The world after COVID, oil and gas bankruptcies, and more

Global economic crises have historically presented a critical opening for government investment in the climate. In 2009, for example, the Obama administration set the stage for today’s booming clean energy market by pumping $90 billion in recovery funds into the sector.

So when the Covid-19 pandemic hit, many economists called on world leaders to “build back better” by prioritizing green initiatives in their stimulus spending, which has amounted to at least $10 trillion globally. The hope was to lock in some of the deep carbon emission reductions brought on by the global slowdown—with the added benefit that green government spending can get more bang for the buck than traditional stimulus measures.

Record unemployment and the coronavirus recession are wreaking havoc with the cash-flow prospects for many municipal bond issuers.

State and local governments that rely on income tax and sales tax face sharply lower revenues. And empty roads, airports, stadiums and convention centers mean there is less (or no) revenue to help pay back the bonds that financed those projects.

The rash of oil and gas bankruptcies in North America is set to continue for the remainder of 2020, a report by Haynes and Boone cited by Reuters shows.

After the coronavirus pandemic and oil price war set in at the end of the first quarter, the second quarter began with a wave of bankruptcies in the oil and gas sector in North America, according to the report.

The collapse in economic activity resulting from the coronavirus pandemic has not only spurred government stimulus spending worth trillions of dollars, euros, and yen. It has also prompted calls to “build back better” by making the recovery a greener, less carbon-intensive one—the subject of a virtual clean-energy summit today that brought together government ministers from countries responsible for 80 percent of the world’s emissions. Yet current plans for green stimulus programs around the world focus too narrowly on how many jobs they create right now and how much they directly reduce carbon emissions. Of course we want more jobs and fewer emissions. But government spending alone cannot solve the climate problem, nor will immediate job creation address the long and deep economic contraction most industrial economies are likely to face. For green stimulus to work on both counts, it must be designed for the long run.

The heyday of America’s mighty oil and gas industry may be passing.

This week three huge pipeline projects, whose combined length would stretch from New York to San Diego, were ditched. Further oil and gas output growth in the world’s most prolific energy market depends on new infrastructure. Building it has become immeasurably harder.