Creative Destruction During Crises - An Opportunity for a Cleaner Energy Mix

IMF Working Papers, December 3, 2021

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Lockdowns resulting from the COVID-19 pandemic have reduced overall energy demand but electricity generation from renewable sources has been resilient.
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.

Recessions → permanent, albeit small, increase in:
- energy efficiency
- the share of renewables in total electricity
Resilience of renewable electricity generation during COVID-19 lockdowns partly reflects the trend increase in renewables.

Market-based measures:
- taxes on pollutants
- trading schemes
- feed-in-tariffs
Non-market measures:
- emission and fuel standards
- R&D investment and subsidies
These measures incentivize and hasten the transition towards renewable sources of energy.

Subject: Commodities, Economic growth, Economic recession, Electricity, Environment, Environmental policy, Non-renewable resources, Renewable energy
Keywords: Covid-19 lockdowns, Economic recession, Electricity, electricity generation, energy demand, energy mix, energy use, Environmental policy, environmental protection stringency, Global, impact of recession, Non-renewable resources, recession, recession result, Renewable energy, renewables.

IMF Working Paper by Pragyan Deb, Davide Furceri, Jonathan David Ostry, and Nour Tawk, December 3, 2021.