Markets of all sorts, in every part of the world, are responding to the shock of Covid-19. Almost nothing is left untouched, whether it’s consumer-facing, a luxury, or a commodity. Looking across a number of markets this week, there are two states: bending and breaking.
One bending market has been U.S. aviation. On March 6, checkpoints run by the Transportation Security Administration processed nearly 2.2 million passengers. On March 31, the TSA processed all of 146,000—a nearly 93% decline.
A broken market occurs where nothing is transacting at all. Last week, an auction for European Union aviation carbon allowances failed, with just four airlines bidding. Demand for air travel is so low, and therefore airlines’ energy consumption and emissions as well, that their need for permits has fallen to the point where there’s no market to be made.
Looking ahead, it’s worth watching corporate sustainability markets to see how much they bend (or if they break) in our current economic climate.
Consider the RE100, a group of corporations that have committed to meet 100% of energy demand with clean sources. There were 12 members when it was founded in 2014; now there are 221. How many more companies will make such a commitment given everything else corporate executives now have to focus on? Companies might not renege on commitments, and if they do, they probably won't make much noise about it.
But there’s a more immediate—and more market sensitive— place to watch this dynamic play out: corporate renewable energy power purchase agreements.
The appetite to sign more of these agreements will certainly be curbed. Falling power demand should depress power prices in most markets, making grid power more attractive. (Although in many places, renewables will still at least be competitive, if not the lowest-cost option.) From a CFO’s perspective right now, “sustainability” is probably more about keeping a business going than examining its electricity mix.
Go deeper at https://carbon.substack.com/p/planet-of-the-humans-coronavirus