Effects of electricity demand reductions under a carbon pricing regime on emissions: lessons from COVID-19

Haxhimusa A, Liebensteiner M (2021)


Publication Language: English

Publication Type: Journal article, Original article

Publication year: 2021

Journal

Book Volume: 156

Pages Range: 112392

DOI: 10.1016/j.enpol.2021.112392

Abstract

The coronavirus pandemic (COVID-19) has led to a massive collapse in economic activity and energy demand, with the result of significant emissions reductions at a global scale. However, the existing literature investigating abatement from COVID-19 mainly overlooked the overwhelming emissions reduction in Europe's power sector. We address this by assessing the intricate relationship between electricity demand shocks and heterogeneous generation technologies in the power sectors of 16 major European economies during January to March 2020. We apply an econometric model in an instrumental-variables framework. In a first step, we assess the impact of COVID-19 infections on electricity demand, and in a second step how this translates into emissions abatement. We find that, during full lockdown, COVID-19 reduced electricity demand by 19\% and carbon emissions by an astonishing 34% per hour, whereas there is severe country heterogeneity depending on the electricity supply structure and demand shock intensity. From our estimates, we predict that power sector emissions fell by 18.4% in 2020. Our results reveal the importance of a carbon price, so that a demand reduction can offset large amounts of emissions by displacing coal at the margin. We derive several policy implications from our analysis to draw lessons from the pandemic.

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How to cite

APA:

Haxhimusa, A., & Liebensteiner, M. (2021). Effects of electricity demand reductions under a carbon pricing regime on emissions: lessons from COVID-19. Energy Policy, 156, 112392. https://dx.doi.org/10.1016/j.enpol.2021.112392

MLA:

Haxhimusa, Adhurim, and Mario Liebensteiner. "Effects of electricity demand reductions under a carbon pricing regime on emissions: lessons from COVID-19." Energy Policy 156 (2021): 112392.

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