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COVID-19, climate policy and carbon markets
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FSR; LifeDicet; Blogpost; 2020; [RSCAS]
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BORGHESI, Simone, COVID-19, climate policy and carbon markets, FSR, LifeDicet, Blogpost, 2020, [RSCAS] - https://hdl.handle.net/1814/66806
Abstract
The COVID-19 pandemic is having a dramatic impact on economic activities worldwide. This has both direct and indirect effects on greenhouse gas emissions and global warming. On the one hand, the current pandemic has a direct and immediate effect on emissions since the fall in production and traffic volumes drastically reduces emissions, as it has already been observed after a few weeks of lockdown in a growing number of countries. On the other hand, COVID-19 might have multiple indirect effects on emissions which could run in the opposite direction, especially in the medium-long run. In the first place, the deep economic recession which might affect the world economy in the next years is likely to slow down the technological progress that is needed to progress along a low-carbon economic path. In the second place, the economic recession obviously has a large impact also on carbon markets: the fall in production brings about a sharp decrease in the demand of emission allowances, which causes a reduction in the allowance prices, and thus also in the incentive to invest in cleaner technologies. Finally, the health emergency may hinder international negotiations on emissions reduction and on the rulebook for international emissions trading to be agreed under the climate pact, as clearly emerges from the recent decision to postpone COP26 to 2021. All these indirect, negative consequences of COVID-19 on emissions reduction might well overtake in the long run its direct, short run effects on emissions.
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Published on the 8th April 2020