Title Page
INTERNATIONAL MONETARY FUND
Creative Destruction During Crises
An Opportunity for a Cleaner Energy Mix
Pragyan Deb, Davide Furceri, Jonathan D. Ostry, and Nour Tawk
WP/21/284
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
2021
November
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© 2021 International Monetary Fund
WP/21/284
IMF Working Paper
Asia & Pacific Department
Creative Destruction during Crises: An Opportunity for a Cleaner Energy Mix Prepared by Pragyan Deb, Davide Furceri, Jonathan D. Ostry, and Nour Tawk
Authorized for distribution by Jonathan D. Ostry
December 2021
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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.
| JEL Classification Numbers: | E32, E6, G01, O13, Q4, Q54, Q56. |
| Keywords: | Covid-19 lockdowns; recession; energy use; energy mix; renewables. |
| Author’s E-Mail Address: | pdeb@imf.org; dfurceri@imf.org; jostry@imf.org; ntawk@imf.org |
| JEL Classification Numbers: | E32, E6, G01, O13, Q4, Q54, Q56. |
| Keywords: | Covid-19 lockdowns; recession; energy use; energy mix; renewables. |
| Author’s E-Mail Address: | pdeb@imf.org; dfurceri@imf.org; jostry@imf.org; ntawk@imf.org |
Title Page
WORKING PAPERS
Creative Destruction during Crises
An Opportunity for a Cleaner Energy Mix
Prepared by:
Pragayn Deb, Davide Furceri, Jonathan D. Ostry, and Nour Tawk
Contents
I. Introduction
II. Recessions, obsolescence, and policies
III. Data and empirical framework
IV. Results
V. Robustness
VI. Country characteristics and environmental policy
VII. Conclusions
Annex I. Figures
Annex Figure 1. Impact of recessions on growth in energy use
Annex Figure 2. GDP growth and level after recession
Annex Figure 3. Changes in level of renewables after recession
Annex Figure 4. Energy intensity after recession
Annex Figure 5. Capacity utilization and investment during recessions
Annex Figure 6. Impact of financial crisis
Annex Figure 7. Impact of pandemics (cases/population)
Annex Figure 8. Impact of growth slowdown (peak to trough)
Annex Figure 9. Impact of per capita growth slowdown (peak to trough)
Annex Figure 10. Impact of GDP growth
Annex Figure 11. Controlling for GDP growth directly (additional results)
Annex Figure 12. Time dummies (additional results)
Annex Figure 13. Time trends (additional results)
References
FIGURES
1. Energy trends during the pandemic
2. Trend in electricity generation
3. Summary of main results
4. Impact of recessions on energy use
5. Impact of recessions on energy intensity
6. Changes in energy mix after recession
7. Impact of recession on renewables
8. Robustness to different types of crisis
9. Robustness to other economic shocks
10. Robustness to lags and leads
11. Robustness to alternative specifications
12. Robustness – Additional controls
13. Robustness – Placebo and parallel trends
14. Impact by type of economy
15. Impact of recession (restricted sample with environmental policy data)
16. Impact of environmental protection stringency (EPS)
17. Impact by market vs non-market EPS
18. Impact of specific measures: Standards, feed-in-tariffs and trading schemes
TABLES
1. Electricity share from renewables after recession
