In a new study published on 23 October, the pro-European think-tank Bruegel demonstrates that economic recessions, such as those caused by pandemics or financial crises, result in permanent increases in energy efficiency and a corresponding drop in the energy intensity of production, “with a disproportionate impact on dirty energy”.
The aim of this study, conducted by Pragyan Deb, Davide Furceri, Jonathan D. Ostry and Nour Tawk, was to analyse empirically whether economic slowdowns affect the distribution of energy production between green and polluting sources, and whether they result in the sustainable “greening” of the energy mix.
The analysis concludes that recessions and crises do indeed lead to permanent, albeit small, increases in energy efficiency and in the share of renewable energies in the total electricity generated.
However, these effects are greater when they are complemented by stricter environmental policies. This can be seen in a context where recessions offer what the authors call “creative destruction”, which can encourage reforms for a more resilient and greener recovery.
Both non-market-based measures (in the form of emission and fuel standards, incentives and public subsidies and investment) and market-based measures (such as carbon trading schemes, renewable energy certificates and energy saving certificates) can stimulate the transition to renewable energies.
Taxes and other environmental policy instruments can also complement each other, as the OECD points out. What’s more, “even though renewable sources of electricity are becoming cost-competitive with fossil fuels and nuclear power, and will soon no longer need subsidies, policies such as carbon pricing and more stringent climate policy can encourage demand for renewable energy and help to meet ambitious climate targets”, the study summarises.
To consult it: https://aeur.eu/f/9cy (Original version in French by Pauline Denys)