions soaring after the global financial crisis—continues to build new coal plants (see China section).
Carpe covid
The Covid-19 pause is not inherently climate-friendly. Countries must make it so. Their aim should be to show by 2021, when they gather to take stock of progress made since the Paris agreement and commit themselves to raising their game, that the pandemic has been a catalyst for a breakthrough on the environment.
Covid-19 has demonstrated that the foundations of prosperity are precarious. Disasters long talked about, and long ignored, can come upon you with no warning, turning life inside out and shaking all that seemed stable. The harm from climate change will be slower than the pandemic but more massive and longer-lasting. If there is a moment for leaders to show bravery in heading off that disaster, this is it. They will never have a more attentive audience. ■
After lockdowns
The cure and the disease
Lockdowns are blunt instruments that can cause immense harm. It is time to be more discriminating
Since China locked down the city of Wuhan on January 23rd, over a third of the world's population has at one time, or another been shut away at home. It is hard to think of any policy ever having been imposed so widely with such little preparation or debate. But then closing down society was not a thought-out response, so much as a desperate measure for a desperate time. It has slowed the pandemic, but at a terrible price. As they seek to put lockdowns behind them, governments are not thinking hard enough about the costs and benefits of what comes next.
Although social distancing may have to be sustained for months or years, lockdowns can only ever be temporary. That is because it is becoming clear how costly they are, especially in poor countries. Part of the price is economic. Goldman Sachs this week predicted that India's GDP would fall in the second quarter at an annualized quarterly rate of 45%, and would rebound by 20% in the third quarter if lockdowns were lifted. Absa, a bank, reckons South Africa's economy could shrink at an annualized rate of 23.5% in the second quarter.
The poorest are hit very hard, because they have nothing to fall back on. In sub-Saharan Africa an individual in the lowest income quintile has only a 4% chance of receiving social assistance from the government in normal times. The combination of Covid-19 and lockdowns could drive up to 420m people into absolute poverty—defined as having to live on less than $1.90 a day. That would increase the total by two-thirds and set back progress against penury by a decade.
The consequences will be far-reaching. Hunger permanently stunts children. Lockdowns that block normal services cost lives. The World Health Organisation has warned that Covid-19 threatens vaccination programmes. If they stop in Africa, 140 children could die for each Covid death averted. A three-month lockdown, followed by a ten-month interruption of tuberculosis treatment, could cause 1.4m deaths in 2020-25. It is the same for malaria and aids. The longer lockdowns continue, the likelier it is that they will cost more lives than they save.
The picture in rich countries is less dramatic, but still worrying. America's unemployment rate increased from 3.5% in February to 14.7% in April. In Britain a third of new graduates had a job offer withdrawn or delayed. Bond markets in America are signalling a wave of defaults, especially in hospitality, raw materials, carmaking and utilities. The scarring in the labour market could last for years. Rich-world services are vulnerable, too. One study concluded that delaying cancer consultations in England by six months would offset 40% of the life-years gained from treating an equivalent number of Covid-19 patients. Vaccination rates have fallen, risking outbreaks of diseases like measles.
Lifting lockdowns risks a second wave. Iran reopened in April to save the economy, but last week designated the capital, Tehran, and eight provinces as "red zones", because the virus is spreading there again. Some American states, such as Georgia, that never suppressed the initial outbreak will soon find whether they lifted lockdowns too hastily. Some African countries are going ahead even though their case loads are rising.
To limit the risk requires an epidemiological approach that focuses on the places and people most likely to spread the disease. An example is care homes, which in Canada have seen 80% of all the country's deaths even though they house only 1% of the population. In Sweden refugees turn out to be high-risk, perhaps because several generations maybe packed into a household. So are security guards, who are often elderly and are exposed to many people in their work.
For this approach to succeed at scale, you need data from tests to provide a fine-grained picture of how the disease spreads. Testing let Germany rapidly spot that it had a problem in its slaughterhouses, where the virus persists longer than expected on cold surfaces. Likewise, South Korea identified a super-spreader in Seoul's gay bars.
Without testing, a country is blind. Armed with data, governments can continuously refine their policies. Some are universal. Masks were once thought ineffective, but in fact help stop the spread of the disease. Like handwashing, they are cheap and do not impose hidden costs. However, closing schools harms children and stops parents from working. In contrast with flu, it turns out, the benefits to health are not especially great. Schools should reopen, under conditions that lower the risk to teachers and vulnerable pupils. As a rule, the balance of costs and benefits favours narrow local policies over blanket national ones. In Britain agency workers carry the virus between care homes: they should work at only one. Gibraltar has a Golden Hour, when open spaces are set aside for the over-70s to exercise while everyone else stays at home. Stockholm is moving vulnerable people into their own flats. Liberty University, run by Jerry Falwell, a supporter of President Donald Trump, was condemned for keeping its campus open. But thanks to social distancing, it has logged no cases of Covid-19.
Poor countries will not be able to afford all these approaches. However, Vietnam and the Indian state of Kerala have shown that good primary-health systems can devise and disseminate sensible adaptations. Poor countries have more experience of infectious diseases than rich ones. Epidemiologists talk of "smart containment" that all can practise. Rwanda has put foot-operated handwashing stations in busy places such as bus depots. Slums need clean water for handwashing and to cut queues. Local leaders can spread health messages and designate areas where suspected cases can be isolated. Markets must remain open, but limit social contact. If people can earn some money, millions who would otherwise go hungry could feed themselves.
The emergency phase of the pandemic is drawing to a close. Too many governments failed to spot what was coming, but then did what they could. In the much longer second phase they will have no such excuse. They must identify groups at risk; devise and enact policies for them; explain these so that vulnerable people change their behaviour without becoming scapegoats; provide vital infrastructure; and be ready to adapt as new data come in. This will sort countries where the government works from those where it does not. The stakes could not be higher. ■
Big pharma
Back in from the cold
An unpopular business has a shot at redemption
For much of the past two decades big pharma has been a lost cause. Despised by the public, it became notorious for price-gouging, secretiveness and its neglect of global health problems. Big pharma also lost its lustre with investors, despite its bumper profits. They worried that a business model that relied too much on rent-seeking and too little on innovation was unsustainable, and that citizens would eventually revolt and demand more regulation—or even rip up the patent system that gives drugs firms a temporary monopoly over new medicines. As a result, in the five years before the Covid crisis the pharmaceutical sector lagged behind America's s&p 500 index.
The pandemic has reminded the world of the industry's strengths—its capacity to innovate and provide drugs on a vast scale. Many of the big firms, such as Johnson & Johnson and Sanofi, are working on Covid-19 vaccines and therapies. Scores of smaller companies are at work, too. On May 18th Moderna, an American biotech firm, said that its much-anticipated vaccine has shown positive early results (although some analysts questioned the validity of its tests). AstraZeneca, a big British firm that invests heavily in research and development (r&d), is working on a vaccine with scientists at Oxford University, helped by $1bn of new funding from America's government. Even before the virus, the industry had started to invest more heavily. In the most recent quarter America's 30 biggest firms boosted their r&d by a median of 6% year on year. Now medical innovation is back in fashion.
It looks like big pharma's moment to shine. However, the pandemic has also created new ethical and political dilemmas. Vaccine nationalism is spreading as governments panic that others may get their hands on crucial drugs first. France's Sanofi has found itself embroiled in a transatlantic row over who will be first to get any Covid-19 vaccine it develops. Paul Hudson, the firm's boss, stated last week that because the American government invested in his firm's risky scientific efforts, the United States would have early access. This led to a political explosion in France and a dressing-down from Emmanuel Macron, France's president.
And there is mounting pressure to suspend elements of the patent system. A gathering of the World Health Organisation this week passed a resolution urging drugs firms to pool patent rights. Several dozen current and former world leaders released an open letter demanding that any successful Covid-19 vaccine should be made available patent-free.
There is an alternative to beggar-thy-neighbour nationalism and taking a sledgehammer to the intellectual-property regime. First, a global agreement is needed to govern the manufacture and distribution of a potential vaccine. It could take several years to vaccinate the world's population; global co-operation will mean that the vaccine is deployed first where it brings most benefit.
Second, the patent system should be preserved because, correctly designed, it incentivises investment in new treatments. The big drugs firms have already said they will make any vaccine available at cost-plus prices. Arrangements exist for tiered pricing of medicines and free vaccinations for diseases afflicting the world's poor that should be extended to Covid-19 treatments. If a smaller drugs firm tried to price-gouge, governments in the West and elsewhere have the powers to pass compulsory licensing orders in an emergency.
When the pandemic passes, there must be no going back to the bad old days. Governments should seek to authorize new drug patents faster, as the best way to balance innovation and lower prices. And big pharma needs to keep investing. That will help shareholders and global public health, too. ■
THE WORLD HAS AN OPENING TO DO SOME DRASTIC CHANGES, NEEDED TO AVOID EVEN GREATER CALAMITY; WILL THE NATIONS RISE TO THE TASKE—— ONLY TIME WILL TELL!
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