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Five years from the emergence of the disease, the world — and the climate — is still grappling with its effects.
Five years ago this month, the novel coronavirus that would eventually become known as Covid-19 began to spread in Wuhan, China, kicking off a sequence of events that quite literally changed the world as we know it, the global climate not excepted.
The most dramatic effect of Covid on climate change wasn’t the 8% drop in annual greenhouse gas emissions caused by lockdowns and border closures in 2020, however. It wasn’t the crash in oil prices, which briefly went negative in April 2020. It wasn’t the delay of COP26 and of the United Nations Intergovernmental Panel on Climate Change’s Sixth Assessment Report. And it wasn’t, sadly, a legacy of green stimulus measures (some good efforts notwithstanding).
Rather, it was in the way the world’s governments (especially the largest and most powerful) responded to the virus, which undermined the very idea of multilateralism, climate action included. This took place along three main vectors: inertia on global financial rules, even as long-acknowledged failings turned catastrophic; a renaissance in industrial policy that may prove transformative for domestic fiscal policy; and, at the intersection of both, deterioration of what we might call geopolitics or “global solidarity.”
Evidence of this phenomenon can be found in nearly every aspect of the global order. The World Bank in October pointed to Covid as chief among a “polycrisis” of “multiple and interconnected crises occurring simultaneously, where their interactions amplify the overall impact.” Development gains have almost slowed to a halt. Extreme poverty has increased overall in low-income countries since 2014, after decades of improvement, according to the World Bank’s analysis.
None of this, however, was an inevitable effect of Covid. Poor countries got poorer, for the most part, because of norms and hard rules in global finance that they have little control over — what a group of researchers last year termed “financial subordination.”
To understand why, a brief history: Developing countries during the 2010s were seeking new avenues of finance as traditional sources like multilateral development bank loans, official development assistance, and commercial bank loans waned. Many turned to the U.S. dollar sovereign bond markets, and also to China; a few countries also turned to commodity traders like Glencore and Trafigura, taking on opaque debts to be repaid with their own oil and other commodities.
When the pandemic response shut down many kinds of economic activity in 2020, what World Bank researchers called a “fourth wave” of debt followed. After a continuous series of debt surges from 1970 to 1989, 1990 to 2001, and 2002 to 2009, global debt markets had been relatively stable for the preceding decade. What was different about this fourth wave was that it was largely in developing countries.
With Covid, the fourth wave turned into a tsunami. Countries everywhere were paralysed by the pandemic, but the poorest ones lost critical revenue from tourism, remittances, and some exports. On top of that, they suffered the same lockdowns and illness that depressed local economic activity and drained government budgets in many countries. Unlike rich countries, developing countries had limited ability to dip into reserves or raise money from the bond markets to keep their citizens safe and tide over those who lost work.
Wealthy countries and lenders did little to ameliorate this stress. A “Debt Servicing Suspension Initiative” facilitated by the G20 provided some relief for 46 countries; China participated, too, granting deferrals to some of its debtor countries. But private bondholders (who were earning returns as high as 9%) and multilateral banks did not. The debts still had to be paid, and by 2023, aggregate net capital flows were negativefor developing countries — that is, more money flowed from poorer countries to richer ones than the other way around.
Numerous governments defaulted on their debts in the wake of Covid, including Ghana, Sri Lanka, Zambia, Ethiopia, and Suriname. But perhaps just as bad, many, many more countries continued to pay their debts by slashing their health and social welfare budgets just as they were needed most. Low- and middle-income countries spent more on debt servicing in 2022 than they spent on health in 2020, during the height of the pandemic.
Tensions between the U.S. and China, meanwhile, became even more overt around Covid, helped in part by accusations and recriminations over the source of the disease. The two great powers were themselves deeply changed. China emerged from its Covid Zero measures with public discontent at a nearly unprecedented pitch and its engines of economic growth — domestic infrastructure and residential property — faltering as vast local government debts became unmanageable. The country’s central government renewed its focus on an export-led growth model, but this time instead of cheap, low-tech consumer goods, it was semiconductors, solar panels, and electric vehicles.
It quickly became clear that the Biden administration would not be much less hawkish towards China than Trump’s was. It largely focused inwards, on tackling the disenfranchisement of formerly solid Democratic working class constituencies that Trump had exploited and Covid deepened. These were largely seen as an outcome of untrammelled free trade — especially with China. But Covid lockdowns and the rush to regain normalcy in the re-opening choked complex supply chains and logistics networks, driving up prices around the world and helping to spark a global inflation crisis that has yet to meaningfully abate in many parts of the world.
When Russia invaded Ukraine, energy prices shot up, particularly in those countries reliant on imported oil and natural gas. This shook the global fossil energy economy. Exports of liquified natural gas by the United States to Europe skyrocketed, as European countries desperately sought alternatives to Russian piped gas. Those same desperate Europeans also bought LNG shipments that had been bound for countries like Bangladesh and Pakistan, outbidding the poorer countries which then endured blackouts and further hits to their financial reserves as they struggled to match the new EU price.
Global energy price rises compounded the Covid supply-chain pressures and monetary policymakers decided hiking interest rates was unavoidable. While Russian troops tried to capture Kyiv in March of 2022, the U.S. Federal Reserve — perhaps the most powerful U.S. entity for the rest of the world — began hiking interest rates, taking them from just a quarter of a percent before the invasion to more than 5% by mid-2023. This strengthened the U.S. dollar, heaping more pressure on developing countries trying to pay dollar-denominated debts. Meanwhile, in rich and poor countries alike, the jump in living costs has helped drive backlashes against incumbents, and a surge in far-right populism.
Perhaps years ago, if we’d known that we’d see a spike in temperatures, droughts, and storms alongside a flood of cheap solar panels and EVs, technological breakthroughs in batteries, and a renewed interest in industrial policy, it might have seemed that more urgent climate action was assured. Instead, divisions have worsened. The agreement text from this year’s United Nations climate conference is actually slightly watered down from the last year’s statement on fossil fuel phaseout. A special conference on biodiversity Cali, Colombia, finished last month only when delegates had to catch flights home, and a desertification conference hosted by Saudi Arabia finished this month with no group statement.
Rachel Kyte, the UK special envoy for climate change, told an event hosted by the Overseas Development Institute think tank that even as it approached its 10-year anniversary, the 2015 Paris Agreement was more fragile than it had ever been. Countries like the UK, she said, had been inflicting “paper cuts” on developing countries for so long that the ill will was becoming impossible to wave away.
“[W]e’ve also cherry-picked which international laws we want to stand behind and then, which conflicts we believe the international law is important for and not,” she added. “And you sit in the climate negotiations and they know that you know that they know that you know.”
And yet a hopeful note sounding out of all of this has been the central role of clean energy in many countries’ responses to the increasingly fractious global landscape. Responses to Covid, as chaotic as they were, demonstrated that governments can take decisive action. Although the vast majority of Covid stimulus was climate-neutral at best; about a trillion dollars’ worth of investments really were green. Efforts to boost cycling gained ground in some cities, including in Paris, where bike trips now outnumber car trips in and around the city center.
Renewed interest in energy security sparked by the Ukraine invasion has been largely supportive of clean energy. Europe’s combined wind and solar generation rose 10% in the first year after the invasion as the bloc made its emissions reduction target more ambitious. Green industrial policy introduced by the Biden administration has encouraged other countries to see decarbonization as a competitive opportunity rather than an obligation. And China’s doubling down on its manufacturing of the “new three” — batteries, EVs, and solar panels — has created an oversupply that spurred rapid uptake of clean energy in many countries.
Fractures, however, are rife. Too many countries have steep tariffs on clean energy imports preventing them from taking advantage of cheap Chinese components, adding to other barriers to clean energy generation, such as the restrictive planning rules in Japan, where renewable energy generation lags; even wind power, where the country has ample potential, was virtually flat for the decade to 2022. Tariffs on imports to the U.S., while helping to build a domestic industry, also slow the rate of deployment. Globalized supply chains tend to be cheaper; a study in Nature estimated that they saved the U.S. up to $31 billion in the 12 years leading up to 2020, while China saved up to $45 billion, compared to a scenario in which domestic suppliers were prioritized. Even with its rapid expansion in clean tech manufacturing thanks to the Inflation Reduction Act, it will take years for the U.S. to catch up to China’s capabilities, while in the meantime, tariffs will slow down installations.
For those in wealthier and more powerful countries, there’s at least a chance of political shift. For countries under financial subordination, there are hard limits to what can be achieved.
Geopolitical alignment is an increasingly sensitive question for countries trying to avoid the pitfalls of appearing to be too close to either China or the U.S. Auto manufacturing has become the site of intense competition and tension, with the U.S. and EU putting punitive tariffs on Chinese EV imports to compensate for “state subsidies.” The introduction of the European carbon border adjustment mechanism this year, which penalizes high-carbon imports so they don’t undermine the continent’s carbon pricing regime, has introduced a new source of tension around trade, particularly for African countries that rely on exports to Europe and are nowhere near having their own carbon accounting scheme that is a prerequisite to avoiding the surcharges.
We may only know in retrospect, but the supply bottlenecks and inflationary surges associated with the Covid lockdowns and reopenings may have been a kind of masked transition phase into a new, more permanently supply-constrained world. Researchers at Potsdam Institute and the European Central Bank published new research in March showing that climate change impacts will raise general inflation by more than a percentage point by 2035.
The damage could be seen in the recent COP29 in Azerbaijan. Trust was close to an all-time low over negotiations for a new target for finance flows from wealthy to poor countries. After it ended with a controversially low $300 billion target, Fiona Harvey of the Guardian called it the second worst COP of the 18 she’s attended, surpassed only by the disastrous 2009 COP15 in Copenhagen, which ended with no agreement at all. It can also be seen in the rebound in emissions since 2021.
While some hopeful shifts have emerged from the Covid era, the increasingly febrile global atmosphere risks endangering our already slim chances of protecting the habitable atmosphere. As climate impacts worsen, pushing back on that axiom will be more difficult, but more urgent. Combating climate change is such a monumental undertaking that collaboration – in technology, manufacturing, knowledge, and diplomacy – will be vital.
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The Loan Programs Office is good for more than just nuclear funding.
That China has a whip hand over the rare earths mining and refining industry is one of the few things Washington can agree on.
That’s why Alex Jacquez, who worked on industrial policy for Joe Biden’s National Economic Council, found it “astounding”when he read in the Washington Post this week that the White House was trying to figure out on the fly what to do about China restricting exports of rare earth metals in response to President Trump’s massive tariffs on the country’s imports.
Rare earth metals have a wide variety of applications, including for magnets in medical technology, defense, and energy productssuch as wind turbines and electric motors.
Jacquez told me there has been “years of work, including by the first Trump administration, that has pointed to this exact case as the worst-case scenario that could happen in an escalation with China.” It stands to reason, then, that experienced policymakers in the Trump administration might have been mindful of forestalling this when developing their tariff plan. But apparently not.
“The lines of attack here are numerous,” Jacquez said. “The fact that the National Economic Council and others are apparently just thinking about this for the first time is pretty shocking.”
And that’s not the only thing the Trump administration is doing that could hamper American access to rare earths and critical minerals.
Though China still effectively controls the global pipeline for most critical minerals (a broader category that includes rare earths as well as more commonly known metals and minerals such as lithium and cobalt), the U.S. has been at work for at least the past five years developing its own domestic supply chain. Much of that work has fallen to the Department of Energy, whose Loan Programs Office has funded mining and processing facilities, and whose Office of Manufacturing and Energy Supply Chains hasfunded and overseen demonstration projects for rare earths and critical minerals mining and refining.
The LPO is in line for dramatic cuts, as Heatmap has reported. So, too, are other departments working on rare earths, including the Office of Manufacturing and Energy Supply Chains. In its zeal to slash the federal government, the Trump administration may have to start from scratch in its efforts to build up a rare earths supply chain.
The Department of Energy did not reply to a request for comment.
This vulnerability to China has been well known in Washington for years, including by the first Trump administration.
“Our dependence on one country, the People's Republic of China (China), for multiple critical minerals is particularly concerning,” then-President Trump said in a 2020 executive order declaring a “national emergency” to deal with “our Nation's undue reliance on critical minerals.” At around the same time, the Loan Programs Office issued guidance “stating a preference for projects related to critical mineral” for applicants for the office’s funding, noting that “80 percent of its rare earth elements directly from China.” Using the Defense Production Act, the Trump administration also issued a grant to the company operating America's sole rare earth mine, MP Materials, to help fund a processing facility at the site of its California mine.
The Biden administration’s work on rare earths and critical minerals was almost entirely consistent with its predecessor’s, just at a greater scale and more focused on energy. About a month after taking office, President Bidenissued an executive order calling for, among other things, a Defense Department report “identifying risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements.”
Then as part of the Inflation Reduction Act in 2022, the Biden administration increased funding for LPO, which supported a number of critical minerals projects. It also funneled more money into MP Materials — including a $35 million contract from the Department of Defense in 2022 for the California project. In 2024, it awarded the company a competitive tax credit worth $58.5 million to help finance construction of its neodymium-iron-boron magnet factory in Texas. That facilitybegan commercial operation earlier this year.
The finished magnets will be bought by General Motors for its electric vehicles. But even operating at full capacity, it won’t be able to do much to replace China’s production. The MP Metals facility is projected to produce 1,000 tons of the magnets per year.China produced 138,000 tons of NdFeB magnets in 2018.
The Trump administration is not averse to direct financial support for mining and minerals projects, but they seem to want to do it a different way. Secretary of the Interior Doug Burgum has proposed using a sovereign wealth fund to invest in critical mineral mines. There is one big problem with that plan, however: the U.S. doesn’t have one (for the moment, at least).
“LPO can invest in mining projects now,” Jacquez told me. “Cutting 60% of their staff and the experts who work on this is not going to give certainty to the business community if they’re looking to invest in a mine that needs some government backstop.”
And while the fate of the Inflation Reduction Act remains very much in doubt, the subsidies it provided for electric vehicles, solar, and wind, along with domestic content requirements have been a major source of demand for critical minerals mining and refining projects in the United States.
“It’s not something we’re going to solve overnight,” Jacquez said. “But in the midst of a maximalist trade with China, it is something we will have to deal with on an overnight basis, unless and until there’s some kind of de-escalation or agreement.”
A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.