Economic crises can accelerate decarbonization

"Building back better" is a popular buzzword in times of crisis, but is it realistic? A new study published in February in the journal "Nature" was published, examined the impact of economic crises on decarbonization and showed that while crises do not automatically lead to structural changes and long-term decarbonization, they have played an important role in initiating systemic change. "Almost all countries that reached a peak in their CO2 emissions did so during an economic crisis," says first author Germán Bersalli of the Research Institute for Sustainability (RIFS) in Potsdam, Germany. With colleagues from RIFS and ETH Zurich, he studied the relationship between emissions peaks and economic crises in the 45 countries that were members of the OECD and G20 between 1965 and 2019.

Decarbonization thanks to economic crises?

Over the past 50 years, 28 of these countries reached their emissions peak, 26 of them just before or during the major economic crises of that period. These include the 1973-75 and 1979-80 oil crises, the collapse of the Soviet Union (1989-91), and the global financial crisis (2007-09). Even as countries' economies rebounded, emissions did not rise back to their pre-crisis levels. This positive development contrasts with the global trend: worldwide carbon dioxide emissions increased steadily over the period, with only small dips during the crises.

The mechanisms behind lower emissions

The researchers describe three mechanisms that have led to lower emissions over the long term:

• With Energy efficiency measures governments and companies respond to higher energy prices or worsening economic conditions. "This mechanism is particularly pronounced during oil crises. Countries that peaked during this period - the United Kingdom, Germany and France, for example - saw a significant improvement in energy intensity. Consumption of expensive imported fuels fell, and industrial efficiency rose," says Bersalli. In addition to government measures, companies also responded to crises and triggered new market trends, such as a shift to smaller and more efficient cars during the oil crises.
• Changes in the economic structure include a decline in CO2-intensive industries and a post-crisis recovery for less energy-intensive industries. This change is driven by economic and sometimes political forces. As the economy recovers, companies are increasingly turning to less energy- or carbon-intensive plants. But there is also a shift from goods-producing to services. Bersalli cites Spain as a striking example of this phenomenon: "In Spain, which was one of the hardest hit countries during the global financial crisis and the subsequent euro crisis, industry suffered particularly badly. Its share of GDP fell from 26 percent in 2007 to 20 percent in 2015, and the construction industry collapsed and never returned to pre-crisis levels. Spain's return to growth occurred in other, less carbon- and energy-intensive sectors."
• New market conditions or political changes have Changes in the energy mix which led to a reduction in CO2 emissions. The first oil crisis in the early 1970s had a lasting impact on the energy mix, particularly in Western Europe: Nuclear power was expanded and interest in emerging renewable energy technologies increased.

Understanding the effects of measures

The findings could help develop more robust climate policies, points out co-author Johan Lilliestam (RIFS): "We also observe in the context of the Covid 19 pandemic that ambitious climate policies prove their worth in times of crisis. Countries that previously supported the transition to a carbon-neutral energy system invested the most in green sectors with their stimulus packages and used the opportunity to strengthen their market position in emerging carbon-free technologies and industries." That will lead to declining emissions in the long run, he said. The findings also provided an answer to the much-discussed question of whether green growth is possible: according to the study, an absolute decoupling of growth and emissions is possible if economic growth is moderate. In the past, carbon and energy intensity has rarely fallen more than four percent per year. Even the early economies that peaked in the 1970s still have a long way to go to fully decarbonize their economies. Bersalli, G., Tröndle, T., Lilliestam, J. (2023). Most industrialised countries have peaked carbon dioxide emissions during economic crises through strengthened structural change, Communications Earth & Environment, 4, 44 The post Economic crises can accelerate decarbonization appeared first on Organizer.