Working Paper: CEPR ID: DP16819
Authors: Pragyan Deb; Davide Furceri; Jonathan D. Ostry; Nour Tawk
Abstract: Lockdowns resulting from the COVID-19 pandemic have reduced overall energy demand but electricity generation from renewable sources has been resilient. While this partly reflects the trend increase in renewables, the empirical analysis presented in this paper highlights that recessions result in a permanent, albeit small, increase in energy efficiency and in the share of renewables in total electricity. These effects are stronger in the case of advanced economies and when complemented with environment and energy policies—both market-based measures such as taxes on pollutants, trading schemes and feed-in-tariffs, as well as non-market measures such as emission and fuel standards and R&D investment and subsidies—to incentivize and hasten the transition towards renewable sources of energy.
Keywords: COVID-19; lockdowns; recession; energy use; energy mix; renewables
JEL Codes: E32; E6; G01; O13; Q4; Q54; Q56
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Supportive policy measures (E69) | Amplification of recession effects on renewable energy share (Q43) |
| Supportive policy measures (E69) | Amplification of recession effects on dirty energy share (Q43) |
| Recession-induced decline in energy demand (Q43) | Shift in investment towards renewable technologies (Q42) |
| Resilience of renewable energy production during economic downturns (Q47) | Structural shift in energy consumption patterns favoring greener alternatives (Q42) |
| Recessions (E32) | Increase in energy efficiency (Q41) |
| Recessions (E32) | Increase in share of renewables in total electricity (Q42) |
| Recessions (E32) | Decrease in share of dirty energy (Q42) |