Perhaps in no other energy demand sector are the impacts of the COVID-19 response more readily apparent than in transport. Lockdowns and stay-at-home orders have altered all aspects of our lives – from the daily commute to how and what we eat, and how and what we buy. They have transformed personal mobility in and outside cities, demand for domestic and international flights, and global supply chains not only for raw materials and fuels, but for intermediate and final consumer products as well.

Public transport, active modes and shared micromobility

Public transport operations in cities have been severely affected. As metro and bus services have decreased, so has ridership, with usage falling 50-90% worldwide. As cities come out of lockdown, ramping up services to provide as much capacity as is feasible while ensuring safety and security for those who rely on the metro, light rail and bus will be a formidable challenge. With an estimated EUR 40 billion of revenue losses in the European Union alone in 2020 due to the pandemic, many operators are in a critical financial situation and require assistance. The inclusion of USD 25 billion in emergency support for transit agencies in the US CARES Act, approved in March 2020, is one example of necessary policy support being provided in a timely fashion.

Support for public transit systems is essential not only to preserve jobs in the sector, but to help avoid service degradation and fare hikes. Poor service could prompt users to shift to private car use, exacerbating local air pollution, GHG emissions, noise, safety and congestion issues.

Beyond softening environmental impacts and enhancing quality of life, the economic and social benefits of high-quality public transport are numerous and substantial: by providing equitable and affordable access to safe mobility, public transportation is a key factor of social inclusion and local economic development, in addition to offering direct job opportunities.

The longer-term impact on how people get around in cities will depend on both how successful societies are at managing the spread of the virus and how much cities value the wider social benefits that high-quality public transport (and also micromobility and active modes, i.e. walking and cycling) provide. The complementary initiatives of allocating more public space for active transport modes and providing incentives for them are also promising.

Contrary to public transport, there has been a resurgence in active modes of transport such as walking and cycling in cities worldwide, particularly as lockdowns are lifted. To support this trend, a number of cities, such as Milan, Paris, Rome, Brussels, Berlin, Budapest and Bogotá, have reallocated street and public space to pedestrians and cyclists.

As the Covid-19 crisis disrupts mobility routines, some regional governments and cities are seizing what they perceive as a unique opportunity to promote potentially lasting new mobility behaviours that favour active mobility. Policies being pursued include speed limits and car-free zones in city centres (e.g. London, Athens), making road reallocation permanent, and investing in new infrastructure such as bicycle lanes, bicycle parking and expanded walkways. Cities are also providing rental services and subsidies for the purchase and maintenance of traditional and electric bicycles.

Further policy support could include raising longer-term targets for active transport and launching information and awareness-raising campaigns. The modal complementarities between robust active transport infrastructure and strong public transport services could also be exploited to encourage multi-modal movement. As a cornerstone of sustainable urban transport, active transport offers considerable social, environmental and economic benefits: greater safety and equity; less noise, congestion and air pollution; and better health and quality of life.

Under lockdown, shared micromobility use has plummeted to near zero and operators have reduced or suspended services, although shared bike use has rebounded substantially in Chinese cities in particular as lockdown measures are lifted. The financial impacts have been severe, and significant market consolidation of operators seems inevitable in the near term. Shared micromobility may be important in the post-pandemic urban transport mix to reduce private car travel and ease public transport capacity challenges. Cities are exploring a range of regulatory and fiscal actions.

Rail

During the lockdown in India, Indian railways, which provides commuter rail services for more passengers than any other national rail network except China’s, stopped all passenger train services and reduced freight train services to 60% capacity (also due to reduced demand for bulk goods such as iron and coal).

Covid-19 has severely impacted the high-speed rail sector. Between January and April 2020, operators lost USD 19 billion in revenue in Asia and USD 2.5 billion in Europe. Social distancing regulations reduce maximum rail car occupancy and increase sanitation requirements, raising operational costs and reducing profitability.

Nevertheless, policy initiatives could benefit high-speed rail, for instance by allocating stimulus funding to new lines that could be opened rapidly to serve corridors among major cities. Governments could also tie airline bailouts to restrictions on short-distance domestic segments already served by high-speed rail. These examples highlight policy opportunities to couple short-term bailouts with long-term sustainability goals.

Car sales and EVs

Between January and April 2020, cars sales dropped by about 9 million (roughly one-third of sales during the same period in 2019). The timing and extent of plummeting sales were dictated by the timing and stringency of lockdowns. In China, the world’s largest car market, February 2020 sales were 80% lower than in February 2019. By April, US sales relative to 2019 had dropped by 50%, in Germany by 60%, and in France by 90%.

As lockdowns ease, initial signs point to robust latent demand for cars, and demand rebounds may be bolstered by the perceived safety and security benefits of cars compared with active and public transport.

Rapid and continuous growth in EV sales has also stalled as a result of lockdowns, but so far electric car sales have generally been hit less hard than non-electric sales. Indeed, EV sales prospects for the rest of 2020 are likely a silver lining in the current crisis cloud.

Global electric car sales by key markets, 2010-2020

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Global car sales by key markets, 2005-2020

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How the current crisis affects the pace of the electromobility shift in the longer term will hinge critically on the public policy response. In China, the central government and local governments alike have doubled down on policy support for electric vehicles. At the same time, cities that have temporarily relaxed vehicle circulation restrictions and licence plate schemes will need to discontinue these exceptional measures promptly as traffic and car sales begin to rebound. Preventing the relaxation of fuel economy and zero-emission-vehicle policies is necessary to ensure that long-term sustainability goals are not sacrificed for short-term economic exigencies.

In theory, vehicle scrappage schemes can reduce the potential for households to delay new car purchases and instead continue to rely on old vehicles that have higher pollutant and CO2 emissions. But while vehicle scrappage schemes are undeniably beneficial for car buyers and car makers, merely making cars more affordable boosts the overall number of cars on the road. Therefore, unless programmes are carefully crafted, their climate benefits are not clear-cut and they may even prompt net increases in CO2 emissions.

Conditional automaker bailouts linked with subsidies for electric and hybrid vehicles (France) or with vehicles’ environmental performance (Italy) can help stem the immediate impacts of the crisis while encouraging manufacturers to manage the transition to electromobility.

Aviation

As entire countries close their borders to international flights, commercial aviation has been hit particularly hard by plummeting demand. Relative to May 2019, in May 2020 the number of flights had dropped 40% in Asia and 90% in Europe. By the end of May, global capacity on commercial passenger airlines (measured in seats) was ramping up again, but was still less than 30% of 2019 capacity. The number of passengers on commercial flights is expected to be 35‑65% lower in 2020 than in 2019.

With estimated revenue losses for commercial passenger aviation in 2020 between USD 60 billion and USD 115 billion (compared with profits of USD 26 billion in 2019), some airlines are declaring bankruptcy, others are shedding old and inefficient aircraft, and still others are receiving stimulus funding. With 25 million aviation sector jobs at risk, European governments have agreed on financial aid of EUR 12.8 billion, and a further EUR 17.1 billion is under discussion. If the initiatives taken by France in their bailout package for Air France-KLM to accelerate the reduction of domestic CO2 emissions, deploy biofuels, and renew their fleet, were made binding, they would point to opportunities in coupling near-term economic exigencies with long-term climate and sustainability needs.

Consolidation and fleet retirement may lead to greater efficiency in air travel, but domestic airline bailouts that do not obligate recipients to invest in operational and technical efficiency might very well risk propping up airlines that will fail in the longer term anyway – with little compelling societal benefit.

Global scheduled seat capacity on commercial passenger aviation, 2019 and 2020

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Shipping

In international shipping, record drops in cargo and oil demand have reduced maritime shipping activity. Many oil tankers are effectively serving as floating storage to temporarily hold reserves off the market and limit the plunge in oil prices.

Stagnating demand for goods has reduced the global trade of products normally carried by container and cargo ships. Many vessels have been dry-docked, and those still operating are moving at reduced speed to cut fuel consumption, or are serving as floating storage. This is having a considerable effect on maritime fuel markets, with the price of very-low-sulphur fuel oil (VLSFO) falling to USD 150/tonne at the end of April, closing the price gap with high-sulphur fuel oil. Whereas installing on-board scrubbers that capture SOX exhaust emissions had previously been the most economical option for many ship owners to comply with the IMO 2020 sulphur cap, with the collapse in VLSFO prices, many owners and operators have been cancelling or reconsidering their scrubber orders.

While plummeting short-term shipping activity has cut shipping emissions in 2020, several factors suggest that it might hamper maritime shipping efforts to transition to low-carbon operations and technologies.

First, sustained low oil prices might not only widen the price gap with low-carbon fuels and discourage their adoption by ship owners, but may also make it less imperative to adopt technical and operational measures to reduce fuel consumption.

In addition, the IMO’s Marine Environment Protection Committee (MEPC) negotiations on measures needed to achieve the first IMO strategy have been postponed to the second half of the year, which risks delaying the implementation of agreed regulatory schemes.

The long-term effects on maritime shipping’s low-carbon transition are still unclear. Stimulus packages to revitalise the shipping industry could be an opportunity to accelerate its clean transition, provided that incentives are granted only to operators that prove they are making efforts to scale up the adoption of low-carbon technologies and fuels.

Transport biofuels

The Covid-19 crisis has radically changed the global context for biofuels. Transport biofuel production is anticipated to contract by 13% in 2020, the first decrease in output in two decades. Widespread virus containment measures and curtailed economic activity have reduced transport fuel demand considerably. Gasoline demand is forecast to fall by 9% in 2020 and diesel demand by around 6%, in turn limiting the consumption of biofuels normally mixed with fossil-based transport fuels to meet blending mandates.

Ethanol output is expected to contract by 15%, and a 6% reduction in biodiesel and hydrotreated vegetable oil (HVO) output is anticipated. Some of the Covid-19 impacts could, however, be temporary: if transport fuel demand rebounds in 2021, biofuel production could also return to 2019 levels. Longer-term implications for growth may arise from the suspension of new policy initiatives in some countries due to low oil prices.

Annual change in biofuel production, 2018-2020

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